Kia Kokalitcheva
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Finance pros want in on the cryptocurrency boom

Illustration: Rebecca Zisser / Axios

Bitcoin and Ethereum are no longer just for libertarian geeks and their Reddit pals. That became clear last week when a day-long conference about cryptocurrency hedge funds in San Francisco was filled with suits instead of t-shirts and hoodies. Cryptocurrency is the next "it" thing in trading, and the professionals know it. (Except for Jamie Dimon.)

Why it matters: Regulators around the world are grappling with the rise of cryptocurrencies and, more recently, initial coin offerings. This will become increasingly important as more financial professionals want to make a business out of it.

Key quote: "In this space I think we will soon see one person generate $1 billion of value." — Ethereum co-creator Vitalik Buterin

Hot conference topics:

Security: "I don't think it's realistic to assume that no one at the fund can steal the money," said Ari Paul, BlockTower Capital managing partner. "Security at the moment is about not losing LP funds."

Regulation: "The IRS is really not gonna understand the technology," said Arthur Bell tax advisor Cynthia Pederson, adding that fund managers have to make sure they clearly explain everything to the agency.

Risk management: Common questions from fund investors involve exchange hacks and shutdowns, said some fund managers. Security vulnerabilities in the protocols (or cryptocurrencies) themselves also add risk.

Definitions: Though the Commodity Futures Trading Commission declared cryptocurrencies to be commodities in 2015, some experts think regulators will have to take a more nuanced view as new tech emerges.

ICOs: With some groups now raising hundreds of millions of dollars through initial coin offerings, they'll need to hire people to manage the funds. Unlike traditional startups that usually have an established business by the time they raise such amounts, these issuers rarely have more than a team of developers and an white paper.

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Ex-Y Combinator COO working on self-driving car startup

via QasarYounis.com

Qasar Younis, a former Google product manager who was most recently chief operating officer at startup accelerator Y Combinator, is quietly working on an autonomous driving startup, Axios has learned from multiple sources.

Background: Younis left Y Combinator in March after four years at the famed Silicon Valley accelerator. Before that, he spent three years as a product manager at Google, which he joined after the search giant acquired his startup (and YC alum) TalkBin. Early in his career, Younis was an engineer with General Motors.

The details: The company is said to be working on simulation software for self-driving cars, and is finalizing a $10 million funding round led by Andreessen Horowitz (with Marc Andreessen joining the board of directors). Andreessen Horowitz declined comment, while Younis did not return requests for comment.

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SEC says 2016 hack may have led to illegal trading

The floor of the New York Stock Exchange (Richard Drew / AP)

The U.S. Securities and Exchange Commission disclosed on Wednesday that its online corporate document system was hacked in 2016 and may have resulted in trading using illegally obtained information. Edgar, the online filing system, stores the documents submitted by publicly-traded companies and others regulated by the commission. The commission did not say which companies may have been affected or share more details about the breach.

According to the SEC, the commission discovered the hack in 2016 and the software vulnerability was promptly patched, however it only learned last month that it may have been the source of trading using non-public documents. "It is believed the intrusion did not result in unauthorized access to personally identifiable information, jeopardize the operations of the Commission, or result in systemic risk," it said in a statement.

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Venture capital trade group sues Homeland Security

AP

The venture capital industry's national trade group is leading a lawsuit against the U.S. Department of Homeland Security over the decision in July to delay a rule that would have made it easier for startup founders to get a visa. The rule, called the International Entrepreneur Rule, was created during theObama administration and was scheduled to come into effect on July 17. It's been postponed until March 2018.

The National Venture Capital Association says that the DHS failed to solicit public comment before making the decision to delay the rule, thus violating the Administrative Procedure Act. At the time of the postponement, the agency said it would get public input as it reconsiders the laws.

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Udacity adding new degrees on self-driving and "flying" cars

Courtesy of Udacity

Self-driving cars are a growing industry but not a common field of study in traditional colleges. Udacity, which debuted an online education program last year to help fill the jobs demand, is now adding an introductory "nanodegree" on the topic. It will also add a nanodegree next year inspired by the nascent "flying car" industry.

Remember: Today we discuss self-driving cars as a certain future, but "this wasn't the case 3 years ago," Udacity co-founder and president Sebastian Thrun told Axios. Thrun was one of the earliest to work on Google's self-driving technology and a winner of the DARPA Grand Challenge.

  • "Now I get the same reaction about flying cars," he adds. "You should skate where the puck is going."

"Education is so much more than job placement, but for Udacity it's job placement," said Thrun. "In the future, tech is gonna move faster and faster so we're gonna lose our skills faster. We can't afford to go to college every time."

  • Udacity's courses and degrees are designed based on what employers want. "We say 'what would impress you? What things would a student have to do to impress you?'"
  • With that said, Thrun also believes that online education schools like Udacity don't serve fresh high school graduates who may want to get a fundamental college education. Last year, he said that he'd still want his own son to attend a traditional university.

More: Lyft is sponsoring scholarships for 400 students from underrepresented groups to take Udacity's introductory nanodegree over the next year. Lyft is also a recruiting partner for Udacity's self-driving car degree.


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Patreon raises $60 million because fans still pay for content

Courtesy of Patreon

An art industry startup is doing what many media companies believe is impossible: Attracting consumers who want to pay for content. Patreon, which lets artists charge fees for their work, today announced that it has raised $60 million in a new funding round led by Thrive Capital.

How it works: Borrowing from the idea of patronage, Patreon's creators can collect membership fees from their fans (or patrons) in exchange for access to exclusive art or content. This year, the company will pay out $150 million in earnings to its 50,000 creators.

Why it matters: "I think we're seeing a shift in the entire ecosystem where people are realizing that they're sick of clickbait," Carlos Cabrera, Patreon's VP of data science and operations, told Axios. "The current systems are really bad at promoting great stuff."

  • Patreon co-founder and CEO Jack Conte is intimately acquainted with the challenges artists face—he's a musician himself, performing as one half of music duo Pomplamoose.
  • And yet, changing consumers' mindset is still a big challenge for Patreon, said Cabrera.

Deal details: Index Ventures, CRV, Freestyle, and DFJ are also participating in the round, which brings Patreon's total funding to $100 million. Last week, TechCrunch reported that Patreon is raising funding at a $450 million valuation, although Axios is told that this isn't accurate.

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Shasta Ventures debuts fund focused on AR/VR

Kia Kokalitcheva / Axios

Shasta Ventures, known for its early investments in companies like Nest, is debuting a new investment initiative dubbed the Shasta Camera Fund. Principal Jacob Mullins unveiled the fund on Monday at the TechCrunch Disrupt conference in San Francisco.

Through the new fund, the firm is going after the recent boom in apps and tools focused on photos, videos, and augmented reality. Major social media companies like Snap and Facebook have already declared the camera as the next frontier, and with tools like Apple's ARKit and Google's ARCore, among other tools, it's easier than ever for entrepreneurs to build these new media experiences.

Fund details: It will invest at the pre-seed or seed stage, up to $100,000 per startup. It's a carve-out from Shasta Ventures' Fund V.

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Google in talks to invest in Lyft

Josh Edelson / AP

Google has held talks to invest around $1 billion in Lyft, Axios has learned from multiple sources. Bloomberg is reporting the same. It is unclear which group within Google would make the investment — the company has several investment arms and also invests off its balance sheet — but word is that this is being driven by top-level executives like Alphabet CEO Larry Page.

Why it matters: It would be a stunning move, given that Google was an early investor in Lyft rival Uber, even though the two companies have since gotten litigious over allegations of trade secret theft. Or, as one Uber investor explained it to Axios: "That is seriously messed up."

Complication: SoftBank currently is in talks to invest in Uber, but is insisting on a minimum ownership of 17.3% (i.e., some existing shareholders would need to sell). If SoftBank can't reach that threshold, it has threatened to instead invest in Lyft — a move that theoretically could impact the company's negotiations with Google.

Funding history: Lyft has raised over $2 billion in funding to date, from backers like General Motors, Carl Icahn, Andreessen Horowitz, Floodgate, Mayfield, Coatue Management, Founders Fund and Rakuten.

A Lyft spokesperson declined comment. Google has not yet returned requests for comment.

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Why some employees critical of Uber are staying

Eric Risberg / AP

Since Uber's avalanche of explosive allegations and controversies began earlier this year, one of the biggest questions has been: Why aren't more employees running out the door? Some executives and employees have certainly left, but many remain and continue to root for Uber's success.

Follow the money: For some employees, especially those who joined early enough, there's huge financial upside. And, until recently, walking away would have likely meant forfeiting equity.

  • "How do you ask people to easily give up 95% of their potential wealth and retirement?" an investor (not in Uber) recently asked.
  • Some employees who have chosen to stick around, despite being deeply critical of Uber's leadership, nevertheless would prefer to see their years of hard work ultimately pay out, two tell Axios.

Renewed hope: Uber's new CEO also changes the math. While over a thousand employees petitioned for ex-CEO Travis Kalanick's return after he was forced to resign in June, many were glad to see him go. New boss Dara Khosrowshahi has said that he foresees an IPO in 18 to 24 months, giving clearer expectations than Kalanick's preference for delaying the event.

Other reasons: One young female engineer has told Axios that she genuinely enjoys working with her team and her current projects, which she finds meaningful, despite the toxic culture that past leadership enabled.
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Google hit with gender pay discrimination lawsuit

AP

Three female former Google employees have filed a lawsuit against the search giant alleging gender-based pay discrimination, as the Associated Press reported. The former employees, Kelly Ellis, Holly Pease and Kelli Wisuri, all left the company after being put on career paths within the company that they say would pay them less than their male counterparts.

  • The lawyer representing the women is seeking class action status to represent thousands of employees in California.
  • The lawsuit comes after Google faced a probe by the Department of Labor over its employee pay after the agency found evidence of systemic pay discrimination resulting in lower wages for women.
  • In 2015, nine months after leaving the company, Ellis posted a series of tweets detailing sexual harassment she said she experienced at Google from some of her male superiors, including inappropriate comments about her looks. Google's HR department reprimanded her for reporting the incidents instead of helping her, she said.

Update: In a statement, Google said it had yet to review the lawsuit in detail, but said "we disagree with the central allegations.

Here is Google's full statement:

We work really hard to create a great workplace for everyone, and to give everyone the chance to thrive here. In relation to this particular lawsuit, we'll review it in detail, but we disagree with the central allegations. Job levels and promotions are determined through rigorous hiring and promotion committees, and must pass multiple levels of review, including checks to make sure there is no gender bias in these decisions. And we have extensive systems in place to ensure that we pay fairly. But on all these topics, if we ever see individual discrepancies or problems, we work to fix them, because Google has always sought to be a great employer, for every one of our employees.