A fight is brewing between two machine intelligence startups, and neither side looks all that smart

… and Avalon Ventures — says it is fundamentally different than Quid. It says Quid’s product is a network-based data visualization and exploration tool, …

Sometimes, reading a lawsuit, it’s tempting to pick sides, to judge who is more right than wrong based on its contents. But a new lawsuit involving two venture-backed companies — both of which are rooted in machine intelligence — makes both sides sound surprisingly careless given their line of work.

The plaintiff is Quid, a now 12-year-old company that has raised roughly $108 million from investors, shows Crunchbase. Its newest, $38 million round closed in October, led by REV Ventures, the investment arm of LexisNexis owner RELX Group, and it included participation from some very heavy hitters, including Tiger Global founder Julian Robertson and KKR cofounder Henry Kravis.

Quid calls itself a “platform that searches, analyzes and visualizes the world’s collective intelligence to help answer strategic questions.” As company cofounder Bob Goodson has described the company, its software scours the internet, including company websites, news databases and social media postings to help its clients understand how their industries are changing.

What has Quid convening with lawyers — including powerhouse attorney Patty Glaser (she has represented Harvey Weinstein, Kirk Kerkorian, and Conan O’Brien, among many others) — is a small group of former employees who Quid says stole from the company to create a rival startup. That company, Primer.ai, says it “builds machines that can read and write, automating the analysis of very large datasets” in order to “accelerate” its understanding of the world, then sell those insights to clients in government, in finance, and to other companies.

It sounds similar, but Primer.ai – – founded four years ago in San Francisco and now venture-backed with $54.7 million, including from Lux Capital, Data Collective, and Avalon Ventures — says it is fundamentally different than Quid. It says Quid’s product is a network-based data visualization and exploration tool, while it instead focuses on text-generation technologies using deep neural networks.

If there are actual trade secrets employed by Primer.ai that belong to Quid, it’s now for a judge to decide. In the meantime, we rule the battle ridiculous sounding.

It’s a lot to read through, so we’ll just highlight some of the parts of this back and forth that we find particularly strange, starting at the very beginning.

What we mean: Quid alleges corporate espionage that dates back to August 2014, saying the company told its then CTO — now Primer.ai founder – – Sean Gourley, that it wanted to let him go, but rather than terminate him, it let him know he was going to be fired, then it asked him to stay with the company for five more months until it could close its next round of funding. On its face, that sounds not smart, but Quid also insults Gourley’s intelligence in its legal complaint, which reads:

On June 23, 2008, Gourley joined [Quid precursor] You-Noodle pursuant to a consulting agreement where Gourley provided research, development and strategic advice to assist with creation of an earlier . iteration of the Quid platform known at “Startup Predictor.” After completion of this .consulting assignment, Gourley was offered and accepted a full-time position as Director of Data Tools, relocated to San Francisco and started employment in this capacity on November 1, 2009. On the same day, he executed his Confidentiality Agreement.

In September 2010, following the name change to Quid, Gourley was promoted to Chief Technology Officer and given the responsibility to direct a team of software engineers in the development of Quid’s next-generation platform. In January 2012, Gourley announced the new product ready for demonstration to Quid’s Board of Directors, but his presentation failed as the platform did not work as intended, and Gourley seemed to not comprehend its basic functionality. In the wake of this failed presentation, the Board demanded that changes in leadership and direction be made at the Company. Goodson stepped down as CEO and was tasked with sales and helping to reengineer the platform to get it back on track. With the benefit of new funding and the full-time efforts of a new Vice President of Engineering (who took over Gourley’s engineering responsibilities), the product deficiencies were corrected and Quid was able to release the product for commercial testing and use by late 2013.

By early August 2014, Quid’s new CEO, Kevin Freedman, saw no need to keep Gourley as a Quid employee but decided to maintain continuity by retaining Gourley until new investor funding—expected to be in place by mid-January 2015—could be secured. Accordingly, on or about August 8, 2014, Freedman proposed an arrangement to Gourley whereby he would be relieved of his position as CTO and would act as “Advisor to the CEO” until his effective termination date of January 15, 2015. Gourley accepted.

In short, Quid says, in its own complaint, that its cofounder and CEO, Bob Goodson, was demoted, then a new CEO who was brought in fired Gourley, the company’s CTO, in what sounds like a knuckle-headed way.

Unsurprisingly, a legal response since filed by Gourley — who, it’s probably worth noting, has a PhD in physics from Oxford — makes Gourley sound highly capable while painting the same picture of disorganization in Quid’s filing. Here’s Gourley version of events of that same period, taken from his response to Quid’s filing:

The board blamed CEO Bob Goodson for the lack of budgeting and demanded monthly financial reports. This was one of the primary topics in the January 16, 2012 board meeting where the consensus was that the business side of the company needed to be reformed. It was during this same meeting that Dr. Gourley demonstrated the functioning of Quid’s new software to the board. After the meeting, Mr. Goodson was demoted and relieved of his duties as CEO. The board then began the search

for a new CEO. Id. They located Kevin Freedman in February and he took the position in March 2014. Mr. Goodson was demoted to Chief Revenue Officer.

As for Dr. Gourley, far from “fail[ing]” as Quid suggests, on March 20, 2012 he presented the same technology he had presented to the board publicly at a “Data Driven NYC” event. The technology, which largely mirrors Quid’s functionality today, worked. Moreover, after Mr. Freedman was named CEO, Quid awarded Dr. Gourley a significant bonus and pay increase.

Despite the technical successes, Quid’s management remained a problem. Dr. Gourley decided to take action and in June 2014 met with the Chairman of the Board Charles Lho to discuss his concerns. While the board reviewed Mr. Freedman’s performance, Mr. Freedman decided to terminate Dr. Gourley. However, because Dr. Gourley was such an integral member of the company, they decided that the termination would be gradual so that he could continue to help Quid with sales and fundraising while seeking new projects.

Freeman was apparently fired eight weeks after firing Gourley and Neville Crawley, the company’s COO, was named CEO.

But whether Gourley is brilliant or was incapable of comprehending Quid’s technology seven years ago isn’t what’s really central to this fight anyway. Neither does it matter how Freeman handled the situation. The bigger question is whether Gourley, as Quid asserts, violated a confidentiality agreement with Quid by gathering up information, including Quid’s proprietary code, in the time after he was alerted he would be terminated. Quid’s big concern is that Gourley took and used it at Primer.ai, which also employs some former Quid employees who joined Gourley.

In fact, it’s out of fear that these trade secrets inform some of Primer.ai’s technology that Quid is asking a judge to put Primer.ai in a deep freeze until it can know for certain. It says it only recently began suspecting Gourley after an IT manager at Quid last October discovered that Gourley- – over the four years following his Quid termination — had repeatedly logged into the Quid computer network to “access Quid confidential data and use his Quid email address.”

From Quid’s filing:

This application is made on the grounds that Defendants — all former employees of Plaintiff –accessed, copied, downloaded and made active use of trade secret and highly confidential computer data of Plaintiff – both during and subsequent to their employment with plaintiff – all for the purpose of benefitting their directly competing company Primer Technologies, Inc. (“Primer”) in the computer-generated analysis of large data collections. As set forth in the accompanying Ex Parte Application, direct evidence confirms that Defendant Gourley – while still an employee of Quid – repeatedly downloaded from Quid’s computer network a complete Google data archive of his entire “Google Suite” of Quid accessible computer data including both his email and Google drive, amounting to over 100,000 separate highly proprietary items at Quid, including source code Thereafter, direct evidence also demonstrates that, during and subsequent to his Quid employment, Defendant Gourley with the active assistance of the other Individual Defendants used his Quid email address for the purpose of soliciting and diverting business opportunities intended for Quid to his new directly competing entity thereby enabling Primer to receive funding and customers otherwise intended for Quid’s benefit. All of this conduct occurred in direct violation of each of the Individual Defendants’ contractual commitments – – continuously in place until this very day – – to preserve during employment and immediately return upon employment termination all Proprietary Information at Quid.

Here’s the thing, though: Quid — which, again, is an machine intelligence company — says it only stumbled into this discovery after Gourley was finally cut off from his Quid email account and asked Goodson (who was reinstated as CEO in late 2016) if he could continue to access it.

According to Quid’s complaint, Gourley told Goodson that he had personal communications and photos stored with the account, among other things. Goodson didn’t direct that the account be reinstated, however, and this January, according to Quid’s complaint, a forensic team discovered “Gourley’s downloads of the 86 python source code files,” adding that “Quid continues to investigate the full scope of Gourley’s source code theft.”

We don’t have a horse in this race, and obviously, if Quid is proven right in its allegations that Gourley stole from the company while an employee of afterward, there should be appropriate consequences. We appreciate that there’s much on line for both parties, particularly given the opportunity ahead of each.

Still, Quid’s own complaint reveals much about how little the company had buttoned down over the years. In the meantime, Gourley insists that he has done nothing wrong and that Primer.ai is currently in the middle of its own forensic analysis to ensure as much. Relatedly, he says it was known to Quid management for years that he . was still accessing his Quid email, including because he was working for them on commission and communicating with them on it.

Here are all the filings we’ve seen thus far. We’ll keep an eye out and let you know how this story develops.

Quid Motion by TechCrunch on Scribd

Primer Corrected PI Opp (004) by TechCrunch on Scribd

4. Gourley Declaration by TechCrunch on Scribd

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Tech-centric SF installment-loan company lands $300 million in funding

According to its Crunchbase profile, “Affirm is a financial technology services company that offers installment loans to consumers at the point of sale.

San Francisco-based consumer lending company Affirm has secured $300 million in Series F funding, according to company database Crunchbase, topping the city’s recent funding headlines. The cash infusion was announced April 3 and led by Thrive Capital.

According to its Crunchbase profile, “Affirm is a financial technology services company that offers installment loans to consumers at the point of sale. Its aim is to improve the banking industry to be more accountable and accessible to consumers.”

The seven-year-old company has raised six previous funding rounds, including a $200 million Series E round in 2017.

The round brings total funding raised by San Francisco companies in financial services over the past month to $665 million, and increase of $478 million from the month before. The local financial services industry has produced 224 funding rounds over the past year, securing a total of $4.6 billion in venture funding.

This story was created automatically using local investment data, then reviewed by an editor. Click here for more about what we’re doing. Got thoughts? Go here to share your feedback.

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Indian social commerce startup GlowRoad raises $10M Series B

… from investors including Shunwei Capital, Sequoia Capital India, RPS Ventures, Y Combinator, Venture Highway, SAIF Partners and DST Partners, …

Indian social commerce startup GlowRoad announced today that it has raised a $10 million Series B. The round was led by CDH Investments, a Chinese investment firm, with participation from returning investor Accel Partners.

GlowRoad’s last funding, a $2 million Series A led by Accel, was announced in September 2017, a few months after it launched. The startup’s founding team includes Sonal Verma, a physician who focused on community medicine before co-founding telemedicine company HealthcareMagic in 2008. During her medical work, Verma realized that many stay-at-home mothers and housewives resell products in their neighborhoods. GlowRoad was created to help them take their businesses online by drop-shipping products.

GlowRoad screens manufacturers before adding them to its platform, then GlowRoad’s sellers decide which items to add to their stores and how to market them. The company now claims more than 100,000 resellers, 20,000 suppliers and 300,000 buyers. One of its most notable competitors is reselling platform Meesho, which has raised a total of $65.2 million from investors, including Shunwei Capital, Sequoia Capital India, RPS Ventures, Y Combinator, Venture Highway, SAIF Partners and DST Partners, according to Crunchbase.

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Zoom Targets $28 to $32 Per Share In IPO

… company is leaving the private market with $160.5 million in funding, with investors like Sequoia Capital, Emergence Capital, and Horizon Ventures.

Zoom, a business-focused video conferencing company, priced its initial shares for its upcoming IPO at $28 to $32 per share, according to its S-1/A filing. 1

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Using a simple count of Class A and B shares outstanding after the IPO, Zoom would be worth $8.25 billion at $32 per share. More than 3 million shares are being offered to underwriters, putting the non-diluted valuation of Zoom, inclusive of the underwriter option, at $32 per share at $8.35 billion. According to Renaissance Capital, at the midpoint of its range, the company would sport “a fully diluted market value of $8.7 billion.”

Zoom is not going public on the strength of sheer growth, like Lyft. Instead, it’s going public on the back of profitable growth, which, this pricing shows us, is in demand. As such, Zoom is selling its shares at a valuation much higher than its private market worth, which was last known to be at a pre-money valuation of $900 million as part of its $115M Series D announced on January 2017. Unlike Pinterest, which recently set terms for its IPO to come in under its final private valuation, Zoom is posting material gains from its final private price.

As Crunchbase News noted at the time of Zoom’s first S-1 filing, the company doubled its revenue in its fiscal year ending January 31, 2018, with $330.5 million. It more than doubled its revenue from the year prior.

It generated nearly $270 million in gross profit, which is a gross margin of about 81.6 percent, an impressive figure for a company at Zoom’s size.

The Others

Other recent or upcoming IPOs like Lyft, Uber and Pinterest lack the one thing Zoom has: profit. Its revenue grew 118 percent in the last fiscal year.

It means investors made the right bet the conference tool—the company is leaving the private market with $160.5 million in funding, with investors like Sequoia Capital, Emergence Capital, and Horizon Ventures.

Its proposed ticker symbol is “ZM,” and it is expected to start trading on Nasdaq next week, around the same time that Pinterest is rumored to list. As we reported this morning, Pinterest priced under its valuation, which could mean a slew of things, but mostly that the path toward profitability is hard. Still, as both companies tumble toward the finish line, we’ll see a textbook type of experiment on how the market reacts to two types of Unicorns: the profitable and the not-so-much. Stay tuned.

  1. Disclosure: Emergence is an investor in Crunchbase, the parent company of Crunchbase News. Crunchbase’s investors are listed as part of its Crunchbase profile. For more about Crunchbase News’s editorial policies on disclosure, see the News team’s About page.

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Tech Bootcamp Startup Trilogy Education Acquired For $750M

The startup’s lead investors, who likely stand to gain the most from the acquisition, include Highland Capital Partners, Macquarie Group, and Exceed …

Tech companies around the globe claim there’s a talent shortage; however, there doesn’t seem to be a shortage of liquidity for those startups attempting to bridge the gap.

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Trilogy Education, a workforce training startup that offers programs in “web development, data analytics, UX/UI design, and cybersecurity,” has been acquired by 2U, a SaaS platform for school operations, for $750 million in cash and stock, according to a press release.

It’s a near-unicorn level acquisition deal for Trilogy Education, which has, according to Crunchbase, raised a (these days) modest $80 million. The startup’s lead investors, who likely stand to gain the most from the acquisition, include Highland Capital Partners, Macquarie Group, and Exceed Capital Partners.

The acquisition is also a confirmation of a broader trend of tech training schools to garner attractive exits. Just over a year ago, General Assembly was acquired by Adecco, a Swiss staffing firm, for $413 million. WeWork also bought Flatiron School in 2017.

According to 2U’s Co-Founder and CEO Christopher Paucek, the Trilogy Education acquisition will help the company reach $1 billion in revenue by 2021. The acquisition will also nearly double 2U’s footprint, going from “36 to 68 [university ] partners.”

Illustration: Li-Anne Dias.

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