fortune--2020-02-20--Three mega-deals to have on your radar today

We subscribe to meals , clothes , and TV shows .
What about cars ?

Good morning, Term Sheet readers! I was out of the office for several days, and I was definitely not mentally prepared for the avalanche of email in my inbox this morning. After sorting through an egregious amount of deals, I present three mega-deals to have on your radar today:
VICTORIA’S SECRET WILL GO PRIVATE: L Brands Inc is close to selling a controlling stake in Victoria’s Secret to private equity firm Sycamore Partners in a deal that values the lingerie brand at $1.1 billion, according to The Wall Street Journal. Sycamore Partners will buy a controlling stake of 55% in the company, and L Brands will retain 45% in a separate firm that includes the Pink chain. As part of the deal, Leslie Wexner, the founder of L Brands, is expected to step down as chairman and CEO. The change happens amid scrutiny of his past ties to Jeffrey Epstein. He will reportedly remain on the L Brands board and retain stakes in both companies.
The turnaround of Victoria’s Secret continues as sales decline and competition grows. Let’s see what Sycamore Partners does. The firm is known for scooping embattled brands including The Limited, Hot Topic, Nine West and Staples.
Read more.
MORGAN STANLEY SCOOPS UP E*TRADE: Morgan Stanley has agreed to purchase electronic trading platform E*Trade in a $13 billion all-stock deal. This is the biggest takeover by a giant U.S. bank since the 2008 financial crisis, according to the WSJ.
As a result of the acquisition, Morgan Stanley will gain access to E*Trade’s 5.2 million customer accounts with $360 billion in assets. Perhaps most importantly, Morgan Stanley will get its hands on E*Trade’s $56 billion in deposits that it can use to fund loans.
“We’ll take on Schwab. We’ll take on Fidelity,” Morgan Stanley CEO James Gorman told the WSJ. “This isn’t about legacy-building; it’s about getting [Morgan Stanley] ready for prime time.”
FRANKLIN TEMPLETON BUYS LEGG MASON: Asset manager Franklin Templeton has agreed to buy rival Legg Mason for $6.5 billion, including debt, as first reported by The Financial Times. The deal would create a $1.5 trillion monster whose size trails only BlackRock, Vanguard Group, Fidelity Investments, Capital Group, and Amundi Asset Management.
As Bloomberg’s Brian Chappatta noted, the merging of these two firms suggests that there is no room in the current investing landscape for a mid-sized asset manager. You either go big, go niche, or go home.
QUOTE OF THE DAY: “One of the things that I don’t think would serve society well is if we have companies that only want to serve Democrats or Republicans.” — Santa Clara University’s Ann Skeet on venture-backed startups that grapple with their investors’ political affiliations. Read more.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- OneTrust, an Atlanta-based developer of enterprise software platform, raised $210 million in Series B funding. Coatue and Insight Partners led the round.
- SentinelOne, a Mountain View, Calif.-based autonomous endpoint protection company, raised $200 million in Series E funding at a $1.1 billion valuation. Insight Partners led the round, and was joined by investors including Tiger Global Management, Qualcomm Ventures LLC, Vista Public Strategies of Vista Equity Partners, and Third Point Ventures.
- Swiggy, an India-based on-demand food delivery platform, raised $113 million in funding. Prosus Ventures (formerly Naspers Ventures) led the round, and was joined by investors including Meituan Dianping and Wellington Management Company.
- ZeroFOX, a Baltimore, Md.-based social cyber security intelligence, analytics, and protection company, raised $74 million in funding. Intel Capital led the round, and was joined by investors including NEA, Highland Capital Partners, Redline Capital Management, Hercules Capital and Core Capital.
- Rarebreed Veterinary Partners, a Portland, Maine-based animal health startup, raised nearly $40 million in funding. The investors were not named.
- Feather, a New York City-based furniture rental service, raised $30 million in Series B funding. Cobalt Capital led the round, and was joined by investors including Spark Capital, Kleiner Perkins, Bain Capital Ventures, Y Combinator, SV Angel, PJC, Fuel Capital, and Wildcat Capital Management.
- Lilac Solutions, an Oakland, Calif.-based lithium mining technology company, raised $20 million in Series A funding. Breakthrough Energy Ventures led the round, and was joined by investors including The Engine, Lowercarbon Capital, and The Grantham Foundation.
- Teikametrics, a Boston-based SaaS provider of AI-powered optimization for brands and sellers on Amazon and Walmart, raised $15 million in funding. Jump Capital led the round, and was joined by investors including Granite Point Capital, Jerry Hausman, and Ed Baker.
- Liquid Death, a Santa Monica, Calif.-based water brand, raised $9 million in Series A funding. Velvet Sea Ventures led the round.
- Enveil, a Fulton, Md.-based data security company, raised $10 million in Series A funding. C5 Capital led the round, and was joined by investors including Mastercard, Capital One Ventures, Bloomberg Beta, and 1843 Capital.
- Ordway, a Washington, D.C.-based billing and revenue automation platform for scaling companies, raised $10 million in Series A funding. CRV led the round, and was joined by investors including Clocktower Ventures, Lerer Hippeau and Revolution's Rise of the Rest Seed Fund.
- Blueprint Title, a Nashville, Tenn.-based title and escrow company for real estate investors, raised $8.5 million in Series A funding. Santander Innoventures led the round, and was joined by investors including Greycroft, Liberty Mutual Strategic Ventures, Mucker Capital and Tribeca Early Stage Partners.
- Hopin, a remote live online events company, raised £5 million ($6.5 million) in seed funding. Accel led the round, and was joined by investors including Northzone, Seedcamp, Web Summit’s Amaranthine Fund and Slack Fund.
- Coassemble, an Australia-based provider of online training for global brands, raised $4.4 million in Series A funding. Equity Venture Partners led the round.
- Electriphi, a San Francisco-based provider of software solutions for electric vehicle fleet and energy management, raised $3.5 million in seed funding. Investors include Wireframe Ventures, the Urban Innovation Fund, Blackhorn Ventures, Acario Innovation and Lemnos Labs.
- The Org, a San Francisco-based platform where users can explore any company’s organizational chart, raised $8.5 million in Series A funding. Founders Fund led the round, and was joined by investors including Sequoia Capital and Balderton Capital.
- ChartHop, a Brooklyn-based organizational management platform, raised $5 million in seed funding. Andreessen Horowitz led the round, and was joined by investors including Abstract Ventures, the a16z Cultural Leadership Fund, CoFound, Cowboy Ventures, Flybridge Capital, Shrug Capital, and Work Life Ventures.
- Arize AI, a Berkeley, Calif.-based company built to solve production AI issues for businesses, raised $4 million in funding. Foundation Capital led the round, and was joined by investors including Trinity Ventures and Brett Wilson.
PRIVATE EQUITY DEALS
- Thompson Street Capital Partners will acquire Len the Plumber, a Boothwyn, Penn.-based full-service residential plumbing contractor. Fintemr
- IQ-EQ acquired Blue River Partners, a Dallas, Texas-based provider of outsourced solutions to alternative asset managers. Financial terms weren't disclosed.
OTHERS
- Knowlton Development Corporation agreed to acquire Zobele Group, an Italy-based manufacturer of home and air care products. Financial terms weren't disclosed.
IPOs
- SIA, an Italian payments firm, is preparing for a listing on the Milan bourse, Reuters reports citing sources. The company plans to raise 1 billion-1.5 billion euros ($1 billion-$1.6 billion). Read more.
- Imara, a Boston-based biotech developing small molecule therapies for rare genetic disorders, filed for an $86 million IPO. It posted a loss of $23.5 million in 2019. New Enterprise Associates (31.8% pre-offering), Lundbeckfond Invest (16.3%), and Pfizer (11.2%). It plans to trade on the Nasdaq as “IMRA.” Read more.
EXITS
- WorkJam acquired Forge, a Playa Vista, Calif.-based on-demand staffing platform. Financial terms weren't disclosed. Forge had raised $4 million in venture funding from investors including Brainstorm Ventures, Jason Calacanis, XRC Labs, Sherpa Capital, and the Dorm Room Fund.
FIRMS + FUNDS
- ForgePoint Capital, a San Francisco-based venture capital firm, raised $450 million for its second fund.
- Marcy Venture Partners, a venture firm co-founded by JAY-Z, Jay Brown and Larry Marcus, raised $85 million for its inaugural fund, Marcy Venture Partners Fund, L.P.
PEOPLE
- StepStone Group LP appointed Kieran Farrelly, Sheila Gibson, Adam Johnston, and Suzanne Tavill to partner.
- Noah Carr joined Unusual Ventures as an enterprise partner. Carr was previously at Bain Capital and Point72 Ventures.


fortune--2020-02-20--Udacity’s new, online A.I. course targets an important market: bosses

HTC CEO Yves Maitre on the company ’ s ‘ new vision , ’ virtual reality , and the rivalry @ @

Udacity, the online education company co-founded by Google X moonshot founder Sebastian Thrun, is trying to capitalize on executive interest in artificial intelligence. The company announced Thursday that it would offer a new online program intended for executives looking to incorporate A.I. into their businesses.
Udacity’s online courses have previously been oriented towards people wanting to educate themselves in tech-oriented fields like computer programming and data science.
“This is our first foray into the leadership space,” Udacity CEO Gabriel Dalporto said. “Most of our programs have been around creating practitioners.”
Udacity first debuted an A.I. training program for people to learn machine learning skills via online courses in 2016. The A.I. training program was part of Udacity’s other online training programs, which can last between six to nine months and cost students between $1,800 to $2,400 to obtain the company’s so-called nanodegrees.
Udacity’s A.I. leadership program, which will debut on Feb. 25, differs from the previous A.I. training program in that students won’t learn practical skills, like how to create neural networks (the infrastructure software that learns and adapts to large amounts of data). Instead, Dalporto said, the leadership program will teach business managers basic A.I. fundamentals, like terminology, to help them communicate with their data science staff. The new program will also explore which machine-learning techniques are best suited for particular corporate uses, like sales forecasting. The potential impacts of biased data, which can cause companies’ A.I. systems to potentially discriminate against people underrepresented in the datasets, is also a topic of the course.
Dalporto said the A.I. leadership program would require managers to dedicate five hours per week for between six to eight weeks, in order to watch the online training seminars and complete coursework that involves creating an A.I. strategy for their companies or dummy businesses as examples. Executives from BMW—which has used Udacity to train its employees in A.I.—helped develop some of the coursework, along with MIT Sloan School of management professor Erik Brynjolfsson, who will lecture in some of online videos.
With the new A.I. leadership programs, Udacity joins a hosts of other firms that have debuted A.I. training programs and education materials for corporate leaders who may be confused about the trending technology. For instance, the World Economic Forum created A.I. guidelines for business leaders to familiarize themselves with the benefits and potential pitfalls of applying A.I. to their companies; Stanford’s graduate school of business has an A.I. executive education program; and Udacity rival Coursera has an A.I. program that it pitches to non-technical managers as a way to learn “how to build a sustainable AI strategy.”
“The reality is we have competitors,” Udacity co-founder Thrun said. “We are not the only ones obviously—there’s many.”
But because the overall business world lacks managers trained in A.I., Thrun believes Udacity will still get executives to sign up for its program.
“If as a manager you don’t understand the technology, you will be scared by it,” Thrun said.
Udacity said the new A.I. leadership course is included with the company’s enterprise plan it sells to companies on a subscription basis. Udacity declined to comment about how much its corporate training plans cost, only to say that it is a “multi-year, seat-based subscription model that gives learners access to all of our Nanodegree programs and courses.”
More must-read stories from Fortune:
—How Apple defied the odds to post the biggest quarterly profit ever
—Oracle and Google are about to face off in tech’s trial of the century
—Can San Francisco be saved?
—Did the ‘techlash’ kill Alphabet’s city of the future?
—Predicting the biggest tech headlines of 2020
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-20--Here’s how wireless carriers rank on 5G speeds, according to report

Mobile subscribers who upgrade to one of the expensive, new 5G compatible phones may find the experience more than a little bit frustrating, at least for now, according to a new report from research firm Opensignal.
Download speeds vary widely, though they are typically faster than the average 4G download, Opensignal says in the report. But coverage is also extremely uneven, even in the cities where the carriers say that they have installed 5G.
“All of the 5G speeds we see are fast by U.S. standards, but seeing a 5G icon on the screen is no guarantee of 5G,” Opensignal analysts Francesco Rizzato and Ian Fogg noted in a blog post accompanying the results.
Verizon, AT&T, and T-Mobile are spending tens of billions of dollars to add 5G. But it will take several more years before the superfast technology, which can theoretically offer download speeds 10 to 100 times faster than an average 4G connection, are widely available.
Additionally, customers must upgrade to 5G compatible phones, which currently cost at least $1,000, though lower-priced models should hit stores in coming months. The faster connections will also eventually bring new applications, like mobile virtual reality games and multi-angle live sports broadcasts.
In Opensignal’s report, actual results depended on the type of 5G that each carrier has deployed in their networks. Verizon is currently relying on 5G in high-frequency bands, known as millimeter wave, that carry vast amounts of data but don’t travel too far. Meanwhile, for consumers, AT&T is using lower bands, just like those used for 4G, that travel farther but carry less data (AT&T says it will add millimeter wave for consumers next month when some new Samsung phones become available). T-Mobile is using both approaches.
The bottom line is that Verizon provides the fastest average download speeds but the smallest coverage area, according to Opensignal. Connections on Verizon’s 5G network averaged 723 megabits per second, fast enough to download a high-definition movie in a few seconds, the report says. But such coverage was found only 5% of the time—even in the downtown areas of the 31 cities where Verizon installed the new technology, Opensignal says. Verizon says it will reach 60 cities by year end.
AT&T, which has reached over 30 cities so far, averaged 59 Mbps speeds and 11% availability in the cities where its consumer service is available.
T-Mobile’s higher-speed network offered download speeds averaging 243 Mbps and availability 11% of the time in the six cities where it is available. In a much larger area covering most of the country, T-Mobile’s lower-frequency and lower-speed 5G network averaged just 48 Mbps downloads, requiring five to 10 minutes to download a movie, but it was available 53% of the time.
Sprint, which is about to be acquired by T-Mobile, is using a hybrid approach to 5G in nine cities. Its network averaged download speeds of 243 Mbps and was available 47% of the time in downtown areas. But T-Mobile says it will reallocate that spectrum to be used in its 5G network once the $26 billion merger is completed.
The overall findings from Opensignal are consistent with what Fortune found its own recent tests.
All 5G phones revert to using 4G networks when they cannot find a 5G signal. So Opensignal also reported on the best combined experience for the phones.
Verizon’s 5G phone still topped the list, averaging 85 Mbps for all downloads on 4G and 5G networks. T-Mobile was second at 59 Mbps and AT&T was third at 52 Mbps.
Opensignal collects download and connection data from apps installed on tens of millions of consumers phones, rather than by driving around with its own test phones, as rival Rootmetrics does. The crowd-sourced data provides many more measurements but without the same exact comparability of its rival’s more planned phone tests.
More must-read stories from Fortune:
—How Apple defied the odds to post the biggest quarterly profit ever
—Oracle and Google are about to face off in tech’s trial of the century
—Can San Francisco be saved?
—Did the ‘techlash’ kill Alphabet’s city of the future?
—Predicting the biggest tech headlines of 2020
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-20--We subscribe to meals, clothes, and TV shows. What about cars?

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
Good morning, Data Sheet readers. This is Aric Jenkins, filling in for Adam.
What’s your most expensive monthly bill, outside of rent or a mortgage?
Residents of the 25 largest U.S. metros paid an average of $376 a month for car loans—the highest recurring expense, CNBC reported last year. Insurance was the second most expensive at $238 per month. Then, of course, you have to add in the costs of occasional maintenance or repair.
What if all those expenses were taken care of for a monthly subscription of $699? And instead of using one car that you own or lease, you can drive an interchangeable roster of vehicles, with unlimited swap-outs on a daily basis.
That’s the latest pitch from Nissan, which joins a host of car companies experimenting with a Netflix-style subscription service. In addition to insurance and maintenance, the monthly price includes cleaning and roadside assistance. A dealership concierge member would deliver your cars to you within the service area, which for now is limited to Houston, Texas.
“This is a great opportunity for people to drive what they want when they need it for one, predictable payment,” Central Houston Nissan general manager Chad Milow said in a statement.
But while the payment model may be convenient for customers, car dealers are predictably peeved with the strategy, claiming direct subscription services unfairly cut them out of potential sales.
Industry infighting aside, questions still arise over consumers’ willingness to pay such a steep fee each month. Unlike other subscription services, subscribing to cars is not cheap—even with the added perks of insurance and repairs. And while research shows that millennials, the target demographic, actually drive more than commonly thought, they still favor urban centers where ride-hailing and bike lanes are prevalent.
Personally, I have no intention of swapping out my New York City MetroCard for a car subscription any time soon. The subway might be unreliable and occasionally unpleasant, but a $127 monthly pass is still a hell of a lot cheaper than 700 bucks.
Aric Jenkins
Twitter: @aricwithan_a
Email: aric.jenkins@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Keep your fingers out of the jam. European regulators intend to enact rules restricting artificial intelligence and data sharing that will apply to American and Chinese tech companies. The European Commission said it will share draft legislation later this year that could limit the use of facial recognition and other machine learning applications.
No more secrets. A bit earlier than usual, Google released a preview of its next version of Android. The 11th generation mobile OS includes more features for folding phones, 5G, and spam-call screening, plus finer location privacy controls. This release was aimed at software developers and won't be ready for consumers for some months. And Apple's next iPhone software may let users set non-Apple apps as their defaults for basic functions like email and web browsing, Bloomberg reports.
That's a very respectable neighborhood. A long-running tax dispute between the Internal Revenue Service and Facebook went to court this week. The IRS is seeking to prove that Facebook understated the value of intellectual property sold to its Irish subsidiary in 2010. The government says the company owes $9 billion in back taxes.
Dissed. There were a few software-related jabs at last night's Democratic candidates debate. Sen. Elizabeth Warren attacked Pete Buttigieg's healthcare plan with the line: “It’s not a plan, it’s a PowerPoint.” The former mayor of South Bend shot back: “I’m more of a Microsoft Word guy.” Later, other former mayor Mike Bloomberg explained that his taxes were complicated: "The number of pages will probably be thousands of pages. I can’t go to TurboTax.”
Cats and dogs sleeping together. One of the oldest and most storied Wall Street banks, Morgan Stanley, will pay $13 billion to acquire one of the scrappiest upstart brokerage firms, E*Trade. It's a big move online and down market.
FOOD FOR THOUGHT
Computer scientist Larry Tessler, who died this week, is known for inventing the way computer systems cut, copy, and paste text. He came up with the feature while working at the Xerox PARC, where he also led a tour in 1979 for one Steve Jobs. Shortly thereafter, Tessler went to work for Jobs, as he explained to reporter Luke Dormehl.
“It’s funny because Apple was really the trigger for me wanting to leave Xerox, but I’d never seriously considered it as a career option,” he told me. “Even though I had been pretty impressed by the people who attended the PARC demo, I still thought of them as primarily being a hobbyist computer company. It wasn’t like I was against going to work for them, but I also didn’t come out of the demo thinking, ‘I’ve got to go and work for Apple.’”
ON THE MOVE
Banco Santander hired Trish Burgess as its new global head of peer-to-peer payments. Burgess comes from Apple where she helped launch Apple Pay and the Apple Card...Speaking of Apple, the iPhone maker hired Jeff Bronikowski of Warner Music Group as global head of strategic music initiatives...SpaceX hired NASA's former chief of human spaceflight, William Gerstenmaier, to assist with its upcoming human spaceflights...Reddit co-founder Alexis Ohanian's VC firm, Initialized Capital, hired Reddit's former head of HR, Katelin Holloway, as a partner....Shutterstock CEO and founder Jon Oringer will bump up to executive chairman on April 1 so COO Stan Pavlovsky can take over.
IN CASE YOU MISSED IT
Billionaires are donating millions to fight China’s coronavirus. But where is the money going? By Eamon Barrett
The public octo-track process By Lucinda Shen
Why only one-quarter of the world will get true 5G wireless, McKinsey says By Aaron Pressman
Ethereum, Bitcoin’s closest rival, faces its moment of truth By Jeff John Roberts
Despite ‘crypto winter,’ new Bitcoin mines continue to open By David Z. Morris
A legendary investor offers a green-energy manifesto By Shawn Tully
BEFORE YOU GO
New York Times reporter Emily Flitter, who I worked with back in our Reuters days, recently had quite the thrilling urban pet escape experience. Flitter put her prodigious writing talents to work telling the tale of "The Day Frankie Flew Away." Spoiler alert: There's a happy ending.
Aaron Pressman
On Twitter: @ampressman
Email: aaron.pressman@fortune.com


fortune--2020-02-20--Money, politics, tampons: How ‘for women, by women’ startup Lola views its investor’s Trump ties

Three mega-deals to have on your radar today

Where does your money come from? For the venture-backed startups whose entire business models have been made possible by wealthy institutions and individuals, it’s an increasingly fraught existential question.
Take Lola, a policy-minded, women-founded seller of organic tampons, menstrual pads, and other “feminine care” products. The New York company has raised $35 million from investors including Spark Capital, Alliance Consumer Growth, Serena Williams, Lena Dunham—and RSE Ventures, the firm co-founded by real estate developer Stephen Ross, the billionaire owner of the Miami Dolphins and donor to President Donald Trump.
In August, Lola was one of many Ross-backed companies to face a customer backlash after the developer hosted a high-profile Hamptons fundraiser for Trump’s re-election campaign. SoulCycle attendance dropped; celebrities publicly quit their Equinox memberships; Momofuku founder David Chang donated a day’s worth of his restaurants’ profits to charity. And Lola, which touts its “reproductive care for women, by women,” suddenly found itself on lists of companies to be boycotted by Trump’s critics—and facing increasingly common questions about the combination of venture money, politics, and the branding of “empowerment.”
“Every company is working through questions around who their partners are that we weren’t necessarily thinking through pre-2016,” Lola co-founder Jordana Kier tells me, in the company’s first public comments about its relationship with Ross.
She says that Lola did not consider trying to buy out Ross’s stake directly or asking another investor to do so. However, it’s possible that could change in the coming year, says Kier, as the company seeks to raise a Series C round of investment. “That is an opportunity, and the moment where a bigger investor will want to come in to clean up the cap table” by buying out smaller investors, she says.
A spokeswoman for RSE Ventures declined to comment on its relationship with Lola or on Kier’s remarks about potentially buying out its stake in the company.
Lola, which Kier co-founded with Alexandra Friedman in 2014, has 45 employees and a valuation of $104 million, according to PitchBook. It’s a growing company that now finds itself trying to thread an increasingly tiny needle: advocating “for all women” and for certain legislation that affects these customers—without getting involved in the partisan fighting that often revolves around women and the policies affecting their bodies.
Some high-profile female-focused companies, including Glossier, M.M. LaFleur, and The Wing, have to some extent given up on making it through the eye of that needle, especially regarding the highly politicized fight over reproductive rights. The women who founded those startups—as well as hundreds of other male and female executives, at all sorts of companies—last summer signed a petition supporting access to abortion.
But the traditional business desire to shy away from such debates, or any resulting partisan label, is not necessarily a surprising one for a consumer startup looking for broad appeal. After all, women of all political affiliations buy tampons: “You’d be surprised by how many customers we have who are conservative,” Kier says.
As Ann Skeet, senior director of leadership ethics for the Markkula Center for Applied Ethics at Santa Clara University, puts it: “One of the things that I don’t think would serve society well is if we have companies that only want to serve Democrats or Republicans.”
Still, “there’s a real challenge if you’re a founder and trying to get your arms around who you should be working with as an investor,” she adds. “Then behind that is: Where did any of the money come from in the first place?”
‘It matters a lot’
Lola and other RSE-backed companies are far from the only startups to face increased scrutiny of their funding in recent months. Perhaps the most significant flashpoint was the October 2018 murder of journalist Jamal Khashoggi by assassins tied to the government of Saudi Arabia. His killing raised uncomfortable questions about high-profile startups—including WeWork and Uber—that had taken massive investments either from the Kingdom directly, or through SoftBank’s Saudi-backed Vision Fund.
Now entrepreneurs and investors alike say they are paying closer attention to where they get their funding. “It matters a lot,” says Mike Volpi, partner at Index Ventures.
“Entrepreneurs are increasingly asking us” where the tech-focused venture capital firm gets its funding, he adds. Several years ago, Index Ventures stopped raising money from family offices or most government-owned investment funds, and “we’re not taking money from Middle East sovereign funds or oligarchs,” Volpi says today.
Meanwhile, the wider financial and business world is increasingly trying to stake out positions on conscientious investing (see BlackRock’s efforts to make “sustainability integral” to how it invests clients’ money) and greater social responsibility (see the Business Roundtable’s emphasis on “stakeholders,” not just shareholders). Now pressure is mounting from several corners for venture-backed startups and their investors alike to scrutinize the sources of the funding that sustains them and the agendas of those who provide it.
“A critical question for founders and employees should be: “Where is my money coming from?” the venture capitalist Chamath Palihapitiya wrote in a recent Twitter thread. “It’s not really from Sequoia or Andree[s]sen FYI. It’s from a whole grab-bag of funding sources you may actually not agree with.”
How Lola handled (or postponed handling) its relationship with Ross illuminates the difficult balance for companies that want to get involved in policymaking or wrap themselves in a social mission at a time when some of their investors—or the governments, institutional investors and other “limited partner” sources of that funding—have conflicting political affiliations.
It’s an especially urgent question for direct-to-consumer product sellers like Lola, which have relied on oceans of venture money to get off the ground—and, as Casper’s disappointing IPO and Brandless’s shutdown have most recently demonstrated, can often struggle to wean themselves off it.
‘As nonpartisan as possible’
Last summer started off well for Lola’s cofounders, personally and professionally. Kier and Friedman were successfully covering for each other during adjacent maternity leaves. In between, they were photographed for a New York Times article about legislative efforts Lola is supporting, which would repeal gendered state sales taxes on tampons and other menstrual products. Eliminating those taxes will help “us move toward a better model of economic parity and gender equity,” Kier later said in a Lola-sponsored post on Refinery29.
Then the news broke about the Trump fundraiser hosted by Ross, whose RSE Ventures had made what Kier characterizes as a “small, early” investment in Lola. With Friedman on leave, Kier hopped on the phone with “about 40” concerned customers over the next few weeks. “We wanted to take the time to listen to customers, understand their questions and let them know also, if this made them uncomfortable, we understand,” she says. “This is a really unique time in the political landscape and how that matches into people trying to build businesses.”
Unlike Equinox or SoulCycle or Momofuku, which all, to varying degrees, attempted to publicly distance themselves from the Trump fundraiser, Lola avoided putting out a statement about either the President or the company’s relationship with Ross.
“We obviously have our own personal beliefs, but we want the brand to be as nonpartisan as possible,” says Kier, adding that she’s a “Jewish girl from the Upper West side, and my dad’s a Cuban immigrant—you can probably guess what my politics are.” (She’s also married to Jesse Derris, who runs a New York City communications firm and once served as a presidential-campaign spokesman for former Democratic Sen. John Kerry.)
“Nonpartisan” doesn’t mean apolitical in this case. Through its relationship with the nonprofit Period Equity, Lola has been especially involved in an effort to repeal various states’ sales taxes on tampons and other menstrual products. It’s a feminist objective—and one that serves Lola’s business purposes—but also one that has garnered some bipartisan support. (In 2016, Lola also made some marketing hay off of Trump’s initial presidential campaign, selling “Make Periods Great Again” hats and T-shirts for charity.)
“We think it’s important to listen to all sides of the argument,” Kier says today. “Our mission is to drive that conversation forward, empower women to ask questions about what the ingredients are on their products, and demand equity as far as what they’re being taxed for. Those are things that we feel that everybody can get on board with.”
When asked about Ross, Kier initially said that Lola wouldn’t have been able to buy out RSE Ventures’ investment in August even if it had wanted to. Some of the customers she spoke with at the time asked why Lola didn’t just “kick this person off your cap table?” But “that’s just not how investing works,” says Kier. “[RSE] would have to say, ‘We’re ready to pull out our investment.’”
That’s not entirely accurate. Several once-venture-backed startups, including tech companies Arkadium, Wistia, and Buffer, have indeed proactively bought out their investors. But an investor does have to be willing to be bought out for an agreed-upon price—and of course, the startup needs to find the cash or another way to finance any such buyout.
When I pointed out to Kier that some other companies have bought out their investors, she responded that Lola didn’t want to do a financial deal that wasn’t tied to a larger fundraising. “We didn’t want to be reactive,” she says. (The company later added in an emailed statement that it didn’t buy out the stake “because we believe individuals have the right to their own political beliefs, just as we, our employees, and our customers do.”)
Lola, which recently introduced a new type of menstrual pad and plans to spend this year building out some as-yet-unspecified “digital products,” has broad ambitions. “We think a brand like this needs to exist for women to support them through this reproductive journey from their first period to the last hot flash and beyond,” Kier says. “We should be building something that holds her hand through this entire journey.”
She and Friedman, who have adopted the tampon-industry parlance of discussing their core customer as a nameless, singular “Her,” sketch out an expansion that would provide a digital “community” as well as products for every biological stage of a woman’s life: “We want to be able to show up for her on the shelf and with the products that she needs,” Kier says, adding that Lola also wants to help that unnamed customer “understand her body and the questions she needs to be asking.”
It’s an ambitious—and idealistic—goal for many tampon startups, which are competing in a crowded market still dominated by Tampax maker Procter & Gamble and other big consumer-product conglomerates. “The fate of most of these period startups, closely aligned to the fate of most startups in general, will be to disappear,” as a long Guardian feature on Tampax and the tampon industry put it last week. And in the past year, some of Lola’s competitors have pulled that vanishing act: This is L. was sold to P&G, and Sustain was acquired by another startup, natural-products specialist Grove Collaborative.
Feminine-care startups that want to beat the odds will need to continue to raise private funding—and to navigate these questions of whether their backers’ views align with their company missions. Most startups that began as “direct-to-consumer” sellers of physical goods, like makeup or razors or mattresses, have survived on tens or hundreds of millions of dollars raised from private investors—and most have so far failed to turn a profit. Meanwhile, their potential viable exits from the private-fundraising cycle seem to be shrinking: Just last week, Casper’s disappointing IPO and Brandless’s shutdown were joined by the federally-assisted collapse of the planned $1.4 billion buyout of razor company Harry’s.
Lola, in a statement, shrugs off these comparisons, arguing that direct-to-consumer businesses “offer fundamentally different products with varying customer engagement and purchase behaviors.” Kier and Friedman say they regularly “have conversations with” potential strategic buyers, and strike an agnostic note when asked about Lola’s future independence.
“We view Lola as a brand that we want to exist in 100 years. If that means that this is going to be a private company, if it’s going to be part of a larger CPG or if it’s going to be a public company, we’re just trying to be really opportunistic,” Kier says. “Our longterm vision of being there for her is what we’re focused on.”


fortune--2020-02-20--Elizabeth Warren and Mike Bloomberg take the NDA debate primetime

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! Les Wexner is stepping down at L Brands, women are likely out of the running to replace Angela Merkel, and non-disclosure agreements go primetime. Have a terrific Thursday.
– The great NDA debate. If you predicted at the start of primary season that non-disclosure agreements would be a major talking point of the ninth Democratic debate, well, you saw coming what the rest of us missed.
But there it was last night: the clunky topic of NDAs, lobbed like a grenade into a heated Democratic debate, or, more specifically, into a heated debate between Sen. Elizabeth Warren and late entrant Michael Bloomberg.
It came up as Warren, fading in the polls, berated Bloomberg for his alleged history of misogynist remarks and sexist behavior (claims Bloomberg has defended himself against) and for his reliance on NDAs that have kept accusers from speaking out.
“I’d like to talk about who we’re running against: a billionaire who calls women fat broads and horse-faced lesbians,” Warren said. “And no, I’m not talking about Donald Trump. I’m talking about Mayor Bloomberg.” She insisted that Bloomberg reveal how many NDAs he’s signed and release his accusers from their obligations to stay silent.
“So, Mr. Mayor, are you willing to release all of those women from those non-disclosure agreements so we can hear their side of the story?” she said.
Bloomberg refused. “None of them accuse me of doing anything other than maybe they didn’t like a joke I told,” he said. “These are agreements between two parties that wanted to keep it quiet, and that’s up to them. They signed those agreements, and we’ll live with it.”
Warren’s attack put in stark terms the general criticism of NDAs; that they are tools to hide alleged bad actors’ misbehavior from future victims, from future employers, and—in this case—from future voters.
The legal mechanism has its defenders; they argue that confidentiality entitles alleged victims to favorable outcomes that would otherwise be hard to win and guarantees the privacy that many claimants crave. But the #MeToo movement has revealed how NDAs muzzle women who allege sexual harassment or misconduct, so much so that some lawmakers have proposed banning their use in such cases.
Like forced arbitration, NDAs are part of the corporate machinery that can sustain toxic workplaces and unshackle repeat offenders. They have come under fire before, but never to the extent that they did on national TV last night. Bloomberg will certainly face more questions about NDAs; others that employ the secrecy agreements shouldn’t escape scrutiny either—and they should be prepared to provide a more convincing defense than Bloomberg mustered last night.
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
-Wexner walks. L Brands CEO and chairman Leslie Wexner has announced that he is stepping down—and that the company will sell a majority stake in Victoria’s Secret, which the NYT calls L Brands' "crown jewel," to a private equity firm. The move comes in the wake of questions about Wexner's ties to Jeffrey Epstein and allegations of harassment and misogyny at the company. New York Times
- A new kind of training. Gretchen Carlson and Roxanne Petraeus, CEO of the sexual harassment training startup Ethena, argue in this piece for Fortune that current sexual harassment training is ineffective. Companies should make training about behavior change—not just compliance—and abandon the use of non-disclosure agreements in sexual harassment cases, the pair write. Fortune
- Mega-merger. Franklin Templeton will buy Legg Mason in $6.5 billion deal including debt, meaning that the U.S. asset manager now controls more than $1.5 trillion in assets. Franklin Templeton CEO Jenny Johnson will lead the combined business. Johnson only took over as chief executive of Franklin this month. The acquisition is about "having an all-weather product line-up and world-class distribution platform," she says. Financial Times
- Take her advice. E. Jean Carroll, the writer and Elle advice columnist who wrote in her recent book that President Trump raped her in the mid-1990s (he denies the charge), says that the magazine fired her from her position of almost 30 years after she made the allegation. "I don't blame Elle. It was the great honor of my life writing 'Ask E. Jean.' I blame [Trump]," Carroll wrote on Twitter. Elle's owner Hearst has not responded to media outlets' requests for comment. Carroll is suing Trump for defamation, which she ties to the end of her employment: she says the magazine fired her "because Trump ridiculed my reputation, laughed at my looks, & dragged me through the mud." NBC News
MOVERS AND SHAKERS: Nike promoted Heidi O'Neill, president of Nike's direct business, to president of consumer and marketplace.
IN CASE YOU MISSED IT
- Out of the running. As Angela Merkel's carefully considered succession plan falls apart in Germany, Fortune's David Meyer breaks down who is in the running to take over as the face of the Christian Democratic Union, and maybe as Chancellor. Now that onetime heir apparent Annegret Kramp-Karrenbauer is out of the running, the remaining likely candidates are all men. Fortune
- Clijsters's comeback. This week, tennis star Kim Clijsters played the first match after coming out of her second retirement. A 36-year-old mother of three, Clijsters says training and competition became a form of self-care after seven years mostly at home with her children. "I’ve been a full-time mum, and I love it. I really, really do,” she said in her announcement video last fall. "But I also love being a professional tennis player. Honestly, I miss that feeling. So what if I tried to do both?" Clijsters lost her match on Monday, but her comeback is just starting. The New Yorker
- Reproductive health on PR. The Clinton Foundation has been putting resources toward aid for pregnant women and new mothers in Puerto Rico. Hillary Clinton recently spent time on the island as part of those efforts, and talks to Glamour about why. "The press has never taken reproductive health seriously,” she says. “They don’t raise it, they don’t understand its importance. We have to do a better job of speaking up and educating people about why this is a critical issue for women.” Glamour
- Work from home. Anna Liu was a journalist at Q Daily in Beijing, when she was laid off in December and returned home to Wuhan to celebrate the Lunar New Year with her family. She ended up quarantined as the city shut down amid the coronavirus outbreak—but she's been using her skills as a reporter, even though she's confined at home, to help the city's citizens access information about the disease, file complaints, and find treatment. She says her career clashing with Beijing's bureaucracy prepared her for the challenge. New York Times
ON MY RADAR
Harry and Meghan's use of the word 'Royal' being reviewed, source says CNN
Romances that let black women be ambitious for a change New York Times
Gender-neutral baby clothes: a quietly radical movement Vox
PARTING WORDS
"I would have thought the car would be covered in tampon ads and Massengill and whatever."
-Racecar driver Jackie Heinricher on the sponsors she thought would back her team of female drivers.


fortune--2020-02-20--Morgan Stanley will buy E*Trade for $13 billion as brokerage consolidation heats up

Morgan Stanley agreed to buy discount brokerage E*Trade Financial Corp. for $13 billion, pushing further into the retail market with its biggest acquisition since the financial crisis.
The all-stock takeover adds E*Trade’s $360 billion of client assets to Morgan Stanley’s $2.7 trillion, the companies said Thursday in a statement. Morgan Stanley also gets E*Trade’s direct-to-consumer and digital capabilities to complement its full-service, advisory-focused brokerage.
“E*Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy,” Chief Executive Officer James Gorman said in the statement. “This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue.”
The retail-brokerage industry is being reshaped by price wars and consolidation. In early October, Charles Schwab Corp. eliminated commissions for U.S. stock trading, forcing other brokerages to follow suit and sweeping away an important revenue stream.
The following month, Schwab agreed to buy rival TD Ameritrade Holding Corp. for about $26 billion and create a mega-firm with $5 trillion in assets, forcing smaller brokerages like E*Trade to contend with a much more formidable competitor.
“It’s a pretty hefty price,” Alison Williams, an analyst at Bloomberg Intelligence, said on Bloomberg Television. “This is consistent with Morgan Stanley’s strategy” to dive deeper into the mass-affluent market.
Shares of Morgan Stanley slumped 3.6% to $54.31 at 8 a.m. in early trading in New York. E*Trade surged 25% to $56.
Gorman’s Focus
Gorman has been emphasizing Morgan Stanley’s wealth-management powerhouse, and purchasing E*Trade helps him add less-wealthy clients than its traditional customers. The New York-based company has lost some business to the retail brokerages in recent years as those firms invested heavily in their web platforms.
For Morgan Stanley, the deal “deepens the ‘safe’ wealth-management franchise — rich in fees and stability,” credit analyst David Havens at Imperial Capital wrote in a note to clients. “It reduces reliance on the more mercurial trading and markets businesses.”
Stockholders in E*Trade, which posted worse-than-expected earnings last month, will receive 1.0432 Morgan Stanley shares for each of their shares, valued at $58.74 based on Wednesday’s closing price.
More must-read stories from Fortune:
—Inflation is at historic lows, so why do things seem so expensive?—America’s heading for a tax on the middle class
—How Apple defied the odds to post the biggest quarterly profit ever
—How Blackstone became the world’s biggest corporate landlord
—WATCH: Biggest investing opportunities and risks for 2020
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-02-20--Trump backs Oracle in fight against Google on day founder Ellison hosts reelection fundraiser for hi

Trump backs Oracle in fight against Google on day founder Ellison hosts reelection fundraiser for him

The Trump administration urged the U.S. Supreme Court to reject an appeal by Alphabet Inc.’s Google, boosting Oracle Corp.’s bid to collect more than $8 billion in royalties for Google’s use of copyrighted programming code in the Android operating system.
The administration weighed in on the high-stakes case on the same day that President Donald Trump attended a re-election campaign fundraiser in California hosted by Oracle’s co-founder, billionaire Larry Ellison.
Ellison hosted a golf outing and photos with Trump. The event cost a minimum of $100,000 per couple to attend, with a higher ticket price of $250,000 for those who wanted to participate in a policy roundtable with the president, the Palm Springs Desert Sun reported.
Google is challenging an appeals court ruling that it violated Oracle copyrights when it included some Oracle-owned Java programming code in Android. The dispute has split Silicon Valley, pitting developers of software code against companies that use the code to create programs.
Google’s “verbatim copying” of Oracle’s code into a competing product wasn’t necessary to foster innovation, the U.S. Solicitor General Noel Francisco said Wednesday in a filing with the court.
Francisco had asked the high court in September, on behalf of the administration, not to hear Google’s appeal. The Supreme Court usually, though not always, takes the solicitor general’s advice about pending appeals. In this case, the justices agreed to take the case and are scheduled to hold oral arguments on March 24.
”The Obama Solicitor General Don Verrilli supported Oracle’s position in Oracle v. Google, a position maintained by Trump Solicitor General Noel Francisco,” Oracle spokeswoman Deborah Hellinger said in an email.
Google contends the appeals court ruling, if not reversed, will make it harder to develop new applications.
“A remarkable range of consumers, developers, computer scientists, and businesses agree that open software interfaces promote innovation and that no single company should be able to monopolize creativity by blocking software tools from working together,” the company said in a statement. “Openness and interoperability have helped developers create a variety of new products that consumers use to communicate, work, and play across different platforms.”
Francisco asked the justices to give the government 10 minutes to argue its position in the case. The U.S. has “substantial interest” in issues regarding copyright law and the re-use of computer code at the heart of the dispute, he said in a filing.
More must-read stories from Fortune:
—What happens to leftover campaign funds when a candidate drops out of the race?
—Putting politics aside to close the skills gap
—America’s heading for a tax on the middle class
—The case for a national primary
—Can Amazon convince a federal court to depose Trump over a $10 billion Pentagon contract?
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-02-20--What will get people to save more for retirement? Letting them ‘opt out’

Last week the White House laid out a potential plan with the stated goal of incentivizing more American households to invest in the stock market. One such proposal would allow those earning up to $200,000 to invest $10,000 on a tax-free basis outside of a typical workplace retirement account such as a 401(k).
Roughly half of all Americans have an ownership stake in the stock market but that ownership is concentrated at the top of the wealth scale. One of the main reasons inequality has gotten so out of whack in recent years is because the wealthy own the majority of the financial assets in this country. Getting more people invested in stocks is a worthy goal so more Americans can take advantage of the growth and innovation which takes place in the corporate sector over time.
Unfortunately, simply offering tax incentives won’t likely move the needle for most people. Getting people to save money isn’t typically about tax structures or willpower; it’s about intelligently designed systems that automate good behavior ahead of time. If we want more people to invest in the stock market we have to make it easier for them to do so.
The Employee Benefit Research Institute (EBRI) estimates that the retirement savings shortfall for U.S. households between the ages of 35 and 64 to be nearly $4 trillion. Most people know they need to save but they’re either too overwhelmed with the problem or don’t know where to begin.
If the government truly wanted to “force” people to save more, there are a few steps they could take. Since people are generally lackadaisical when it comes to fixing their finances, an opt-out feature where people are automatically signed up for this program would surely have better results.
The classic example of this idea was presented by Richard Thaler and Cass Sunstein in their book Nudge. Germany uses an opt-in system for registering organ donors. The consent rate among their population is just 12%. Austria, on the other hand, utilizes an opt-out system where everyone is automatically signed up but has the ability to decline if they so choose. Their consent rate is 99%.
The same theory applies to retirement savings. One study found just 49% of employees participated in their workplace retirement plan under an opt-in system. But those companies who defaulted to an opt-out system had an 86% participation rate.
Vanguard is one of the largest providers of defined contribution retirement plans in the country, with more than $1.4 trillion under management. Every year, they offer an update on these plans in a report called How America Saves. There is a massive difference in participation rates between plans that have an automatic enrollment feature and those that don’t.
You can see the biggest bump in the participation rate occurs for younger workers, who can see the biggest benefits from saving because they have many decades until they reach retirement age. This allows compound interest to do the heavy lifting for you.
Automatic enrollment also benefits people on the lower end of the income scale.
The problem for many people is they simply don’t have access to a retirement plan. It’s estimated only 40% or so of all private-sector employers offer a workplace retirement plan for their employees. But if we were to include all small businesses and sole proprietors, that numbers drops below 15%. One study found even workers who earn a modest income of between $30,000 to $50,000 a year are twelve times as likely to save for retirement if they have access to a plan at work.
If the federal government really wants more people to save and invest in the stock market, maybe they could follow Oregon’s lead. OregonSaves is a program the state started in 2017 that offers a defined contribution saving option for those workers who don’t have access to a plan with their employer.
The program requires employers to automatically enroll workers in an IRA. The default savings rate is set to 5% which automatically increases by 1% each year until a 10% savings rate is achieved. Employees can opt-out of the program but the fact that the whole process is made easier for this group can have a profound impact. Researchers believe a nationally instituted plan such as this would reduce the current projected retirement deficit by more than $1 trillion.
I give the White House credit for looking to get more people involved in the stock market. But if they really want people to save and invest more for the future they should seek to make it easier on people to take part in this program.
In a perfect world, everyone would live below their means, save the difference and dutifully plan ahead for retirement. But we don’t live in a perfect world. In the real world, changing your behavior is difficult for a large percentage of the population, especially when it comes to their finances.
We’re likely never going to be able to force Americans to save for retirement as they do in a country like Australia. There would be far too much push back from one or both political parties. In lieu of forced savings, intelligently designed systems that default to good behavior is our best bet to get more people to save for the future and take part in the growth of the stock market.
Ben Carlson, CFA is the Director of Institutional Asset Management at Ritholtz Wealth Management. He may own securities or assets discussed in this piece.
More must-read stories from Fortune:
—Inflation is at historic lows, so why do things seem so expensive?
—America’s heading for a tax on the middle class
—How Apple defied the odds to post the biggest quarterly profit ever
—How Blackstone became the world’s biggest corporate landlord
—WATCH: Biggest investing opportunities and risks for 2020


fortune--2020-02-20--Bezos’s $10 billion Earth Fund could shape Earth in Bezos’s favor

This is the web version of The Loop, Fortune’s weekly newsletter on the revolutions in sustainability. To get it delivered daily to your inbox, sign up here.Good morning.
This week, Amazon CEO Jeff Bezos launched a $10 billion fund to “amplify known ways and to explore new ways of fighting the devastating impact of climate change on this planet we all share.” Bezos took to Instagram to announce the Bezos Earth Fund, which seems strange, but with 1.5 million followers (and zero follow-backs) it was a good way to get the word out.
Like all else on Instagram, the Bezos Earth Fund has its fair share of haters. Critics argue the $10 billion goody bag is hypocritical and petty compensation for Amazon’s weak performance on climate change—a reputation the e-commerce giant tried to turn around by establishing its own Climate Pledge last year and by boosting investments in clean energy.
Amazon trailed fellow tech behemoths in embracing renewables, and the company’s own employees continue to question its commitment to combatting climate change, despite Amazon allegedly retaliating with threats of termination—although Amazon says its warnings were in line with HR policies regulating staff engagement with the media.
In what could equally apply as a critique on corporate offset culture, Amazon Employees for Climate Justice wrote on Twitter, “We applaud Jeff Bezos’ philanthropy, but one hand cannot give what the other is taking away.” The AECJ are particularly miffed by Amazon developing technology that helps fossil fuel magnates find and drill new oil wells.
Bezos’s $10 billion is ten times the amount non-government, grant-giving foundations put into the fight against climate change worldwide in 2018 (and yet only 8% of Bezos’s net worth). The size of the fund means there’s a real opportunity for Bezos to shape climate activism in his own image—perhaps, Bloomberg and The Atlantic muse—by funding lobbyists.
That possibility raises a question that speaks to AECJ’s concerns; whether a man who leads a corporation with a questionable climate record should be directing such a narrative.
The fund raises other questions, too. We don’t know, for instance, how it is going to be managed or who will decide where the money goes. There’s no doubt that money can make a huge difference. Even some of Amazon’s critics admit they wouldn’t turn it down, and, as you’ll see below, fellow tech billionaire Bill Gates’ funds continue to do good.
The first pay-out is promised this summer so, if you have an idea that “offers a real possibility to help preserve and protect the natural world,” let Bezos know.
Eamon Barrett
Eamon.barrett@fortune.com
CARBON COPY
Lithium and lilac
Bill Gate’s Breakthrough Energy Ventures fund is leading a $20 million round in Lilac Solutions, a U.S. start-up tackling the issue of water waste in lithium mining. As demand for industrial batteries surges, led by electric vehicles as well as a shift towards renewable energy, lithium mining is on the rise. But the market could see a shortfall in supply as early as 2023, according to BloombergNEF. Bloomberg
Gas begets gas
Oil and gas production may be more responsible for methane emissions than previously thought—to the extent that fossil fuel emissions from human activity may have been underestimated by up to 40%. Despite the high discrepancy, the authors of the report offered an understated warning, saying that the industry needs to “at the very least improve their monitoring.” New York Times
A deadly plague
Locust swarms the size of cities—some measuring 60 kilometers across—are ravaging parts of East Africa in what the UN describes as the worst outbreak in quarter a century. The UN Food and Agriculture Organization says a swarm covering just one square kilometer can decimate enough food for 35,000 people. Climate change is an apparent cause for the extreme swarms as rising temperatures increase cyclones, which dump rain in the desert and create breeding ground for the locusts. Reuters
IN CASE YOU MISSED IT
For tackling climate change, English bishops look to God—and cathedral heating by Katherine Dunn
If we want to keep eating chocolate, we have to end deforestation by Dirk Van de Put
Robot surgery could be the future of health care in remote areas by Ryan Madder
A legendary investor offers a green-energy manifesto by Shawn Tully
Energy emissions plateaued in 2019, as advanced economies gave up coal by Katherine Dunn
Coronavirus may be the straw that breaks the back of oil fracking by Erik Sherman
CLOSING NUMBER
70-90%
According to scientists at the University of Hawaii Manoa, 70-90% of all existing coral reefs could disappear due to warming oceans and pollution over the next 20 years. That is staggering and, as with most warnings on the impact of climate change, it’s not the first time we’ve been told. According to the scientists, "By 2100, few to zero suitable coral habitats will remain.”


fortune--2020-02-20--Japan’s sushi ‘maniac’ finds new inspiration in Hawaii

It is Golden Week, Japan’s longest annual stretch of holidays, and chef Keiji Nakazawa’s Sushi Sho restaurant in Waikiki has been booked up for months with vacationers from his homeland eager for the opportunity to sit in front of one of the country’s culinary legends. The wait-list of people hoping for a last-minute cancellation this week at his 16-seat restaurant runs 200 deep.
Three decades into a career that has seen Nakazawa, 56, reach the pinnacle of his profession, showered with superlatives and awards, he was eager for a new challenge and moved to the Aloha State, where his first restaurant outside Japan sits in one of the two glittering towers of the Ritz-Carlton Residences, Waikiki. Today, as food lovers line up for one of his $300, 30-course omakase meals, it is hard to imagine there was a time when he wondered how he would pay the bills.
Sushi Sho master chef Keiji Nakazawa Courtesy of Sushi Sho
In 1978, when the sushi master embarked on his culinary training at the age of 15, he envisioned himself much like the heroes from his beloved comic books and anime films in Japan.
“I did not like to study. At the time when I was growing up, either you were going to be a really good student and become a teacher or doctor, or you’re going to be a master craftsman, like a carpenter or chef,” Nakazawa says through a Japanese translator. “I thought about it like a superhero who has to go around and train in different places to get all the skills you need to defeat the big boss.”
Over the next 11 years, he apprenticed at 20 different restaurants from Aomori in the north to Fukuoka in the south. But like Luke Skywalker and his truncated time with Yoda, sometimes personal circumstances mean training gets cut short. Nakazawa said his parents were scammed and subsequently lost their home. It tore the family apart. So he opened his first restaurant just outside Tokyo at 26, with the goal of buying back his childhood home. He was eager, but his hubris had led him into a precarious position.
“When I first opened, people only went to sushi restaurants with a reputation, that had been around a long time,” he says. “I was a young kid, and no one was coming. Some days I’d only get maybe one customer for lunch and one for dinner. There were times when I couldn’t pay my employees.”
Nakazawa knew he had to do something to attract diners. At a time when most Tokyo chefs were obsessed with modern innovations, he studied pre-refrigeration methods: “the relics of sushi history,” he remarks.
“One of the chefs I worked under had done the Edomae style of sushi, which was going out of style and fading away,” Nakazawa says. “So I decided to study those methods and bring it back.”
One of Japan’s renowned sushi masters has moved to Honolulu, where he’s opened a 16-seat, 30-course, $300 per person omakase restaurant that is booked months in advance. Courtesy of Sushi Sho
Calling on techniques developed in the 1800s to better preserve fish and rice, Nakazawa ages and treats each item for a precise amount of time to coax out maximum flavor. Pristinely prepared fish, such as fatty tuna belly aged for five days or one-week–aged wild yellowtail, are wrapped in banana leaves, pickled in rice bran, or cured in sushi rice, then coupled with a specifically chosen rice, vegetable, or other accompaniment. The rice is often seasoned with aged vinegar and served at a range of temperatures depending on the seafood pairing.
In his third year, a magazine delivered a positive review, and Nakazawa’s restaurant started to take off. Eventually, Sushi Sho in Tokyo became a pilgrimage spot for sushi connoisseurs. He never had the chance to purchase his parents’ original home, but he did buy them a different one and brought his family back together.
By the time Nakazawa was ready to move abroad, his cuisine had been crowned “the pinnacle of Edomae sushi” by the Japanese press and chronicled in a documentary, Japan’s Top Sushi Maniac, from the Fuji Television Network. His many disciples honor him by including a nod to his restaurant, Sushi Sho, in the names of their own. Around Tokyo there is Sushi Sho Masa, Sushi Sho Shingo, and Sushi Sho Saito.
Nakazawa was listless without a challenge to conquer, and after reaching acclaim in Tokyo he knew it was time to tackle new turf. “The top restaurants and chefs get whatever they want, first pick,” Nakazawa says, referring to Japan’s famous, bustling fish markets, where the best seafood is sold off in a predawn cacophony. “So you have to build your reputation, and eventually the fish suppliers give you the best stuff. By the end, I could get whatever I wanted. But it also got to the point where the eye of the craftsman lost its meaning. The product was so good, someone with 10 years experience could make something just as good as the chef with 40 years.”
His move to Hawaii reinvigorated his creativity as he experiments with Molokai prawns, Kona abalone, and U.S. mainland products like Washington State geoduck clams.
“The exciting thing about Hawaii is always finding new ingredients that I can implement in my sushi. What I get worried about is the quality of ingredients goes up and down. In Japan you get what you want, but in Hawaii it’s more about protecting the environment and avoiding scarcity,” Nakazawa explains. “That’s part of Hawaiian culture. Like, poke is not made from the best fish, but the preparation makes it taste good. In Japan, if people will pay money, they will sell it. Here, it’s more about protecting the aina,” he continues, using the Hawaiian word for “land.”
His take on the Hawaiian dish lau lau uses the cheek of the opah—typically a bycatch fish—and king salmon wrapped in luau leaf, topped with bonito-flavored rice vinegar gelée. He serves moi, known as the fish of Hawaiian royalty, after marinating it for three weeks in red rice vinegar. Steamed monkfish liver is served on a pillow of red-vinegar rice and matched with three-year pickled baby watermelon.
Lau lau is a Native Hawaiian dish, traditionally composed of pork wrapped in taro leaves. Courtesy of Sushi Sho
Backed by iceboxes (he says modern refrigerators dry out the fish) with a custom-carved wooden facade depicting Hanaya Yohei, the father of sushi, fishing in Hawaii for moi, Nakazawa stands in the center of a semicircle counter where he finely tunes each dish in front of diners and deploys one of his most recognized talents, reading people. During one of his 20 apprenticeships, Nakazawa was put in charge of the bar, where he learned how to observe and manage customers.
“A lot of people can master the technique, but what makes a chef different is how he communicates with and handles the customers,” says Yasushi Zenda, who followed Nakazawa from one of his Tokyo restaurants to serve as his third chef and apprentice in Waikiki. “He sees everything and anticipates their needs. He will adjust the pace of service and the portion size depending on the individual.” For instance, when a diner asks for a sake from Sushi Sho’s extensive collection, Nakazawa, a trained sommelier, chooses the appropriate one based on the upcoming courses.
After three decades at the helm of his own restaurant, Nakazawa’s move to Hawaii is about more than just experimenting with new ingredients. Nakazawa also wants to impart his wisdom and prepare the next generation. Zenda, 32, originally thought he would eventually return to Japan to open his own place, but now sees an opportunity to further the spread of the Edomae style by launching a U.S. restaurant someday.
“So many chefs see the pinnacle as the end point, the goal, but a lot of them die at the peak,” Nakazawa says. “But coming down the mountain alive is just as important as reaching the summit. I have the experience, and now I’m sharing that with my apprentices.”
More must-read stories from Fortune:
—The most anticipated books of 2020, according to Goodreads
—Cabo’s newest luxury resort favors tranquility over nightlife
—The magic of the wedding industry’s most exclusive conference
—High-tech fitness offerings are the newest luxury hotel must-have
—The best travel destinations for every season of 2020
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fortune--2020-02-20--Victoria’s Secret is about to be sold after years of scandal and slumping sales

L Brands Inc. is close to selling a controlling stake in its Victoria’s Secret brand to private equity firm Sycamore Partners in a deal that values the lingerie brand at $1.1 billion, Wall Street Journal reported citing unidentified people familiar with the development.
Sycamore Partners is expected to buy 55% in Victoria’s Secret in a transaction that with L Brands and retain 45% in a separate firm that will include the young-adult focused Pink chain, according to the newspaper. L Brands’ billionaire founder Leslie Wexner will step down as chairman and chief executive officer, WSJ said. The deal could be announced as early as Thursday.
Wexner, 82, and the longest-serving chief executive officer on the S&P 500 Index, may remain on the board of L Brands and retain stake in both the companies.
The transaction follows years of scandal and slumping sales at the lingerie chain. The Columbus, Ohio-based firm has struggled to mend an image tarnished by allegations of misogynistic culture under Ed Razek, its controversial former chief marketing officer, as well as lingering questions about Wexner’s relationship with late convicted sex offender Jeffrey Epstein. Wexner says Epstein defrauded him.
Lost Ground
Victoria’s Secret, still tied to the push-up bra aesthetic the company projected for many years, has lost ground to competitors that market their products as comfortable and body-positive. A broader retail shift to e-commerce and away from shopping malls has also dealt a blow.
After this sale, L Brands would be reduced to running the Bath & Body Works chain of skin care products that contributed 35% to the overall revenues in the year ended February 2019. Victoria’s Secret, despite a declining contribution over the years, brought in nearly 56% of L Brands’ revenue last year, according to data compiled by Bloomberg.
The deal follows L Brands’ plans, laid out last September, for a turnaround at Victoria’s Secret. At the time, executives said they would improve the in-store experience and update the marketing to be more inclusive while making sure core customers don’t feel alienated.
L Brands shares have climbed almost 36% this year in New York after declining for four straight years. The company is scheduled to report quarterly results on Feb. 26.
More must-read stories from Fortune:
—Inflation is at historic lows, so why do things seem so expensive?—America’s heading for a tax on the middle class
—How Apple defied the odds to post the biggest quarterly profit ever
—How Blackstone became the world’s biggest corporate landlord
—WATCH: Biggest investing opportunities and risks for 2020
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fortune--2020-02-20--The Chinese province at the heart of the coronavirus outbreak changes how it counts cases—again

The number of new coronavirus cases reported by Hubei province dropped sharply after China changed the way it officially reports the number of infections for the second time in a month, raising questions over the reliability of data from the epicenter of the outbreak.
In its daily tally, Hubei said on Thursday that it had just 349 additional confirmed cases, compared with almost 1,700 additional cases from the day before.
No official explanation was given for the sudden decline, but it came a day after new national guidelines advised the province to only report two numbers in its overall count: confirmed and suspected cases, in line with how other provincial and national figures are reported.
Prior to that, Hubei had been reporting whether new cases of infection were confirmed via CT scans, known as “clinical diagnosis,” or nucleic acid tests. This practice was itself in place for only a week, and resulted from a methodology change made on Feb. 13 which abruptly added nearly 15,000 cases to its total count.
The shifting classification guidelines, and the lack of clarity over what’s included in China’s official count, forced yet another re-calculation of the contours of the crisis that has infected over 70,000 and killed over 2,000.
Patients at night in the Fangcang hospital, Wuhan, Hubei Province, China, on Feb. 18, 2020. Costfoto/Barcroft Media via Getty Images
There is growing mistrust over official data emerging from China, which has the vast majority of coronavirus cases and deaths globally, and suspicion that the country’s officials are prematurely promoting a narrative that the outbreak is coming under control.
The National Health Commission did not respond to questions seeking clarity over the latest data. A report from state-run news agency Xinhua on Thursday cited the Hubei health commission saying that some cases previously confirmed via CT scans were re-classified upon review by medical experts. But it didn’t explain the large drop in new cases for the province as a whole compared to a day ago.
“It points to a rather concerning confusion over how best to officially report the number of cases, leading to a loss of confidence in the true numbers,” said Jeffrey Halley, a Singapore-based senior market analyst with Oanda Asia Pacific Pte. “That could mean that internationally, the rest of the world keeps China in lockdown for longer, which will not be good for the ‘V-shaped recovery’” projections, he said.
Timeline of Events Feb. 5—China advises Hubei province to separate cases diagnosed via CT scans as a separate category within its total count of confirmed cases. Feb. 13—Hubei reports more than 13,000 cases confirmed via CT scans, without specifying a time frame, raising the total by 45% and pushing the global number of infections to over 60,000. Feb. 14—China revises its total death toll lower, saying that 108 deaths had been removed due to “double-counting” in Hubei. It also removes 1,043 confirmed cases. Feb. 19—China advises Hubei province to report cases only as “confirmed” or “suspected,” removing the need to carve out a category of cases diagnosed via CT scans. Feb. 20—Hubei reports only 349 new cases, compared to nearly 1,700 the day before.
CT scans are an alternative method that doctors in Hubei have been using to spot signs of pneumonia in patients due to the lack of nucleic acid test kits that can identify the virus’ genetic sequence in patients. The kits themselves were also known to sometimes throw up false negatives.
In recognition of the inadequacy of testing kits, China advised Hubei province on Feb 5. to begin including patients diagnosed via CT scans as a separate category under its overall count. The province started doing so on Feb. 13 in a shock adjustment that sent its total count up by 45%.
A day later, China’s National Heath Commission removed 108 deaths from its total number due to “double-counting” in Hubei.
“It is not normal for case definitions to be changed so frequently,” said Ben Cowling, a professor of epidemiology at Hong Kong University. “I imagine that the change in case definitions has led to a change in testing practice, that is, less use of the method of clinical diagnosis via CT scans.”
Tommy Xie, an economist at the Oversea-Chinese Banking Corp, saw the latest change as a refining of the previous adjustment and no cause for concern.
“There is no need to question China’s data transparency,” he wrote in a note published Thursday. “What we are seeing right now is the convergence of the counting method in Hubei towards the national standard.” This suggests that the nucleic acid test kit shortage in Hubei has eased, so diagnosis via CT scans is no longer valid without additional confirmation from a test, he wrote.
Uncertainty and Opacity
The latest changes cast doubt over whether the drop in new cases — a positive sign that the epidemic is coming under control at the epicenter — can be taken at face value. In recent days, China’s leaders have sought to project optimism over the outbreak, which has shut down large parts of its economy and plunged industries from retail to aviation into crisis.
Companies and factories across China are now being urged to re-start economic activity, while Chinese premier Li Keqiang said on Monday that the outbreak is on “a positive trend.”
Troubled companies in China are starting to crumble under the strain, intensifying the pressure on China’s leaders to prop up its overall economy. The government is considering direct cash infusions or mergers to stabilize the hobbled airline industry, while the People’s Bank of China said it will work on supporting domestic consumption.
The government of Hainan, the southern island province where indebted conglomerate HNA Group Co. is based, is in talks to seize control of the group after the contagion hurt its ability to meet financial obligations, according to people familiar with the plans.
In this climate, the latest methodology change in Hubei province is raising more questions than it answers.
“I think there may be genuine attempts to report as accurately as possible and this may be just a way of refining the numbers,” said Vishnu Varathan, Singapore-based head of economics and strategy at Mizuho Bank, Ltd.
“But the pertinent point is that in this climate of uncertainty and opacity around what is going on, constant revisions may breed mistrust, which in turn is amplified by social media.”


Delaying the future

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Can Alphabet build the city of the future? That’s what its Sidewalk Labs subsidiary proposed to do. Three years ago, it won the bid to build Toronto’s Quayside as a tech-centric model for urban reinvention. It was going to be a mini-city, driven by data and built of eco-friendly laminated timber, with solar arrays, rainwater-draining “blue roofs”, an underground thermal heating system, and pneumatic tubes for recycling.
Then came the “techlash”, and Quayside project became mired in controversy, with local outcry over data mining and objections to the encroachment of a powerful corporation into the city’s life. While polling found only 17% of residents opposed the project, that minority made itself very well heard—with former co-CEO of Research in Motion Jim Balsillie a prominent voice.
The project has become an early case study in how far people are willing to go to let data technology change their lives. In retrospect, says Sidewalk CEO Dan Doctoroff, “we should have listened sooner and better and carved it back to what we knew would be politically acceptable.” Meanwhile, the future has been delayed.
You can read Robert Hackett’s fine story on Quayside here, which is part of our package on Rethinking the City in the March edition of Fortune magazine.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
UBS CEO
Sergio Ermotti is stepping down as CEO of the Swiss bank UBS, after a nine-year tenure. He will be replaced by current ING Group CEO Ralph Hamers, who wraps up that job on June 30 (Hamers' replacement is yet to be revealed.) Ermotti on his timing: "UBS is in great shape, enjoys maximum strategic flexibility and is well positioned for sustainable growth." Wall Street Journal
Coronavirus warnings
Maersk, Foxconn, Air France-KLM and Qantas are the latest companies to warn of Covid-19's impact on their bottom line. The shipping giant issued its warning as it reported Q4 results that were already below expectations. And Foxconn mentioned its glum outlook as it said it was "cautiously" resuming production at its Chinese factories. The airlines say they will take a hit from flight cancellations. Meanwhile, the first coronavirus deaths have been reported in the Middle East, specifically Iran—cases have also been reported in Egypt and the UAE. Chinese researchers now think the virus may be spread through fecal particles. Fortune
Forever 21
Forever 21 has been rescued from bankruptcy by Authentic Brands, Simon Property and Brookfield Property, which say they want to keep most of its 448 U.S. stores open while expanding the chain internationally. Forever 21 is now hunting for a new CEO to steer its course. BBC
Bloomberg hammered
Michael Bloomberg's Democratic debate debut went really badly, with rivals such as Elizabeth Warren and Joe Biden tearing chunks out of him over his stop-and-frisk policies as New York mayor and his track record of sexist statements and non-disclosure agreements. Warren: "Democrats take a huge risk if we just substitute one arrogant billionaire for another." Bloomberg on those "very few" NDAs: "None of them accuse me of anything…Maybe they didn't like the jokes I told." France24
AROUND THE WATER COOLER
Hate speech
Angela Merkel's cabinet has approved a draft law—likely to be passed by the German parliament—that will force the likes of Facebook and Twitter to proactively tell the police about illegal posts on their networks. That means hate speech (which is prohibited in Germany) as well as posts that indicate preparations for terrorist attacks, and those that feature child sexual abuse material. Washington Post
Far-right attacks
Germany's terrorist problem is far from theoretical. Police arrested a group of people last week who were allegedly planning large-scale attacks on mosques, and last night a gunman with suspected far-right leanings (he left a letter and a video) killed at least nine people at two shisha bars in Hanau, before returning home and killing himself. Al Jazeera
Negative interest
The Financial Times has an interesting piece on Sweden's five-year trial of negative interest rates, which has just come to a close. Central banks around the world are watching closely, to see whether the experience had an impact on inflation and economic growth. Some say it's too soon to tell; others are already calling it a success or a failure. Financial Times
Larry Tesler
Raise a latte to computer scientist Larry Tesler, a computer scientist who passed away a few days ago. Tesler was a giant of user-interface design, working at Apple for 17 years, and also for Amazon and Yahoo. Every time you use cut-and-paste, that's Tesler's innovation you're using. He's also the guy who coined the term "browser". BBC
This edition of CEO Daily was edited by David Meyer.


fortune--2020-02-20--Billionaires are donating millions to fight China’s coronavirus. But where is the money going?

The NBA appears to have bought its way back onto China’s good side.
The National Basketball Association and the Chinese government had a falling out late last year after Houston Rockets manager Daryl Morey tweeted out support for the pro-democracy protests in Hong Kong. Beijing responded by suspending broadcasts of NBA games and effectively permitting a boycott of the association in China. On February 5, however, the Chinese consul general in New York was offering the NBA his heartfelt thanks.
“While China is bravely fighting the virus, people from the United States and all over the world are offering massive support in preventing and controlling this outbreak,” consul general Huang Ping said during a media briefing, reportedly loading special thanks on the NBA, which has donated $1.4 million in cash and supplies to charities in Hubei province, where the outbreak began.
In doing so, the NBA has joined the ranks of billionaires, businesses, celebrities, and philanthropists that have promised donations to help combat the coronavirus. The Bill and Melinda Gates Foundation has pledged $100 million in support; Alibaba founder Jack Ma has committed $14.4 million from his own charity; meanwhile, Boeing has shipped 250,000 masks to frontline staff.
But not all of these donations are going to China, and of the resources that are, not all are ending up where they need to be.
Go, NGOs, go
On January 26, the Ministry of Civil Affairs announced that all donations being made to support efforts to contain the coronavirus should be directed through one of five government-affiliated charities, including the Hubei Provincial Red Cross and the Wuhan Municipal Red Cross—two subsidiaries of the Red Cross Association of China.
But the Red Cross of China is not like the Red Cross overseas, which operates as a non-government agency (NGO). The Red Cross Association of China is what Beijing calls—with no sense of irony—a government-organized non-government organization, or GONGO.
“GONGOs are usually set up by the government to channel international funding and absorb government officials who were laid off during administrative reform in the 1990s. They are either spin-offs of government-affiliated service organizations or direct creations of government agencies, and are often led by retired government officials,” said Li Hui, assistant professor of politics and public administration at the University of Hong Kong.
Deploying former officials to the world of GONGOs gives the government a direct line to their activities, and the former bureaucrats are expected to be more attune to the ambitions and policies of the Party than their civic counterparts.
The ruling China Communist Party prefers GONGOs over independent civic NGOs, Li said, which still exist but are regarded with suspicion by officials who view them as a threat or, at the very least, an interference to Party control.
Foreign NGOs are even less welcome. In 2017, the central government introduced a law requiring foreign NGOs, including those registered in Hong Kong or Taiwan, to find a government sponsor before registering as an NGO. The law also brought foreign NGOs under direct supervision of the Public Security Bureaus—China’s police—which are able to inspect an NGO’s finances, staff roster, and office facilities.
“On the one hand, some officials believe that NGOs can help support service delivery and resolve social conflicts and are open to collaborate with NGOs in providing social services to citizens. On the other hand, the government has devised various policy tools to formally and informally restrict NGOs’ ability to register, raise revenue, and engage in political activities,” Li says. “The political space afforded to NGOs has been tightening.”
Show me the money
The Wuhan Red Cross—the GONGO located in the city at the center of the coronavirus epidemic—had received over $86 million in cash donations from the public as of February 1, according to a local government official. It’s also gotten stockpiles of supplies, including over 9,000 masks, 64,000 protective suits, and more than 80,000 pairs of goggles. But on social media, frontline medical staff complain that the supplies aren’t being passed along.
“We appreciate all donations from society; and in order to make sure all supplies go to the most needed, we have decided to accept donations ourselves without working with the Red Cross,” said Song Zhan, the donation coordination officer for Huoshenshan Hospital, the temporary field hospital built in eight days to accommodate the overflow of patients.
The Red Cross has said there are legitimate reasons why supplies haven’t been forwarded to the frontlines, such as donations of masks that are unsuitable for medical use. On February 1, however, three officials from the Hubei Red Cross were reprimanded for “mishandling donations for the coronavirus,” prompting an apology from the organization.
This isn’t the first time the Red Cross of China has had to apologize for mishandling resources during a crisis. When an earthquake struck Sichuan province in 2008 and killed 69,000 people, the government appointed the Red Cross as the go-to charity for handling donations and relief efforts. A report from Tsinghua University in 2009 estimated that 80% of collected donations were funnelled straight into government coffers as “extra revenue.”
Side step
The shortcomings of China’s GONGOs might be why some altruists are deciding to make indirect contributions to the coronavirus crisis.
Of the $100 million pledged by the Bill and Melinda Gates Foundation, for example, $20 million is going to multilateral agencies such as the Centers for Disease Control (CDC) and the World Health Organization (WHO), while $60 million is earmarked for vaccine research. The $14.4 million pledged by the Jack Ma Foundation will primarily fund vaccine research, too.
“It is exciting to see that individuals, foundations, and corporations are donating money and supplies to help those affected by the coronavirus,” Li said, “But the crises clearly show that the government and the broader society should work collectively to explore ways to sustain the newly emerged donation culture and support the growth of civic NGOs.”
NGOs are far from perfect—just look at the Red Cross in Haiti. But in funneling donations to government-backed charities, China is staking some of its response to the coronavirus crisis on a system mired in the same bureaucracy that stymied its initial response to the outbreak.
More must-read stories from Fortune:
—Mapping a contagion: How the coronavirus may spread around the world
—Frustrations fly as MWC trade show customers seek refunds following last-minute cancelation
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus recovery: Why it’s so hard for China’s factories to get back to work
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-20--‘Revenue surprise’—Corporate America ended 2019 with a bang

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. If yesterday was a good day for the markets, today must be… Yep, it’s a downer. Or, at least mostly. In case you haven’t noticed, we’re in a classic “W” cycle—up one day; down the next.
Here’s what’s moving markets today: Fed minutes, coronavirus, and its fallout into boardrooms and hospitals beyond China.
Markets update
The Asian and European markets are mixed, but more down than up. The U.S. futures, meanwhile, are edging down, as I type. The same can be said for crude and gold. The dollar, meanwhile, continues its surge upward.
The Fed minutes came out yesterday and coronavirus featured prominently. The outbreak is not yet seen as a full-on threat to global growth, but it’s being monitored as if it soon will be. The concern is it will also put the squeeze on already-low inflation.
The coronavirus situation itself offers a mixed picture today. There’s some good—if not confusing—data coming out of China. The number of infections overnight dropped considerably. A big reason for that: China again changed its counting methodology. And now the world is dealing with a new issue: the death toll is climbing abroad.
Meanwhile, more industry sectors warn the contagion is putting a crimp on business. This morning, Air France-KLM and Qantas both reported coronavirus-related profit warnings as has Moller-Maersk, the world’s largest container shipping company. “There is still a lot of uncertainties out there,” Maersk CEO Soren Skou told Bloomberg Television this morning.
Until we get a bit of clarity on this contagion, expect this “W” cycle to continue.
Earnings report card
Let’s move away from pandemics to profits. I got a timely note yesterday evening from John Lynch, Chief Investment Strategist for LPL Financial, who did a deep dive into the latest batch of earnings coming out of S&P 500 companies.
We’re not quite done with the results season, but it’s still worth taking a close look at the health of Corporate America.
LPL’s Lynch sees a lot of promise in the numbers. There’s been healthy revenue growth in the December quarter, and profits came in mostly above expectations.
Let’s start with their top-line assessment:
Solid revenue upside. A solid 65% of S&P 500 Index companies have beaten revenue estimates, the highest level since second quarter 2018 and well above the long-term average at 57%. S&P 500 companies have produced a larger-than-normal nearly one percentage point positive revenue surprise and are tracking to a 3.5% top-line increase.
The “revenue surprise” is particularly impressive as companies are dealing with a number of challenges including slowing global economic growth, a strong dollar, a downturn in manufacturing and reduced capital investment.
The bottom line looks even better. Lynch points out:
The earnings beat rate at 71% is slightly above the 10-year average (70%). S&P 500 earnings growth has surprised by a solid 4.4% so far despite economic, currency, and commodity headwinds.
***
On earnings calls over the past month, quarterly results have taken a back seat to 2020 outlooks. That makes sense. Investors and analysts want to know what to expect in the weeks and quarters to come as the coronavirus stifles travel, disrupts supply chains and shutters factories in the world’s second biggest economy.
Judging by LPL’s number-crunching, 2019 ended on a surprisingly strong note. And we shouldn’t lose light of that.
There was certainly momentum coming into the new year, as their analysis shows. No wonder investors are so conflicted about 2020.
We’ll see you right back here tomorrow. Have a good day.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
Cutting the cord. Speaking of W-like share performances... Roku's latest results have reignited a debate about the company's future. Is the streaming platform doomed to be overrun by bigger, more diversified tech players? Or can it make the leap beyond the commodification of its boxes and embedded interface to expand into more profitable businesses of online services and digital advertising?, asks Fortune’s Aaron Pressman.
All that glitters. As we discussed yesterday, the price of gold has surged by around 6% so far this year, playing its traditional role as a safe haven amid the stormy seas of the coronavirus outbreak. The precious metal traded near a seven-year high on concern that the health crisis will retard global growth, coupled with speculation the Federal Reserve will ease monetary policy before the year-end. Palladium has been even more impressive, holding near a record after building on a powerful rally.
Swiss surprise. Switzerland’s largest bank, UBS, unveiled a surprise change at the top. Ralph Hamers, boss of Dutch bank ING, will replace Sergio Ermotti as chief executive of UBS, the world’s largest wealth manager with $2.6 trillion of assets. Hamers will take over on Nov. 1 from Ermotti, who has spent almost nine years turning around the Swiss lender after it was bailed out during the financial crisis, the Financial Times reports.
Market candy
Quote of the day. "Corporate leaders these days are fat, sloppy and not as aggressive as they used to be.” That’s legendary investor Jeremy Grantham’s crushing verdict on today’s bosses for failing to take the big, daring bets—especially in what he sees as the green economy. The money manager tells Fortune’s Shawn Tully that while CEOs should be deploying their own R&D to find new game-changing products and technologies, "They're afraid of painful write-offs. They wait to see if someone else succeeds, then come around in Round C or Round D of venture funding."