Why expensive workout gear is actually cheap

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

For this week’s deep dive Natasha and Alex wanted to dig into the Tonal EC-1, a huge document spread across a number of posts. Our goals were pretty simple: To better understand Tonal’s journey, and also to get into the mind of its author.

So we corralled JP Mangalindan into firing up his computer, microphone, and recording software for a chat. Here’s what we covered:

  • What is Tonal, why is it interesting, and why did JP spend so much time learning about the company?
  • What did he have to leave out of the final report?
  • His views on fitness gear, and the Peloton effect more broadly
  • What was it like to write something so gosh darn long?

The Tonal EC-1 comprises four main articles representing about 10,600 words and a reading time of about 43 minutes:

As Natasha is currently — shh, it’s a secret — working on an EC-1 of her own, we had more than a usual amount of interest in the project. Use code Equity for a super sweet discount to access this story and all of our premium content.

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday morning at 7:00 a.m. PST, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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ZeroAvia’s hydrogen fuel cell plane ambitions clouded by technical challenges

When ZeroAvia’s six-seater aircraft completed an eight-minute flight from Cranfield Airfield in the U.K. last September, the company claimed a “major breakthrough” with the first-ever hydrogen fuel cell flight of a commercial-size aircraft.

The modified Piper Malibu propeller plane was now the largest hydrogen-powered aircraft in the world, wrote the company. “While some experimental aircraft have flown using hydrogen fuel cells, the size of this aircraft shows that paying passengers could be boarding a truly zero-emission flight very soon,” added Val Miftakhov, ZeroAvia’s CEO.

But just how hydrogen-powered was it, and how close is ZeroAvia to flying passengers?

“[In] this particular setup, not all the energy is coming from hydrogen,” said Miftakhov at a press conference directly afterwards. “There is a combination of the battery and hydrogen. But the way the battery and hydrogen fuel cells combine is such that we are able to fly purely on hydrogen.”

Miftakhov’s comments don’t quite tell the whole story. TechCrunch has learned that batteries provided the majority of the power required for the landmark flight, and will continue to feature heavily in ZeroAvia’s longer flights and new aircraft. And while the Malibu is technically still a passenger aircraft, ZeroAvia has had to replace four of the Malibu’s five passenger seats to accommodate bulky hydrogen tanks and other equipment.

In less than four years, ZeroAvia has gone from testing aircraft parts in pickup trucks to gaining the support of the U.K. government, and attracting investment from the likes of Jeff Bezos, Bill Gates and — just last week — British Airways. Now the question is whether it can continue on its claimed trajectory and truly transform aviation.

Take off

Aviation currently accounts for 2.5% of humanity’s carbon emissions, and could grow to a quarter of the planet’s carbon budget by 2050. Biofuels can displace trees or food crops, while batteries are too heavy for anything more than short hops. Hydrogen, by contrast, can be generated using solar or wind power, and packs quite an energetic punch.

Fuel cells combine hydrogen with oxygen from the air in an efficient reaction that produces only electricity, heat and water. But that doesn’t mean you can simply drop a fuel cell into an existing aircraft. Fuel cells are heavy and complex, hydrogen requires bulky storage and there are many technical problems for startups to solve.

Russian-born Miftakhov arrived in America in 1997 to study for a physics doctorate. In 2012, after starting several companies and a stint at Google, he founded eMotorWerks (aka EMW) to produce electric conversion kits for the BMW 3-series.

But in 2013, BMW accused EMW of infringing its trademarks. Miftakhov agreed to change its logo and marketing materials, and to refrain from suggesting it was affiliated with the carmaker. He also found demand from BMW owners to be sluggish.

EMW then pivoted to providing chargers and a smart energy management platform. The new direction succeeded, and in 2017 Italian energy company Enel acquired EMW for a reported $150 million. But Miftakhov faced legal difficulties here, too.

George Betak, an EMW vice president, filed two civil lawsuits against Miftakhov alleging, among other things, that Miftakhov had left his name off patents, withheld money and even faked a document to make it seem as though Betak had assigned his intellectual property rights to EMW. Betak later withdrew some claims. The cases were quietly settled in the summer of 2020.

Weeks after selling EMW in 2017, Miftakhov incorporated ZeroAvia in San Carlos, California with the stated aim of “zero emissions aviation.” He was counting on the aviation industry being more interested in electrifying existing aircraft than BMW drivers had been.

First step: batteries

The first public outing for ZeroAvia was in October 2018 at Hollister Airport, 50 miles southwest of San Jose. Miftakhov mounted a propeller, an electric motor and batteries in the bed of a 1969 El Camino and took it up to 75 knots (85mph) on electric power.

In December, ZeroAvia bought a Piper PA-46 Matrix, a six-seater propeller plane very similar to the one it would later use in the U.K. Miftakhov’s team installed the motor and about 75kWh of lithium ion batteries — about the same as in an entry-level Tesla Model Y.

In February 2019, two days after the FAA granted it an experimental airworthiness certificate, the all-electric Piper took to the air. By mid-April, the Matrix was flying at its top speed and maximum power. It was ready to upgrade to hydrogen.

Import records show that ZeroAvia took delivery of a carbon fiber hydrogen tank from Germany in March. One company photo exists of the Matrix with a tank on its left wing, but ZeroAvia never released a video of it flying. Something had gone wrong.

In July, ZeroAvia’s R&D director posted a message on a forum for Piper owners: “We have damaged a wing of our Matrix, which we loved and pampered so much. The damage is so bad that it has to be replaced. Is anyone aware of [a suitable aircraft] that is going to be sold for parts any time soon?”

Miftakhov confirmed that the damage, not previously reported, occurred while ZeroAvia was reconfiguring the aircraft. That aircraft has not flown since, and ZeroAvia’s time as a Silicon Valley startup was coming to an end.

Moving to the UK

With ZeroAvia’s U.S. flight tests on hold, Miftakhov turned his attention to Britain, where Prime Minister Boris Johnson is banking on ”a new green industrial revolution.”

In September 2019, Aerospace Technology Institute (ATI), a U.K. government-supported company, funded a ZeroAvia-led project called HyFlyer, with £2.68 million ($3.3 million). Miftakhov committed to deliver a hydrogen fuel cell Piper that could fly more than 280 miles, within a year. Sharing the money would be Intelligent Energy, a fuel cell maker, and the European Marine Energy Centre (EMEC), which would provide hydrogen fueling tech.

“ZeroAvia had proved the concept of retrofitting an electric power train into an aircraft and instead of powering it by batteries, they wanted to power it with hydrogen,” said Richard Ainsworth, EMEC’s hydrogen manager at the time. “That was the whole purpose of the HyFlyer project.”

Gary Elliott, CEO of ATI, told TechCrunch that it was “really important” to ATI that ZeroAvia was using fuel cells rather than a battery system: “You need to spread your investment profile, so that you’ve got as much likelihood of success as you can.”

ZeroAvia set up in Cranfield and in February 2020, bought a six-seater Piper Malibu, similar to the damaged Matrix. Although the company fitted and flew it with batteries by June, the government still needed reassuring. “I’d be happy to catch up and think about what we can do to address the concerns that are nagging away at the ATI,” wrote an official, according to an email obtained by TechCrunch under a freedom of information request.

Intelligent Energy CTO Chris Dudfield told TechCrunch that the HyFlyer program went smoothly, but that his company is still years away from flying a larger fuel cell and that he never even saw ZeroAvia’s plane.

ZeroAvia’s partnership with Intelligent Energy might have helped it secure U.K. government funding but it wasn’t going to help power the Malibu. ZeroAvia needed to find a fuel cell supplier — fast.

Second step: Fuel cell power

In August, ZeroAvia wrote to government officials that “we are now gearing up for our first hydrogen-powered flight,” and invited the Secretary of State to attend.

Miftakhov said that ZeroAvia’s demonstration flight used a 250 kilowatt hydrogen fuel cell powertrain — the largest ever in an aircraft. This is comparable in power to the internal combustion engine that Pipers typically use, giving a healthy margin of safety for the most demanding phase of flight: take off.

ZeroAvia never identified its fuel cell supplier, nor detailed how much of the 250kW came from the fuel cell.

However, the day after the demonstration flight, a Swedish company called PowerCell issued a press release stating that one PowerCell MS-100 fuel cell was “an integral part of the powertrain.”

The MS-100 generates a maximum power of just 100kW, leaving 150kW unaccounted for. This means the majority of the power needed for take-off could only have come from the Piper’s batteries.

In an interview with TechCrunch, Miftakhov acknowledged that the Piper could not have taken off on fuel cell power alone in the September flight. He said the plane’s batteries were probably operational for the entire demonstration flight, and provided “some additional safety margin for the aircraft.”

Many fuel cell vehicles use batteries, either to smooth out fluctuations or to boost power briefly, although some manufacturers have been more transparent about their sources of power. One problem with relying on batteries for take off is that the plane then has to carry them for the whole flight.

“The fundamental challenge for hydrogen fuel cell aircraft is weight,” said Paul Eremenko, CEO of Universal Hydrogen, which is collaborating on a 2000kW fuel cell powertrain for another aircraft. “One of the ways we save weight is having a much smaller battery that is only used when a pilot guns the throttle.”

In February, ZeroAvia’s vice president, Sergey Kiselev, said that the company’s goal was to do without batteries altogether. “Batteries may be used to provide an extra oomph during take off,” he told the Royal Aeronautical Society. “But if you use different types of propulsion or energy storage on the aircraft, the certification effort will be significantly harder.”

Relying heavily on batteries allowed ZeroAvia to pull off its high-profile demonstration flight for investors and the U.K. government, but could ultimately delay its first flights with paying passengers.

The problem of heat

Without an exhaust to expel waste heat, fuel cells usually need a complex air or liquid cooling system to avoid overheating

“This is really the key intellectual property, and why it isn’t just a matter of buying a fuel cell, buying a motor and plugging them together,” says Eremenko.

The German Aerospace Center in Cologne has been flying hydrogen fuel cell aircraft since 2012. Its current aircraft, the custom-designed HY4, can carry four passengers up to 450 miles. Its 65kW fuel cell has a liquid cooling system that uses a large, aerodynamically optimized channel for the cooling air flow (see picture).

A similar 100kW system would generally need a cooling intake longer and a third bigger than the HY4’s. ZeroAvia’s Piper Malibu has no additional cooling intakes at all.

“The openings look way too small for the air speed at take off, and even for cruise speed,” said an aviation fuel cell engineer who asked not to be named because they deal with some of the same companies as ZeroAvia.

“We had to experiment with the location and configuration of the heat exchangers… but we did not have to redesign the shape of the aircraft to handle the heat,” countered Miftakhov. He claims the fuel cell was operating at between 85 and 100kW during the flight.

Following TechCrunch’s interview with ZeroAvia, the company released a video that appears to show the Piper’s fuel cell operating at up to 70kW during a ground test, which could equate to a higher power level when airborne.

Although this still needs to be demonstrated with long-distance flights, ZeroAvia may have solved the heat problem that has dogged other engineers for years.

The next plane: bigger and better?

In September, aviation minister Robert Courts was at Cranfield to watch the demonstration flight. “It’s one of the most historic moments in aviation for decades, and it is a huge triumph for ZeroAvia,” he said after the flight. Time magazine named ZeroAvia’s technology as one of the best inventions of 2020.

Even with the HyFlyer extended flight still to come, in December the U.K. government announced HyFlyer 2 — a £12.3 million ($16.3 million) project for ZeroAvia to deliver a 600kW hydrogen-electric powertrain for a larger aircraft. ZeroAvia agreed to have a 19-seat plane ready for commercialization in 2023. (It now says 2024.)

On the same day, ZeroAvia announced its $21.3 million Series A investor lineup, including Bill Gates’ Breakthrough Ventures Fund, Jeff Bezos’ Amazon Climate Pledge Fund, Ecosystem Integrity Fund, Horizon Ventures, Shell Ventures and Summa Equity. It announced another $23.4 million raise from these investors, without Amazon but with British Airways, in late March.

Miftakhov said the Malibu has now completed about a dozen test flights, with the long-distance U.K. flight pushed to later this year, due to COVID delays. And as for HyFlyer 2, Miftakhov now says that this will initially use half batteries and half fuel cells, although “the final certifiable flight configuration will get its full 600kW from the fuel cells.”

There is no doubt that ZeroAvia is facing a steep climb to deliver its promised aircraft, starting with the 19-seater, then a 50-seater plane in 2026, and a 100-seater by 2030.

Hydrogen fuel cells still have a whiff of snake oil about them, thanks to Nikola, a startup that exaggerated a public demonstration of a hydrogen fuel cell truck, triggering a collapse in its share price and investigation by the SEC. The best option for ambitious start-ups like ZeroAvia is to be more transparent about their current technology and the challenges that lie ahead, even if that means tempering the expectations of investors and a public excited by the prospect of sustainable air travel.

“I desperately want ZeroAvia to be successful,” says Paul Eremenko. “I think we have very complementary business models and together we help complete the value chain to make hydrogen aviation happen.”

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Sunday raises $24 million seed round to build a fast restaurant checkout flow

Meet Sunday, a new startup that is going to attract some headlines as it has raised a $24 million seed round at a $140 million post-money valuation. That’s a lot of money for a company that started just a few months ago but that’s because Sunday wants to move quickly.

Sunday is getting noticed because it is founded by Victor Lugger, Tigrane Seydoux and Christine de Wendel — Lugger and Tigrane have been working together for several years as they’re the founders of Big Mamma. Christine de Wendel headed Zalando in France before joining ManoMano as COO.

If you’re not familiar with Big Mamma, they’ve launched a dozen Italian restaurants in France. They also manage La Felicità, the food court at Station F.

Some people love those restaurants because the food is good and it’s relatively affordable. Some people hate it because Big Mamma is also particularly well known for its long queues and the fact that you always feel like you have to eat quickly for the next group. But it’s clear that it’s been working well for the past few years.

Managing Big Mamma during a pandemic led to Sunday, a spin-off company incorporated in the U.S. The restaurant company wanted to offer a way to check the menu and pay without touching anything. Like many restaurants, they put QR codes on the tables to that customers can scan them with their phones and load a website.

But Sunday didn’t stop at the menu as it also connects directly to the cash register system. Sunday supports Oracle Micros, Brinks, Tiller, Zelty, Revo, CashPad, etc. This way, clients can also scan the QR code, check their tab and pay directly from their phone. When they’re done eating, they can pay by themselves, stand up and leave.

After trying Sunday in Big Mamma restaurants, the company saw some encouraging results. 80% of customers chose to pay using the QR code, which means that restaurants saved 15 minutes in wait time on average leading to a better table turnover rate.

And this is key to understanding Sunday. It’s easy to sell a new payment system to a restaurant if it leads to more revenue. Popular restaurants that feel like they’re always looking for empty tables could greatly benefit from Sunday.

It also opens up some new possibilities. For instance, guests can split the bill directly at the table — everyone loads up Sunday and pay. Sunday is based on QR codes right now, but the company isn’t attached to QR codes specifically. You could imagine loading your bill using RFID chips, a tablet, etc.

The vision is clear — Sunday wants to build the Fast Checkout of restaurants. The startup thinks online checkout is going to merge with offline, brick-and-mortar checkout.

Sunday customers don’t pay any monthly subscription fee or setup fee. You only pay processing fees based on usage. And those fees tend to be lower than the card machine you’re currently using.

The startup’s seed round was led by Coatue with New Wave participating. New Wave is a new European seed fund led by Pia d’Iribarne and backed by Xavier Niel. Multiple hospitality and tech investors are also participating.

The idea is to raise a lot of money, sign up a lot of restaurants and take over the market right now while there’s an opportunity during the pandemic. They have hired 40 people already and they’re signing deals with restaurants even though most of them are still closed in Europe.

Sunday isn’t a tech achievement per se — it’s an execution play. The company that can roll out this kind of checkout experience faster than the others is going to take over the market.

When restaurants are going to be open again, you may notice Sunday QR codes in France at Eataly, PNY, Paris Society, Eric Frechon, Groupe Bertrand’s restaurants (Burger King France, Hippopotamus, Groupe Flo…). Similarly, in the U.K., Sunday is partnering with JKS Group (Hoppers, Brigadiers, Gymkhana…), Corbin & King and others. Sunday is also talking with companies in the U.S. and Spain.

Overall, there are more than a thousand restaurants currently adopting Sunday.

“We follow the same model as the one we used when launching restaurants with Big Mamma. Seven years ago, we invested three times more than the others to compress fixed costs and deliver a better product,” Sunday co-founder and CEO Victor Lugger told me.

The startup already has an ambitious product roadmap. Eventually, you could imagine having your own Sunday account that remembers your past bills, tracks your allergies, saves your favorite payment method, etc. Once again, it’ll come down to execution.

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Ireland opens GDPR investigation into Facebook leak

Facebook’s lead data supervisor in the European Union has opened an investigation into whether the tech giant violated data protection rules vis-a-vis the leak of data reported earlier this month.

Here’s the Irish Data Protection Commission’s statement:

“The Data Protection Commission (DPC) today launched an own-volition inquiry pursuant to section 110 of the Data Protection Act 2018 in relation to multiple international media reports, which highlighted that a collated dataset of Facebook user personal data had been made available on the internet. This dataset was reported to contain personal data relating to approximately 533 million Facebook users worldwide. The DPC engaged with Facebook Ireland in relation to this reported issue, raising queries in relation to GDPR compliance to which Facebook Ireland furnished a number of responses.

The DPC, having considered the information provided by Facebook Ireland regarding this matter to date, is of the opinion that one or more provisions of the GDPR and/or the Data Protection Act 2018 may have been, and/or are being, infringed in relation to Facebook Users’ personal data.

Accordingly, the Commission considers it appropriate to determine whether Facebook Ireland has complied with its obligations, as data controller, in connection with the processing of personal data of its users by means of the Facebook Search, Facebook Messenger Contact Importer and Instagram Contact Importer features of its service, or whether any provision(s) of the GDPR and/or the Data Protection Act 2018 have been, and/or are being, infringed by Facebook in this respect.”

Facebook has been contacted for comment.

The move comes after the European Commission intervened to apply pressure on Ireland’s data protection commissioner. Justice commissioner, Didier Reynders, tweeted Monday that he had spoken with Helen Dixon about the Facebook data leak.

“The Commission continues to follow this case closely and is committed to supporting national authorities,” he added, going on to urge Facebook to “cooperate actively and swiftly to shed light on the identified issues”.

A spokeswoman for the Commission confirmed the virtual meeting between Reynders and Dixon, saying: “Dixon informed the Commissioner about the issues at stake and the different tracks of work to clarify the situation.

“They both urge Facebook to cooperate swiftly and to share the necessary information. It is crucial to shed light on this leak that has affected millions of European citizens.”

“It is up to the Irish data protection authority to assess this case. The Commission remains available if support is needed. The situation will also have to be further analyzed for the future. Lessons should be learned,” she added.

The revelation that a vulnerability in Facebook’s platform enabled unidentified ‘malicious actors’ to extract the personal data (including email addresses, mobile phone numbers and more) of more than 500 million Facebook accounts up until September 2019 — when Facebook claims it fixed the issue — only emerged in the wake of the data being found for free download on a hacker forum earlier this month.

Despite the European Union’s data protection framework (the GDPR) baking in a regime of data breach notifications — with the risk of hefty fines for compliance failure — Facebook did not inform its lead EU data supervisory when it found and fixed the issue. Ireland’s Data Protection Commission (DPC) was left to find out in the press, like everyone else.

Nor has Facebook individually informed the 533M+ users that their information was taken without their knowledge or consent, saying last week it has no plans to do so — despite the heightened risk for affected users of spam and phishing attacks.

Privacy experts have, meanwhile, been swift to point out that the company has still not faced any regulatory sanction under the GDPR — with a number of investigations ongoing into various Facebook businesses and practices and no decisions yet issued in those cases by Ireland’s DPC. (It has so far only issued one cross-border decision, fining Twitter around $550k in December over a breach it disclosed back in 2019.)

Last month the European Parliament adopted a resolution on the implementation of the GDPR which expressed “great concern” over the functioning of the mechanism — raising particular concern over the Irish data protection authority by writing that it “generally closes most cases with a settlement instead of a sanction and that cases referred to Ireland in 2018 have not even reached the stage of a draft decision pursuant to Article 60(3) of the GDPR”.

The latest Facebook data scandal further amps up the pressure on the DPC — providing further succour to critics of the GDPR who argue the regulation is unworkable under the current foot-dragging enforcement structure, given the major bottlenecks in Ireland (and Luxembourg) where many tech giants choose to locate regional HQ.

On Thursday Reynders made his concern over Ireland’s response to the Facebook data leak public, tweeting to say the Commission had been in contact with the DPC.

He does have reason to be personally concerned. Earlier last week Politico reported that Reynders’ own digits had been among the cache of leaked data, along with those of the Luxembourg prime minister Xavier Bettel — and “dozens of EU officials”. However the problem of weak GDPR enforcement affects everyone across the bloc — some 446M people whose rights are not being uniformly and vigorously upheld.

“A strong enforcement of GDPR is of key importance,” Reynders also remarked on Twitter, urging Facebook to “fully cooperate with Irish authorities”.

Last week Italy’s data protection commission also called on Facebook to immediately offer a service for Italian users to check whether they had been affected by the breach. But Facebook made no public acknowledgment or response to the call. Under the GDPR’s one-stop-shop mechanism the tech giant can limit its regulatory exposure by direct dealing only with its lead EU data supervisor in Ireland.

A two-year Commission review of how the data protection regime is functioning, which reported last summer, already drew attention to problems with patchy enforcement. A lack of progress on unblocking GDPR bottlenecks is thus a growing problem for the Commission — which is in the midst of proposing a package of additional digital regulations. That makes the enforcement point a very pressing one as EU lawmakers are being asked how new digital rules will be upheld if existing ones keep being trampled on?

It’s certainly notable that the EU’s executive has proposed a different, centralized enforcement structure for incoming pan-EU legislation targeted at digital services and tech giants. Albeit, getting agreement from all the EU’s institutions and elected representatives on how to reshape platform oversight looks challenging.

And in the meanwhile the data leaks continue: Motherboard reported Friday on another alarming leak of Facebook data it found being made accessible via a bot on the Telegram messaging platform that gives out the names and phone numbers of users who have liked a Facebook page (in exchange for a fee unless the page has had less than 100 likes).

The publication said this data appears to be separate to the 533M+ scraped dataset — after it ran checks against the larger dataset via the breach advice site, haveibeenpwned. It also asked Alon Gal, the person who discovered the aforementioned leaked Facebook dataset being offered for free download online, to compare data obtained via the bot and he did not find any matches.

We contacted Facebook about the source of this leaked data and will update this report with any response.

In his tweet about the 500M+ Facebook data leak last week, Reynders made reference to the Europe Data Protection Board (EDPB), a steering body comprised of representatives from Member State data protection agencies which works to ensure a consistent application of the GDPR.

However the body does not lead on GDPR enforcement — so it’s not clear why he would invoke it. Optics is one possibility, if he was trying to encourage a perception that the EU has vigorous and uniform enforcement structures where people’s data is concerned.

“Under the GDPR, enforcement and the investigation of potential violations lies with the national supervisory authorities. The EDPB does not have investigative powers per se and is not involved in investigations at the national level. As such, the EDPB cannot comment on the processing activities of specific companies,” an EDPB spokeswoman told us when we enquired about Reynders’ remarks.

But she also noted the Commission attends plenary meetings of the EDPB — adding it’s possible there will be an exchange of views among members about the Facebook leak case in the future, as attending supervisory authorities “regularly exchange information on cases at the national level”.

 

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New JavaScript Exploit Can Now Carry Out DDR4 Rowhammer Attacks

Academics from Vrije University in Amsterdam and ETH Zurich have published a new research paper describing yet another variation of the Rowhammer attack.
Dubbed SMASH (Synchronized MAny-Sided Hammering), the technique can be used to successfully trigger the attack from JavaScript on modern DDR4 RAM cards, notwithstanding extensive mitigations that have been put in place by manufacturers over the

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New WhatsApp Bugs Could’ve Let Attackers Hack Your Phone Remotely

Facebook-owned WhatsApp recently addressed two security vulnerabilities in its messaging app for Android that could have been exploited to execute malicious code remotely on the device and even compromise encrypted communications.
The flaws take aim at devices running Android versions up to and including Android 9 by carrying out what’s known as a “man-in-the-disk” attack that makes it possible

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Amazon’s Alexa earbuds return with a smaller design and wireless charging

It’s been about a year and a half since Amazon released the first Echo Buds. I reviewed them when they arrived, and they were, I don’t know, fine, I guess. They were a bit on the cheap side, facing some stiff competition in the category and, honestly, the idea of wearing Alexa on my head still isn’t super exciting to me.

But for a first attempt at the space, they weren’t bad. And now the company’s giving it a second go, with some tweaks to the original formula. Top of the list is a redesign that shrinks them 20% and makes them a bit lighter weight. The nozzle is smaller, which should make them more comfortable for longer periods, coupled with four ear tip sizes. The headphones are rated IPX4 for sweat and weather resistance.

Image Credits: Amazon

Amazon has moved on from the predecessor’s Bose noise canceling to its own proprietary tech, which it says can effectively double V1. There’s also an optional case that supports wireless charging via Qi, à la AirPods. The white case, in particular, looks…rather familiar.

That case runs an extra $20 over the $120 asking price for the USB-C case. Though Amazon’s running a limited-time deal to get the standard for $100 and the wireless charging version for $120. They’re also throwing in six months of Amazon Music Unlimited and Audible Plus. The new buds are also available in white. They’re up for preorder today and start shipping in May.

Image Credits: Amazon

Future software updates will bring a new VIP Filter to the headphones. Introduced on the Echo Frames, the feature lets users filter notifications from select senders. In addition to Alexa, the buds can also be set to access Siri or Google Assistant.

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EU plan for risk-based AI rules to set fines as high as 4% of global turnover, per leaked draft

European Union lawmakers who are drawing up rules for applying artificial intelligence are considering fines of up to 4% of global annual turnover (or €20M, if greater) for a set of prohibited use-cases, according to a leaked draft of the AI regulation — reported earlier by Politico — that’s expected to be officially unveiled next week.

The plan to regulate AI has been on the cards for a while. Back in February 2020 the European Commission published a white paper, sketching plans for regulating so-called “high risk” applications of artificial intelligence.

At the time EU lawmakers were toying with a sectoral focus — envisaging certain sectors like energy and recruitment as vectors for risk. However that approach appears to have been rethought, per the leaked draft — which does not limit discussion of AI risk to particular industries or sectors.

Instead, the focus is on compliance requirements for high risk AI applications, wherever they may occur (weapons/military uses are specifically excluded, however, as such use-cases fall outside the EU treaties). Although it’s not abundantly clear from this draft exactly how ‘high risk’ will be defined.

The overarching goal for the Commission here is to boost public trust in AI, via a system of compliance checks and balances steeped in “EU values” in order to encourage uptake of so-called “trustworthy” and “human-centric” AI. So even makers of AI applications not considered to be ‘high risk’ will still be encouraged to adopt codes of conduct — “to foster the voluntary application of the mandatory requirements applicable to high-risk AI systems”, as the Commission puts it.

Another chunk of the regulation deals with measures to support AI development in the bloc — pushing Member States to establish regulatory sandboxing schemes in which startups and SMEs can be proritized for support to develop and test AI systems before bringing them to market.

Competent authorities “shall be empowered to exercise their discretionary powers and levers of proportionality in relation to artificial intelligence projects of entities participating the sandbox, while fully preserving authorities’ supervisory and corrective powers,” the draft notes.

What’s high risk AI?

Under the planned rules, those intending to apply artificial intelligence will need to determine whether a particular use-case is ‘high risk’ and thus whether they need to conduct a mandatory, pre-market compliance assessment or not.

“The classification of an AI system as high-risk should be based on its intended purpose — which should refer to the use for which an AI system is intended, including the specific context and conditions of use and — and be determined in two steps by considering whether it may cause certain harms and, if so, the severity of the possible harm and the probability of occurrence,” runs one recital in the draft.

“A classification of an AI system as high-risk for the purpose of this Regulation may not necessarily mean that the system as such or the product as a whole would necessarily be considered as ‘high-risk’ under the criteria of the sectoral legislation,” the text also specifies.

Examples of “harms” associated with high-risk AI systems are listed in the draft as including: “the injury or death of a person, damage of property, systemic adverse impacts for society at large, significant disruptions to the provision of essential services for the ordinary conduct of critical economic and societal activities, adverse impact on financial, educational or professional opportunities of persons, adverse impact on the access to public services and any form of public assistance, and adverse impact on [European] fundamental rights.”

Several examples of high risk applications are also discussed — including recruitment systems; systems that provide access to educational or vocational training institutions; emergency service dispatch systems; creditworthiness assessment; systems involved in determining taxpayer-funded benefits allocation; decision-making systems applied around the prevention, detection and prosecution of crime; and decision-making systems used to assist judges.

So long as compliance requirements — such as establishing a risk management system and carrying out post-market surveillance, including via a quality management system — are met such systems would not be barred from the EU market under the legislative plan.

Other requirements include in the area of security and that the AI achieves consistency of accuracy in performance — with a stipulation to report to “any serious incidents or any malfunctioning of the AI system which constitutes a breach of obligations” to an oversight authority no later than 15 days after becoming aware of it.

“High-risk AI systems may be placed on the Union market or otherwise put into service subject to compliance with mandatory requirements,” the text notes.

“Mandatory requirements concerning high-risk AI systems placed or otherwise put into service on the Union market should be complied with taking into account the intended purpose of the AI system and according to the risk management system to be established by the provider.

“Among other things, risk control management measures identified by the provider should be based on due consideration of the effects and possible interactions resulting from the combined application of the mandatory requirements and take into account the generally acknowledged state of the art, also including as reflected in relevant harmonised standards or common specifications.”

Prohibited practices and biometrics

Certain AI “practices” are listed as prohibited under Article 4 of the planned law, per this leaked draft — including (commercial) applications of mass surveillance systems and general purpose social scoring systems which could lead to discrimination.

AI systems that are designed to manipulate human behavior, decisions or opinions to a detrimental end (such as via dark pattern design UIs), are also listed as prohibited under Article 4; as are systems that use personal data to generate predictions in order to (detrimentally) target the vulnerabilities of persons or groups of people.

A casual reader might assume the regulation is proposing to ban, at a stroke, practices like behavioral advertising based on people tracking — aka the business models of companies like Facebook and Google. However that assumes adtech giants will accept that their tools have a detrimental impact on users.

On the contrary, their regulatory circumvention strategy is based on claiming the polar opposite; hence Facebook’s talk of “relevant” ads. So the text (as written) looks like it will be a recipe for (yet) more long-drawn out legal battles to try to make EU law stick vs the self-interested interpretations of tech giants.

The rational for the prohibited practices is summed up in an earlier recital of the draft — which states: “It should be acknowledged that artificial intelligence can enable new manipulative, addictive, social control and indiscriminate surveillance practices that are particularly harmful and should be prohibited as contravening the Union values of respect for human dignity, freedom, democracy, the rule of law and respect for human rights.”

It’s notable that the Commission has avoided proposing a ban on the use of facial recognition in public places — as it had apparently been considering, per a leaked draft early last year, before last year’s White Paper steered away from a ban.

In the leaked draft “remote biometric identification” in public places is singled out for “stricter conformity assessment procedures through the involvement of a notified body” — aka an “authorisation procedure that addresses the specific risks implied by the use of the technology” and includes a mandatory data protection impact assessment — vs most other applications of high risk AIs (which are allowed to meet requirements via self-assessment).

“Furthermore the authorising authority should consider in its assessment the likelihood and severity of harm caused by inaccuracies of a system used for a given purpose, in particular with regard to age, ethnicity, sex or disabilities,” runs the draft. “It should further consider the societal impact, considering in particular democratic and civic participation, as well as the methodology, necessity and proportionality for the inclusion of persons in the reference database.”

AI systems “that may primarily lead to adverse implications for personal safety” are also required to undergo this higher bar of regulatory involvement as part of the compliance process.

The envisaged system of conformity assessments for all high risk AIs is ongoing, with the draft noting: “It is appropriate that an AI system undergoes a new conformity assessment whenever a change occurs which may affect the compliance of the system with this Regulation or when the intended purpose of the system changes.”

“For AI systems which continue to ‘learn’ after being placed on the market or put into service (i.e. they automatically adapt how functions are carried out) changes to the algorithm and performance which have not been pre-determined and assessed at the moment of the conformity assessment shall result in a new conformity
assessment of the AI system,” it adds.

The carrot for compliant businesses is to get to display a ‘CE’ mark to help them win the trust of users and friction-free access across the bloc’s single market.

“High-risk AI systems should bear the CE marking to indicate their conformity with this Regulation so that they can move freely within the Union,” the text notes, adding that: “Member States should not create obstacles to the placing on the market or putting into service of AI systems that comply with the requirements laid down in this Regulation.”

Transparency for bots and deepfakes

As well as seeking to outlaw some practices and establish a system of pan-EU rules for bringing ‘high risk’ AI systems to market safely — with providers expected to make (mostly self) assessments and fulfil compliance obligations (such as around the quality of the data-sets used to train the model; record-keeping/documentation; human oversight; transparency; accuracy) prior to launching such a product into the market and conduct ongoing post-market surveillance — the proposed regulation seeks shrink the risk of AI being used to trick people.

It does this by suggesting “harmonised transparency rules” for AI systems intended to interact with natural persons (aka voice AIs/chat bots etc); and for AI systems used to generate or manipulate image, audio or video content (aka deepfakes).

“Certain AI systems intended to interact with natural persons or to generate content may pose specific risks of impersonation or deception irrespective of whether they qualify as high-risk or not. In certain circumstances, the use of these systems should therefore be subject to specific transparency obligations without prejudice to the requirements and obligations for high-risk AI systems,” runs the text.

“In particular, natural persons should be notified that they are interacting with an AI system, unless this is obvious from the circumstances and the context of use. Moreover, users, who use an AI system to generate or manipulate image, audio or video content that appreciably resembles existing persons, places or events and would falsely appear to a reasonable person to be authentic, should disclose that the content has been artificially created or manipulated by labelling the artificial intelligence output accordingly and disclosing its artificial origin.

“This labelling obligation should not apply where the use of such content is necessary for the purposes of safeguarding public security or for the exercise of a legitimate right or freedom of a person such as for satire, parody or freedom of arts and sciences and subject to appropriate safeguards for the rights and freedoms of third parties.”

What about enforcement?

While the proposed AI regime hasn’t yet been officially unveiled by the Commission — so details could still change before next week — a major question mark looms over how a whole new layer of compliance around specific applications of (often complex) artificial intelligence can be effectively oversee and any violations enforced, especially given ongoing weaknesses in the enforcement of the EU’s data protection regime (which begun being applied back in 2018).

So while providers of high risk AIs are required to take responsibility for putting their system/s on the market (and therefore for compliance with all the various stipulations, which also include registering high risk AI systems in an EU database the Commission intends to maintain), the proposal leaves enforcement in the hands of Member States — who will be responsible for designating one or more national competent authorities to supervise application of the oversight regime.

We’ve seen how this story plays out with the General Data Protection Regulation. The Commission itself has conceded GDPR enforcement is not consistently or vigorously applied across the bloc — so a major question is how these fledgling AI rules will avoid the same forum-shopping fate?

“Member States should take all necessary measures to ensure that the provisions of this Regulation are implemented, including by laying down effective, proportionate and dissuasive penalties for their infringement. For certain specific infringements, Member States should take into account the margins and criteria set out in this Regulation,” runs the draft.

The Commission does add a caveat — about potentially stepping in in the event that Member State enforcement doesn’t deliver. But there’s no near term prospect of a different approach to enforcement, suggesting the same old pitfalls will likely appear.

“Since the objective of this Regulation, namely creating the conditions for an ecosystem of trust regarding the placing on the market, putting into service and use of artificial intelligence in the Union, cannot be sufficiently achieved by the Member States and can rather, by reason of the scale or effects of the action, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union,” is the Commission’s back-stop for future enforcement failure.

The oversight plan for AI includes setting up a mirror entity akin to the GDPR’s European Data Protection Board — to be called the European Artificial Intelligence Board — which will similarly support application of the regulation by issuing relevant recommendations and opinions for EU lawmakers, such as around the list of prohibited AI practices and high-risk systems.

 

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A quick peek inside Fontinalis, one of Detroit’s best-known young venture firms

Fontinalis, the 12-year-old, Detroit-based early stage venture firm, is known for being among the very first investing outfits to focus squarely on mobility as an overarching theme. It wasn’t a surprising mandate, given that the outfit’s cofounders include Bill Ford, the great grandson of Henry Ford and the executive chairman of Ford Motor Company.

Nevertheless, the firm has used its ties to the traditional automotive industry to effectively compete against, and invest alongside, many Silicon Valley venture firms in the intervening years, creating an interesting portfolio along the way. It had stakes in Postmates, acquired in an all-stock deal by Uber, and in Lyft, for example. It also backed the self-driving startup nuTonomy, which sold to auto supplier Delphi Automotive in 2017 for $450 million. Some of its newer bets include Gatik, a startup developing an autonomous vehicle stack for B2B short-haul logistics; Robust.AI, a startup at work on an industrial-grade cognitive platform for robots; and Helm.ai, a maker of driverless car AI.

To get a better sense of what make a deal attractive to Fontinalis, as well as to understand how a venture firm in Detroit ensures that it’s top of mind for the founders it most wants to work with, we talked recently with Dan Ratliff, an investor with Fontinalis who joined the firm nearly seven years ago. Our chat has been edited lightly for length.

TC: Are you a native of Detroit?

DR: I am a native Michigander. I grew up in the metro region; I went to Michigan State. I’ve been here my entire life, except for a year spent in Nashville for grad school, and when I graduated, I moved straight downtown [in Detroit].

TC: From where does the name Fontinalis come?

DR: It’s a Latin name and the name of an outside nature preserve club where Bill [Ford] cultivated a lot of his thoughts on conservation and spent a lot of his youth fly fishing. He also joked that there was no way this name was taken.

TC: How much of the firm’s funding is from Ford Motor Co.?

DR: Fontinalis is very much separate by design. We wanted to be independent and not a strategic VC or Bill’s family office, so from day one, we went to outside LPs and we pulled in 20 to 30 LPs in our first fund, including high-net worth [individuals], family offices, and some institutions. Ford wasn’t even an LP. The company has since come on, but not in a majority position. We also now have a handful of corporate investors, including an OEM that hasn’t been announced yet, and insurance companies. And we have family offices with ties to mobility and the transportation industry and which have a keen interest in how mobility evolves and impacts their businesses. We’ve raised $260 million to date across our funds.

TC: That’s a surprisingly conservative amount in the current market. On the coasts, obviously, we’re seeing a money grab like no other.

DR: We see this as multi-decade opportunity, but there is a bit of a chicken-and-egg problem in the Midwest. There’s not as [ample] a base of angel investors. There are a handful of venture funds but not like on the coasts, where you have a lot of founders or people who’ve been part of companies where they’ve made a lot of money and understand the risk-reward profile. Here, [people are] more conservative; they might have made their wealth in more traditional, versus high-growth startup-type, industries.

I do think with Duo Security selling to Cisco [for $2.35 billion in 2018] and StockX’s awesome rise, we’re developing the right tailwinds to set up an ecosystem, but it requires a lot of different things, including people who are used to being at high-growth companies and are willing to take risks [in the form of equity grants and less] salary.

TC: Fontinalis has a wide range of bets, including on a cognitive platform for robots? What’s the through-line?

DR: The mission of the firm at a high level is to invest in companies and tech that impact the efficient movement of people and goods. Automotive is a component, but so are supply chains and logistics and AI and big data and their impact. So we’ll invest in all modes of transportation — road, rail, bike, air. We also invest in vertical technologies like cybersecurity and additive manufacturing.

TC: These are mostly seed and Series A checks?

DR: We invest in the A and B range, as well as in seed-stage startups and later-stage investments. We view ourselves as bringing the same value that a strategic investor might bring without necessarily the strings that might be attached because we work with a lot of the other corporate VCs and mobility-focused VCs, and we try to see if we can help on the [business development] side to get the startup in front of the right person at the right companies.

TC: Is there any special emphasis on trying to fund startups in Detroit and the broader Midwest?

DR: Our mandate is not geographic specific. We have investments on both coasts, in Northeast Boston, in Tennessee [where Fontinalis’s portfolio company, FreightWaves, the market forecasting and analytics platform is based]. We have deals in Switzerland and Israel. We do look globally; we’re more concerned with making sure we can add value.

TC: One of Fontinalis’s other founding partners, Chris Cheever, is in Boston. Has the firm ever considered relocating outside of Detroit?

DR: No, two of our founding partners are based here. A lot of companies we’ve funded are coming, too, because of the infrastructure here on the manufacturing side and things like the Michigan Mobility Center and we can both facilitate a lot of those introductions as well as be a permanent ‘man on the ground’ for companies that aren’t based here.

TC: Does Detroit have the professional services businesses in place to accommodate startups?

DR: In the last five years, we’ve seen a number of law firms [that work with startups] plant flags in Ann Arbor, and it’s encouraging to see.

Also, from a business standpoint, you have the University of Michigan’s Research Corridor and the automotive industry and OEM suppliers and access to mechanical and electrical engineers whose skill sets are as strong and competitive as anywhere in the country. Over the past five years, too, there has been a huge emphasis, including by city and state policymakers, [to strengthen Michigan’s positioning] including through the Office of Future Mobility and Electrification and Detroit’s economic development arm, which is bringing startups into the city. There are a lot of resources going in on the back of what you’ve seen on the real estate side and all that [billionaire investor] Dan Gilbert has done [for the city], including buying up skyscrapers and making them Class A office space and putting them back on the market.

TC: I had the opportunity to talk with Dan about the quality of life there and he’s obviously a big proponent. 

DR: Michigan and Detroit are super unique. The suburbs feature really strong school systems, and living in Detroit proper is awesome. It feels like a startup of its own, with new restaurants opening up and new construction and people everywhere on patios, even while Detroit maintains its historic feel, with many buildings that are 100 years old. You also have the Great Lakes and skiing and the outdoors. You can draw comparisons to other startup hotbeds, but there are definite diamond-in-the-rough aspects to being in Michigan.

TC: Anecdotally, does it feel like people who grew up there are staying, rather than heading off in other directions?

DR: When I was an undergrad, 75% of people said, ‘I’m going to Chicago or New York.’ That has changed. Now people are moving to downtown Detroit. There’s high-end real estate, a walkability aspect, and if you’re a sports or music fan, the access you have to things like that is unrivaled. You don’t have to plan anything because there are 10 different things to choose from on a Friday night, from theaters to stadiums to art galleries. There are a lot of things pulling in different types of people.

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