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The SAFE TECH Act offers Section 230 reform, but the law’s defenders warn of major side effects

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The first major Section 230 reform proposal of the Biden era is out. In a new bill, Senate Democrats Mark Warner (D-VA), Mazie Hirono (D-HI) and Amy Klobuchar (D-MN) propose changes to Section 230 of the Communications Decency Act that would fundamentally change the 1996 law widely credited with cultivating the modern internet.

Section 230 is a legal shield that protects internet companies from the user-generated content they host, from Facebook and TikTok to Amazon reviews and  comments sections. The new proposed legislation, known as the SAFE TECH Act, would do a few different things to change how that works.

First, it would fundamentally alter the core language of Section 230 — and given how concise that snippet of language is to begin with, any change is a big change. Under the new language, Section 230 would no longer offer protections in situations where payments are involved.

Here’s the current version:

“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information speech provided by another information content provider.”

And here are the changes the SAFE TECH Act would make:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any speech provided by another information content provider, except to the extent the provider or user has accepted payment to make the speech available or, in whole or in part, created or funded the creation of the speech.

(B) (c)(1)(A) shall be an affirmative defense to a claim alleging that an interactive computer service provider is a publisher or speaker with respect to speech provided by another information content provider that an interactive computer service provider has a burden of proving by a preponderance of the evidence.

That might not sound like much, but it could be a massive change. In a tweet promoting the bill, Sen. Warner called online ads a “a key vector for all manner of frauds and scams” so homing in on platform abuses in advertising is the ostensible goal here. But under the current language, it’s possible that many other kinds of paid services could be affected, from Substack, Patreon and other kinds of premium online content to web hosting.

“A good lawyer could argue that this covers many different types of arrangements that go far beyond paid advertisements,” Jeff Kosseff, a cybersecurity law professor at the U.S. Naval Academy who authored a book about Section 230, told TechCrunch. “Platforms accept payments from a wide range of parties during the course of making speech ‘available’ to the public. The bill does not limit the exception to cases in which platforms accept payments from the speaker.”

Internet companies big and small rely on Section 230 protections to operate, but some of them might have to rethink their businesses if rules proposed in the new bill come to pass. Sen. Ron Wyden (D-OR), one of Section 230’s original authors, noted that the new bill has some good intentions, but he issued a strong caution against the blowback its unintended consequences could cause.

“Unfortunately, as written, it would devastate every part of the open internet, and cause massive collateral damage to online speech,” Wyden told TechCrunch, likening the bill to a full repeal of the law with added confusion from a cluster of new exceptions.

“Creating liability for all commercial relationships would cause web hosts, cloud storage providers and even paid email services to purge their networks of any controversial speech,” Wyden said.

Fight for the Future Director Evan Greer echoed the sentiment that the bill is well intentioned but shared the same concerns. “…Unfortunately this bill, as written, would have enormous unintended consequences for human rights and freedom of expression,” Greer said.

“It creates a huge carveout in Section 230 that impacts not only advertising but essentially all paid services, such as web hosting and [content delivery networks], as well as small services like Patreon, Bandcamp, and Etsy.”

Given its focus on advertising and instances in which a company has accepted payment, the bill might be both too broad and too narrow at once to offer effective reform. While online advertising, particularly political advertising, has become a hot topic in recent discussions about cracking down on platforms, the vast majority of violent conspiracies, misinformation, and organized hate is the result of organic content, not the stuff that’s paid or promoted. It also doesn’t address the role of algorithms, a particular focus of a narrow Section 230 reform proposal in the House from Reps. Anna Eshoo (D-CA) and Tom Malinowski (D-NJ).

New exceptions

The other part of the SAFE TECH Act, which attracted buy-in from a number of civil rights organizations including the Anti-Defamation League, the Center for Countering Digital Hate and Color Of Change, does address some of those ills. By appending Section 230, the new bill would open internet companies to more civil liability in some cases, allowing victims of cyber-stalking, targeted harassment, discrimination and wrongful death to the opportunity to file lawsuits against those companies rather than blocking those kinds of suits outright.

The SAFE TECH Act would also create a carve-out allowing individuals to seek court orders in cases when an internet company’s handling of material it hosts could cause “irreparable harm” as well as allowing lawsuits in U.S. courts against American internet companies for human rights abuses abroad.

In a press release, Warner said the bill was about updating the 1996 law to bring it up to speed with modern needs:

“A law meant to encourage service providers to develop tools and policies to support effective moderation has instead conferred sweeping immunity on online providers even when they do nothing to address foreseeable, obvious and repeated misuse of their products and services to cause harm,” Warner said.

There’s no dearth of ideas about reforming Section 230. Among them: the bipartisan PACT Act from Senators Brian Schatz (D-HI) and John Thune (R-SD), which focuses on moderation transparency and providing less cover for companies facing federal and state regulators, and the EARN IT Act, a broad bill from Sen. Lindsey Graham (R-SC) and Richard Blumenthal (D-CT) that 230 defenders and internet freedom advocates regard as unconstitutional, overly broad and disastrous.

With so many proposed Section 230 reforms already floating around, it’s far from guaranteed that a bill like the SAFE TECH Act will prevail. The only thing that’s certain is we’ll be hearing a lot more about the tiny snippet of law with huge consequences for the modern internet.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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UK challenger bank Starling raises $376M, now valued at $1.9B

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Challenger banks continue to see huge infusions of cash from investors bullish on the opportunity for smaller and faster-moving tech-based banking startups to woo customers from their larger rivals. In the latest development, UK-based Starling announced that is has closed £272 million ($376 million at current rates), at a pre-money valuation of £1.1 billion.

This means that the round, a Series D, values the company at £1.372 billion ($1.9 billion) post-money.

Starling — which competes against incumbent banks, as well as other challengers like Monzo and Revolut — said it will be using the money to continue its growth. The bank is already profitable. In updated financials posted today, Starling said it generated revenue of £12 million ($16.6 million) in January of this year, up 400% compared to a year ago, with an annualized revenue run rate of £145 million. It posted operating profits for a fourth consecutive month, and net income currently exceeds £1.5 million per month.

Starling, founded in 2017, has now pased 2 million accounts, with 300,000 business accounts among them. It’s not clear how many of those accounts are active: the figures are for opened accounts, Starling said. Gross lending has passed £2 billion, with deposits at £5.4 billion.

Starling said it plans to use the funding both to expand its lending operations in the UK, to expand into other parts of Europe, and make some strategic acquisitions.

“Digital banking has reached a tipping point,” said Anne Boden, founder and CEO of Starling Bank, in a statement. “Customers now expect a fairer, smarter and more human alternative to the banks of the past and that is what we are giving them at Starling as we continue to grow and add new products and services. Our new investors will bring a wealth of experience as we enter the next stage of growth, while the continued support of our existing backers represents a huge vote of confidence.”

The round is being led by Fidelity Management & Research Company, with Qatar Investment Authority (QIA); RPMI Railpen (Railpen), the investment manager for the £31 billion Railways Pension Scheme; and global investment firm Millennium Management also participating, and it comes on the heels of us reporting in November that it was raising at least £200 million.

The funding comes at a critical time in consumer banking. The trend in the UK — the market where Starling is active — for the last several year has been a gradual shift to online and mobile banking, with those trends rapidly accelerating in the last year of lock-downs and enforced social distancing to slow down the spread of Covid-19.

Challenger (neo) banks have been some of the biggest winners of evolving consumer habits. Using rails provided as white-label services by way of APIs from banking infrastructure providers (another startup category in itself with companies like Rapyd, Plaid, Mambu, CurrencyCloud and others all involved) they will offer the same basic services such as checking and deposit, but they will typically do so with considerably  more flexibility, and additional savings and financial tips, and savings services to customers — all carried out over digital platforms.

Big, incumbent banks have scrambled to keep up with innovation, but newer generations of users are less beholden to their brands and incumbency, not least a result of the banking crisis last decade that revealed many of them to be cosiderably less competent and solid than many might have assumed.

That bigger market picture has also meant a surge of many neobanks, and so Starling competes with more than just the incumbents. Others include Monese, Revolut, Tide, Atom and Monzo — the latter a particularly acute competitor, founded by the ex-CTO of Starling.

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Deliveroo posted narrowed loss of $309M, with gross transactions surging to $5.7B in 2020, EITF shows

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The clock has officially started ticking on Deliveroo’s plans to go public in April. After announcing last week that it planned to list on the London Stock Exchange, today the on-demand food delivery company backed by Amazon and others published selected updated financials for the previous fiscal year, along with its Expected Intention to Float (EITF) — a more formal document that marks the two-week period until the company publishes its prospectus and, at the start of April, embarks on its subsequent IPO.

The bottom line is that Deliveroo is still unprofitable. It posted a 2020 underlying loss of £223.7 million ($309 million), but that figure was down by nearly £100 million from 2019, when it chalked up a loss of £317 million ($438 million). It did not disclose revenues (sometimes called turnover) in today’s statement.

The company said that it now serves some 6 million customers, with its three-sided marketplace also including more than 115,000 restaurants, takeaways and grocery stores, and 100,000 riders in 800 locations among 12 markets.

At the same time, Deliveroo showed some clear momentum in a year where many restaurants had to close their doors and shift operations to take-away models because of Covid-19.

It notes that it has been profitable on an “Adjusted EBITDA basis” over two quarters, with underlying gross profit up by 89.5% to £358 million ($495 million) compared to £189 million in 2019.

Its gross transaction volume (total amount spent by consumers ordering food) grew by 64% to £4.1 billion ($5.67 billion) with the run-rate in Q4 surging to £5 billion. This figure is unsurprising when you consider that Q4 represented the holiday period, and additionally the UK market (Deliveroo’s primary market and its home) went through not one but two different periods of being locked down in that quarter (the second of these is still in place).

It also notes that gross profit margin as a percentage of GTV has grown from 5.8% in 2018 to 8.8% in 2020, with some markets getting to 12%.

“The company remains focused on investing in driving growth in a nascent online food market,” it noted in the EITF, although I’m not sure nascent is exactly the word I’d use. Its drivers are easily the most visible of the many delivery services that exist in London. Deliveroo estimates that the restaurant and grocery sectors represent an addressable market of £1.2 trillion ($1.66 trillion) across the 12 regions where it offers services. In that figure, it says that just 3% of sales are estimated to be online, “equivalent to less than 1 out of the 21 weekly meal occasions being online.”

The company was valued at over $7 billion in it last fundraising, a $180 million round from Durable, Fidelity and others, as recently as January of this year.

It’s a huge leap that is the stuff that tech myths are made of (with untold hours of blood, sweat and tears, and a lot of luck too). I met Will Shu, the CEO and founder, when he was just really getting started at Deliveroo, and he seemed somewhat bewildered by how fast the startup was growing and where it was leading him. It’s interesting that he himself hasn’t forgotten those early days, either, which surely help keep the company focused at a time when there are a lot of opportunities, and therefore a lot of potential for focus unravelling.

“I never set out to be a founder or a CEO. I was never into start-ups, I didn’t read TechCrunch. I’m not one of those Silicon Valley types with a million ideas,” he noted in his letter published in the EITF. “I had one idea. One idea born out of personal frustration. An idea that I was fanatically obsessed with: I wanted to get great food delivered from amazing London restaurants.”

The prospectus will tell us how much the company intends to raise in its IPO so we’ll know those numbers soon. In the meantime, Deliveroo said that it plans to “invest in its long-term proposition by developing its core marketplace, enhancing its superior consumer experience, providing restaurant and grocery partners with unique tools to help them grow their businesses, and providing riders with the flexible work they value alongside security.”

It’s also going to continue building out “dark kitchens” (which it brands Editions); Signature, a white-label service for restaurants to offer delivery via their own online channels; Plus, a Prime-style loyalty subscription service; and on-demand grocery — which is also shaping up to be a huge market in Europe and the rest of the world.

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Porsche raises stake in electric car and components maker Rimac Automobili

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Rimac Automobili, the Croatian company known for its electric hypercars and battery and powertrain development, has gained yet another investment from Porsche AG.

Porsche said Monday it has invested 70 million euros ($83.3 miilion) into Rimac, a move that increases its stake from 15% to 24%.

This is the third time Porsche has invested into Rimac. The German automaker made its first investment into Rimac in 2018. Porsche increased its equity stake into Rimac in September 2019. A few months earlier, Hyundai Motor Company and Kia Motors jointly invested €80 million ($90 million at the time) into Rimac.

Rimac was founded by Mate Rimac in 2009 and is perhaps best known for its electric hypercars, such as the two-seater C Two that it debuted in 2018 at the Geneva International Motor Show. The vehicle produces an eye-popping 1,914 horsepower, has a top speed of 256 miles per hour and can accelerate from 0 to 60 mph in 1.85 seconds. Rimac plans to unveil C Two in its final form in 2021.

However, Rimac does more than produce hypercars. The company, which employs 1,000 people, also focuses on battery technology within the high-voltage segment, engineers and manufactures electric powertrains and develops digital interfaces between humans and machines.

Porsche is most interested in Rimac’s development of components, according to comments made by Lutz Meschke, the deputy chairman of Porsche AG’s executive board. Meschke noted that Rimac is “excellently positioned in prototype solutions and small series” and “is well on its way to becoming a Tier 1 supplier for Porsche and other manufacturers in the high-tech segment.”

Porsche has already placed its first orders with Rimac for the development of highly innovative series components, according to Meschke.

Despite its continued investments, Porsche said it doesn’t have a controlling stake in Rimac.

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