www.latimes.com/business/technology/la-fi-tn-end-of-on-demand-snap-story.html

On-demand business models have put some startups on life support

Last summer, flower delivery start-up BloomThat was in an enviable position.

The 2-year-old San Francisco company had raised more than $5 million in venture capital funding. It had earned a tech world pedigree after graduating from the prestigious incubator Y Combinator. And it had its roots firmly planted in the “on-demand economy” — a business model popularized by Uber that was the hot new category in Silicon Valley.

But to live up to its promise of delivering bouquets within one hour in three markets, BloomThat was hemorrhaging cash. After launching in New York last summer, it was burning through more than $500,000 a month.

“It was not good; we probably had around four to five months of runway left,” said David Bladow, BloomThat’s co-founder and chief executive.

Just in time for Mother’s Day, see how flower delivery services are getting a fresh new twist
Faced with the prospect of going bust, Bladow and his cofounders asked themselves: Do customers really need their service at the press of a button?

It’s a question being asked at a number of startups that promise instant gratification. As the on-demand business model strains companies’ finances and the tech downturn makes investor money harder to come by, companies are realizing that what works for Uber may not work for them.

Some, like BloomThat, have changed course from a model that was, for a time, seen as the easiest way to land funding in Silicon Valley.

“Someone said, ‘grow, grow, grow,’ and someone else parroted it, then everyone else parroted it, and we fell victim to the macro trend,” Bladow said.

Last year alone, venture capital firms invested more than $17 billion across 214 companies that had the on-demand business model, up from $7.3 billion the previous year. These investments represented nearly 13% of all venture funding that year, according to data gathered by CB Insights.

Uber, the pioneer of the on-demand model, also continued to grow, giving the Valley reason to keep throwing money at on-demand businesses.

But offering rides is different from selling flowers.

For Uber to offer on-demand service, all it needs is lots of drivers using their own cars to log onto the app and start driving. For BloomThat to deliver flowers in a one-hour window, it had to set up distribution centers stocked with fresh bouquets that were ready to be deployed at a moment’s notice. That takes real estate, supplies and staff — before even getting into the logistics of one-hour delivery.

Zirx, a venture-funded San Francisco startup that offered on-demand valet parking, found its initial business model undermined by similar costs.

The company was paying a premium to lease parking spots in cities that have notoriously few parking spots. The more popular the company got, the more it cost to secure additional spots. Customers, however, weren’t willing to pay the premium.

“Most consumers have a price point in mind for a service,” said Sean Behr, chief executive of Zirx. “The consumer is unwilling to pay for the true nature of on-demand.”

The idea that we’re an on-demand company — that was part of the problem.
— Matt Schwab, BloomThat co-founder and president
And so the first signs of an on-demand exodus have started to show. Some, like Spoonrocket (on-demand meals), Homejoy (on-demand house cleaning), and Shuddle (Uber for kids), have gone out of business because they couldn’t raise enough money. Sidecar, an Uber competitor, sold its assets to General Motors last year. And Zirx has dropped the on-demand component of its business entirely.

“A company needs to look into their own business and ask themselves what they’re best at,” said Eurie Kim, a partner at venture capital firm Forerunner Ventures, which invested in BloomThat and supported the company’s move away from on-demand delivery. “When you do that, you realize there are probably two or three things your customer really loves about your business, and it’s not necessarily the delivery.”

For BloomThat, the company learned that customers thought on-demand delivery was nice, but it wasn’t a deal breaker. People didn’t mind ordering flowers and getting them in a later window, or even the next day. By extending the delivery window by an hour, the company was able to reduce its number of drivers and distribution centers and cut costs by 25%.

The company now offers on-demand delivery only in city centers, and nationwide next-day delivery. The latter accounts for 50% of its orders, and the company became profitable four months ago.

When Behr looked at Zirx’s model, he realized “it would be a very difficult product to make money.” So he, too, changed the company’s course. Earlier this year Zirx changed its business to offer a service where it moves vehicles for other companies, such as rental car services, mechanics, and car dealers. Behr expects Zirx to be profitable by the end of the year.

“The idea that we’re an on-demand company — that was part of the problem,” said Matt Schwab, BloomThat’s co-founder and president. “We’re not an on-demand company. We’re a company that builds products that has on-demand delivery. It seems trivial, but flipping the thinking changed the focus of the company.”

There are some industries where on-demand delivery is critical, said Ooshma Garg, founder of Gobble, a dinner kit company that delivered on-demand meals back in 2012, before changing to a subscription model. But that only applies to two or three industries, not 100.

“We figured out that on-demand didn’t work for us within three months of trying it,” she said.

During its on-demand period, the quality of Gobble’s food and service suffered. Its target market, which was families, lived in the suburbs — meaning it had to have delivery drivers stationed across the Bay Area with trunks full of food. Any meals that weren’t sold went to waste. It wasn’t profitable.

Gobble quickly changed direction to a subscription model. It is now 20 times larger and is no longer losing money.

It’s not just companies that are waking up to the fact being “on-demand” doesn’t guarantee success — the investor tide has also turned.

As the downturn leads to more cautious investment, on-demand businesses are among the hardest-hit; funding for such companies fell in the first quarter of this year to $1.3 billion, down from $7.3 billion six months ago.

“If you look in venture capital markets, the on-demand sector is definitely out of favor,” said Ajay Chopra, a partner at Trinity Ventures who is an investor in both Gobble and Zirx.

It’s not lost on venture capitalists that the collective fear of missing out on investing in the next Uber is what drove many of the investments in on-demand businesses to begin with.

But as with any boom, there is a shake-out. Here, it’s been the realization that on-demand delivery isn’t as new or groundbreaking as previously thought (e-commerce firms Webvan and Kozmo.com offered delivery in less than an hour in the late ’90s before going out of business during the dot-com crash), and it’s not actually crucial to most companies.

“A lot will go out of business, sell, or merge,” Chopra said. “And I expect a lot of companies will pivot to a different model.”

And while a pivot may be an admission that a company didn’t get it right the first time, that’s just part of running a business, Chopra said.

It’s not easy. Gobble, Zirx and BloomThat all went through awkward transition periods. Gobble spent months educating its customers on the new business. Zirx had to cut the consumer-facing part of its business entirely. BloomThat’s growth flatlined for five months while it figured out its new model.

It’s not the straightforward overnight success story that Silicon Valley likes to sell. But it’s far more sustainable and lucrative than the rush to win at on-demand.

“We’ve come out of this fog,” Bladow said. “It allows me to sleep a lot better at night.”

First published June 15, 2016

In Silicon Valley, even mobile homes are getting too pricey for longtime residents


During the last week of March, Apple reached a record market value of $754 billion, Google tweaked a policy to protect its $22-billion-a-quarter advertising business and Yahoo inched toward closing a $4.83-billion sale. Meanwhile, Judy Pavlick drove around her Sunnyvale, Calif., mobile home park collecting plastic bottles and empty drink cans to save her future.

At a recycling rate of 5 to 10 cents a bottle, the 70-year-old’s attempt to raise $10,000 to campaign for a rent control measure seemed like a long shot. But living in the heart of Silicon Valley — where rents keep soaring, outside interests are encroaching and protections for renters are scant — what else was she going to do?

“People are looking for somebody to save them, and they’re not looking to themselves,” said Pavlick, a retiree who has lived in the Plaza del Rey mobile home park since 1989.

The mobile home park sits on more than 65 acres of some of California’s hottest real estate. Its 800 tidy modular homes are less than two miles from the campuses of Apple, Google, Yahoo and LinkedIn. One of the world’s largest private equity firms, the Carlyle Group, bought the land two years ago for $151.1 million. And in its first year owning the park, it increased space rents (the amount that homeowners pay to lease land) by 7.5% — the largest in Plaza del Rey’s 47-year history.

Pavlick knows how this goes. She’s not going to wait to be priced out. She’s rallying her neighbors: Plastics. Cans. Put ‘em out, now.

:::

To live in the Bay Area is to face skyrocketing rents, threats of displacement and evictions. It’s to hear about techies moving in, to hear about even techies being priced out. It’s to watch glistening tech campuses go up as the gulf between those who make the tech and those who just happen to be here widens.

“When people think Silicon Valley, they think ‘pot of gold,’ ” said Dorothy Niblock, 90, a Plaza del Rey resident who lives alone in the two-bedroom mobile home she designed with her late husband 44 years ago. “That doesn’t really apply to us.”

Most of Sunnyvale’s dozen or so mobile home parks started as retirement communities, and nearly half remain that way. Plaza del Rey is now a family park, but its retirement roots linger: Seniors make up the bulk of its population.

Its monthly newsletter includes a calendar of activities such as Mahjong Tuesdays, Bridge Club Wednesdays and exercise groups four days a week. On Valentine’s Day, there was a spaghetti dinner in the main clubhouse. On St. Patrick’s Day, it was corned beef and cabbage. “Please bring your own plates and utensils,” the flier read. “We will be serving water, but feel free to BYOB!”

Many longtime residents have never thought of themselves as part of the Silicon Valley story. But sometimes, you don’t get to choose.

The most recent tech boom created staggering job growth in the region, with real estate brokers estimating that firms such as Google and Apple now occupy around nine times the amount of land they did in 2005. The expansion of companies such as Facebook, LinkedIn and Microsoft — along with the tens of thousands of employees they attract — has also significantly increased demand for real estate in the area.

One-bedroom homes in the Sunnyvale area have gone from a median selling price of $205,000 in 2012 to more than $445,000 in 2017. Apartments have over the last four years seen double-digit rent increases. Teachers have been priced out of the school districts where they teach. Even lawyers have left the region in a huff. And as investors still keen to park their money in Silicon Valley look for ways to squeeze value out of what’s already there, no property is getting a free pass — not even mobile home parks.

:::

On her first day driving around the park, Pavlick collected 10 bags of bottles and cans. Total Value: $40.

“Next Thursday, how about 20 donations?” she wrote to Plaza del Rey’s Nextdoor community forum.

It costs only $200 to file the initial paperwork to get a measure on the ballot in Sunnyvale. But getting a ballot measure passed is more expensive and difficult, said Juliet Brodie, an attorney who represented the Mountain View Tenants Coalition in its successful push for rent control last year.

Proponents have to publish a notice of intent in local newspapers, get the ballot measure written, gather signatures of at least 10% of the city’s eligible voters and win a majority of votes. Printing costs alone can push costs into the thousands of dollars.

“You can’t just take a notepad and get signatures,” Brodie said.

When Pavlick bought her home in 1989, she paid $65,000 plus $356 in monthly space rent, which also included water, garbage, sewage and cable. She was a business systems analyst, working for companies such as Memorex and Genentech. The park was close to her job, and its affordability meant that she could get a two-bedroom, allowing her to care for her late mother, who had Alzheimer’s disease.

The original owners kept Plaza del Rey in the family for more than four decades until granddaughter Shereen Caswell sold it to Carlyle in 2015 (Caswell could not be reached for comment).

Today, Pavlick pays $1,004 for space rent, the result of incremental rent increases over nearly 30 years. Residents now cover the cost of all utilities, in addition to personal property taxes and the cost of maintaining their homes, patios and yards. On top of doubling the space rent increase in 2016 from previous years (residents have long paid increases of 3% to 4% a year, comparable to neighboring parks), Carlyle raised the space rents for new residents to $1,600, nearly 40% more than the park average.

Earlier this year the firm offered residents a five-year lease that would cap rent increases at 4% a year, but only if they also agreed to sign a contract that would give Carlyle the right to make the first bid if a homeowner decided to sell. Carlyle declined to comment on the rent increases or its plans for the park after the five-year period is up. As of May, around 70% of residents have signed the lease. Those who have not signed might see rents increase to market value — Carlyle declined to define what this would be.

Mobile home owners face a “double whammy,” according to housing lawyers, because unlike traditional homeowners, they don’t own the land beneath their houses. That means they can’t expect a windfall when they sell. Newer, larger mobile homes can go for as much as $400,000, according to local Realtors, but older homes in the park can sell for as little as $120,000. Recent space rent increases have hurt homeowners looking to sell because Realtors estimate that for every $100 increase in space rent, a home loses $10,000 in value.

And unlike renters, who can easily up and leave, mobile home owners are saddled with a house that is, despite the name, difficult to move. Some homes exceed 1,800 square feet, with multiple bedrooms and bathrooms. Many are brought into the park in pieces and built on site. Taking apart and transporting a mobile home can cost tens of thousands of dollars. Putting one back together can cost even more. And once a home has been uprooted, homeowners have to find a new space for it.

“Just move, just move,” said Pavlick, mimicking those who believe that the solution to her problem is to leave. “Move where?”

:::

Mobile home parks have traditionally been mom-and-pop operations. But as the value of land in Silicon Valley soars, a growing number of institutional investors have been eyeing its undervalued lots.

That includes private equity firms. Private equity investors typically snatch up struggling or undervalued businesses and find ways to increase their value — either by investing resources to beef up the business or cutting costs to improve the bottom line — then reselling them at a profit.

Carlyle spokesman Randall Whitestone told the Los Angeles Times that the publicly traded Washington, D.C., firm, which has $162 billion in assets under management across industries such as healthcare, aerospace, real estate and financial services, has been buying up mobile home parks because they’re “less volatile than many other asset classes.”

“We like to buy in locations where there are good supply-demand fundamentals and economic strength,” Whitestone said.

Because of zoning rules, there is little chance that Plaza del Rey will one day become a tech campus. But there are other ways to raise the value of the park.

Investors can upgrade a park before they sell it. Although Carlyle declined to comment on its long-term plans for the park, Whitestone said it has “made significant capital investments to materially improve the property for residents.”

Another way is to increase the rent.

Plaza del Rey is, to the dismay of many longtime residents, an ideal investment for Carlyle. In a place like Silicon Valley, where tech salaries are among the highest in the country and the housing market is among the most competitive, it won’t be hard to find someone willing to pay $1,600 or more for space rent. And according to private equity experts, it doesn’t matter to Carlyle who that someone might be.

“They won’t care if it’s seniors or young people,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Their challenge is to turn something they bought for $100 million into something that’s worth $300 million. That’s the end game for a private equity fund.”

This gives Carlyle reason to fear rent control. Any caps to rent increases would not only limit the park’s near-term profitability but also potentially reduce its future resale value, which is where private equity firms make most of their profit.

And that’s why Carlyle sent its managing director of U.S. real restate, Dave Kingery, to a Sunnyvale City Council meeting in January to argue against rent control.

“We do not believe it furthers the objectives of the city, the residents or the owners in the long term,” Kingery said at the meeting.

The firm’s annual earnings reports spelled it out more plainly: Under the “risks” heading, which details all the things that could hurt Carlyle’s business, the tenth bullet point reads “changes in government regulations (such as rent control).”

:::

Depending on who you talk to, rent control either always works or it never works. It’s the answer to the housing affordability crisis. It’s the reason that homes are so expensive. It will deter developers from creating more housing stock. It will keep people in their homes. It has never solved a city’s problems. It’s the answer to residents’ prayers.

Although Silicon Valley communities have either resisted or been slow to develop new housing to accommodate the influx of workers the region has attracted over the years, Sunnyvale has one of the strongest track records in California when it comes to building affordable housing. About 10% of the units in its development pipeline are affordable housing units.

But it’s also one of the few cities in Silicon Valley that doesn’t have rent control, either citywide or specifically for mobile home parks, and its City Council has shown a reluctance to entertain the thorny issue.

“The problem I have is there are a lot of loopholes in rent control, and we’re going to have a lot of lawsuits the moment it goes through,” council member Michael Goldman said in an interview with The Times.

The neighboring city of Mountain View, which passed a voter-approved measure in November, was slapped with a lawsuit from the California Apartment Assn. seeking to block the measure from being enforced immediately after the election. A Santa Clara County judge in April denied the request for an injunction, clearing the way for the city to go ahead with its rent control rollout.

“This is a free country and anybody with a filing fee can file a lawsuit,” said Brodie, the attorney who helped Mountain View get rent control. “If we allow that to prevent us from making good policy, that’s just not reasonable.”

For housing advocates, rent control is good policy. For opponents, it’s a Band-Aid solution. Rents are high, they argue, not just because landlords can charge whatever they want, but because Silicon Valley became a global tech mecca faster than its cities could handle it. How do you solve that?

“There are no bad guys in all this,” Goldman said of Carlyle and Plaza del Rey. “When I see people saying ‘It’s really expensive for me,’ I say if you’re not working in high tech, which requires you to be here, why are you here? If you’re here, you’re making a decision every minute you’re here that the cost of being here is worth it.”

There are tech industry workers who live in Plaza del Rey — employees of Apple, Google, Oracle and local start-ups. They’re increasingly feeling the squeeze too.

Despite making a six-figure salary working in information technology, a traditional home was out of reach for Bay Area native Ron Van Scherpe, 45. Having a young family, he didn’t want to rent anymore. So he and his wife did what they thought was the next best thing: They bought a three-bedroom home in Plaza del Rey.

When they moved in 12 years ago, their combined mortgage and space rent was only $2,150. Today, it’s $2,600, which is still more affordable than the rent on a one-bedroom Sunnyvale apartment. But if the space rent keeps climbing, at some point they’ll be no different from renters.

“The tech industry is displacing the middle class,” said Van Scherpe, who has signed up to help Pavlick in her rent control effort. “We’re going to give it two years with this rent control issue, and if it doesn’t look promising, we’re going to have to relocate by the end of five years.”

He and his wife are considering Austin, Texas. He worries that it will be hard on his kids, though. Their grandparents live here.

:::

On a recent Thursday morning, Pavlick drove around Plaza del Rey with her neighbors Patrick and Karen Garcia picking up heavy glass bottles of Perrier and empty cans of Coca-Cola.

“Someone must have had a party,” Karen Garcia said.

At the recycling facility, they traded the goods for $46.55.

Pavlick frowned. “I thought we’d get more from those heavy bottles,” she said. “But it’s more than last week.”

“Enough to pay for a third of an hour with an attorney!” Garcia joked.

Pavlick did the math in her head. If Plaza del Rey averaged $40 in recycling a week, and the dozen or so mobile home parks in Sunnyvale also got involved and raised $40 a week, they could collectively raise everything they needed in less than six months.

She currently has around 115 people from Plaza del Rey and neighboring parks working with her. In the coming weeks she hopes that more people will put out their recycling, knock on doors and, eventually, campaign for rent control.

It’s a long shot: a few dozen mobile home park residents trying to stop a private equity firm from upending their lives. But Pavlick likes to say aloud: “Carlyle has the money, but we have the people.”

Now she just needs those people to knock on doors, push for rent control and fight for their future — one plastic bottle at a time.

AS VENTURE CAPITAL DRIES UP, TECH START-UPS DISCOVER FRUGALITY



Tech start-up Appthority’s office has plush conference rooms, soundproof phone booths, an enormous kitchen and a view of San Francisco Bay. It has ping-pong and foosball tables, beer on tap and 11 types of tea.

The cybersecurity company owns none of it. And that’s how the company’s president and co-founder, Domingo Guerra, likes it.

“Any time you have flexibility and you don’t have a liability, it looks good on the books,” Guerra said. Although his 30-person company has raised $20.25 million from venture capital firms such as Venrock and U.S. Venture Partners, it operates out of a WeWork co-working space, where amenities such as Wi-Fi and office furnishings are included in the rent.

As investor sentiment in the tech industry cools, start-ups are facing a new reality: Money doesn’t always come easily. The abundant venture capital funding that convinced companies they could stay private longer is now harder to come by — such funding in Silicon Valley fell 19.5% in the first quarter of 2016 compared with the same period in 2015. And Wall Street has grown so skeptical of Silicon Valley that not a single tech firm has dared to go public so far this year.

In this climate, having good-looking books is now top of mind for start-ups that don’t want to go the way of companies such as Foursquare, which halved its valuation in order to raise money earlier this year, or SpoonRocket and Shuddle, which shut down after running out of money.

To that end, small and midsize start-ups are trying to outlast the downturn by cutting back on one of tech’s trademark innovations: outlandish spending.

There was a time, for example, when Appthority was thinking about getting its own office. But after heightened investor scrutiny stretched the company’s latest fundraising process to seven months — more than its previous rounds — Guerra decided a co-working setup was its smartest bet.

“If we had leased our own office, most landlords wanted us to sign a five- to 10-year lease, and they were asking for a seven-month security deposit, which would have been six figures,” Guerra said. “From an investment perspective, it was a lot of liabilities.”

A few blocks away from Appthority in San Francisco’s Financial District, Wonolo — an on-demand staffing start-up that has raised $8.9 million from investors such as Coca-Cola Founders and CrunchFund — has slowed down hiring.

“We’re not rushing to make a hire just because a position has opened up,” said AJ Brustein, Wonolo’s co-founder and chief operating officer. “We’re being smarter about who we hire, and that might mean we’re taking longer than we’d want.”

Waits of up to two months, Brustein said, ensure the company finds the right person and reduces the chances of hiring someone who might be a poor fit, which would ultimately be costly.

The company has also opted for a modest office, choosing to take out a yearlong sublease on a 7,000-square-foot space to accommodate its 27 employees.

The decision came after a fundraising push that started in October dragged into January. By then, “it was very clear every single VC in the Valley was writing about doom and gloom,” Brustein said. “We kept that in consideration when we moved into an office — it’s not necessarily the type of office we would have gotten six months ago, but it was one that we could pay for.”

Commercial real estate firms have noticed the shift. Cushman & Wakefield’s San Francisco market leader J.D. Lumpkin said that tech start-ups are starting to make “scrappier, more responsible real estate decisions” to avoid spending huge amounts of money on a lease.

Subleasing is on the rise — even larger tech companies such as Twitter and Dropbox are renting parts of their offices to start-ups — and a growing number of deals on ambitious office spaces have been put on hold.

“Some start-ups are doing well, like Lyft and Fitbit,” said Robert Sammons, Cushman & Wakefield’s director of research in San Francisco, who noted that those firms are still expanding into bigger offices and snapping up long-term leases. “But for some start-ups, their growth patterns haven’t panned out.”

It’s a reality check, Sammons said. Tech has traditionally spent more on leasing and renovating real estate than other industries.

Payments company Square, for example, built an atrium into its office. Github has a full wet bar.

Numerous start-ups have spent millions making their offices workplace wonderlands. And, Sammons said, “board members are now saying, ‘What are you doing? You’re not even profitable.'”

Real estate is only one of many considerations for start-ups navigating the downturn, said Dale Chang, vice president of portfolio operations at venture capital firm Scale Venture Partners, which has invested in companies such as Box and DocuSign.

“I advise our companies to be smart at all times about growth,” Chang said. “Even in frothy times, I don’t think going out there and spending a lot of money is the right strategy.”

Instead, Chang advises his portfolio companies to focus on the core set of activities that the company was set up to do. Making an app? Hit the ball out of the park with it. Offering software as a service? Make it best in class. Anything that isn’t integral to that — marketing, hiring, office expansions — can be slowed down.

Start-ups that have raised funds in recent months have had to alter their investor presentations to address that too.

Invoca, a 160-person Santa Barbara company that makes analytics tools for marketers, closed a $30-million round in March after a seven-month fundraising process that stretched out like bubble gum.

Its previous rounds took half the time. Going into it, the company’s chief executive, Mark Woodward, said investors were “way, way, way more conservative compared to prior months,” and were no longer just interested in companies with high growth. They wanted to know the quality of Invoca’s technology, the market opportunity, the business model, its competitive position, and how defensible that position was.

“They wanted to know if Facebook or Google decided to enter our market, would they wipe us out tomorrow?” Woodward said.

When the company raised funds two years ago, the money went toward aggressive hiring of sales and marketing teams and research and development. The latest round, Woodward said, will get the company to self-sustainability, at which point it won’t need to raise funds again.

“We’re not increasing spending by a dime on marketing,” Woodward said. “We’re not chasing Uber-sized top-line growth — that’s expensive and risky. Just because we have money in the bank doesn’t mean we’re going to spend it.”

Back in San Francisco, Jeff Burkland, the founder of Burkland Associates, a firm that offers chief financial officer services to start-ups, said that over the years he’s seen companies try different strategies to extend their runway.

Slowing down hiring is one. Finding shorter, more flexible leases is another. In extreme cases, founders might decide to not take a salary, or move some of their work to offshore contractors.

Building a war chest before a downturn hits is also an option; a move that rewards those who take advantage of frothy times by accepting funding well before they need it.

If a company had plans to raise funds within the next two years, Burkland advised them last year to get it over with.

Which is why Segment, a data hub start-up where Burkland is the CFO, raised funds last fall even though the company didn’t need the extra cash yet.

“We felt like the market was too warm to stay that way,” said Peter Reinhardt, Segment’s chief executive. “We had all this investor interest, and we felt like it wasn’t going to be that great in six months.”

The fundraising process — emailing investors, setting up meetings, signing a term sheet — took only 11 days.

Ultimately, Burkland said, it’s about staying nimble and being adaptive. Trimming excess, finding flexibility and, sometimes, being scrappy. You know, like a start-up.

THINK YOU HAVE TOO MANY ROOMMATES? PEOPLE WITH 16 ARE PAYING EXTRA FOR THE PRICILEGE


Jay Standish showed off a three-story house in the leafy neighborhood of Adams Point, pausing at the home’s top-floor kitchen.

“That’s the second kitchen,” he said, motioning toward the refrigerator, stove-top, sink and toaster ovens. “It’s good for when there’s high traffic in the downstairs kitchen, or, you know,” he shrugged, “if you’re not in a mood to be social.”

Standish, 31, lives here with 10 other people. The house, called Euclid Manor, isn’t a college dorm. It’s not a hostel-style “hacker house” either. According to Standish, this isn’t a tech thing, or a hippie thing, or a rent-is-too-expensive-and-I’m-desperate thing.

It’s called co-living, and it’s a lifestyle choice emerging among young people who favor Airbnb over hotels and Lyft rides over car ownership. Rather than seeking out housemates on Craigslist, city-dwellers in high-cost markets such as the Bay Area and New York City are now paying companies — some small and others, like WeWork, backed by millions in venture capital — a premium to live in a building with a curated roster of housemates, stocked kitchens and planned get-togethers.

It’s about building a community, Standish said. And for him, it’s also about building a business.

Standish and Ben Provan, 32, run OpenDoor, which manages Euclid Manor and two other properties: the Canopy, also in Oakland, where 12 people live, and the Farmhouse in Berkeley, which 16 call home.

The pair see themselves as more than landlords. Though they handle house repairs and rent collection, they also vet tenants to make sure that there’s a balanced mix of personality types in the house, maintain the culture of the houses, help run activities and act as mediators when needed.

“Humans are very social beings and pre-Industrial Revolution we lived in large groups,” Standish said while showing off Euclid Manor’s dining room, which has a long, banquet-length table used for house meetings and dinner parties. “I mean, this house is an interesting example of that. It was built in 1910, and back then you’d have these huge estates where there were 20 people living in a house together,” though many were live-in servants. (A “totally different dynamic,” he said).

But Standish thinks that many people, particularly millennials, are eschewing the American dream of owning a house in favor of finding a second family of like-minded people.

Research from real estate site Trulia found that homeownership in the millennial age group is the lowest it has ever been. Around 70% of people age 18-34 in the U.S. rent. Trulia’s chief economist, Ralph McLaughlin, said that is in part because in places such as the Bay Area, New York and Southern California, the median buyer would have to spend upward of 60% to 70% of his or her monthly income to buy a house.

The rise of co-living is a response to both escalating real estate costs and growing demand from people actively seeking such housing and willing to pay for it, McLaughlin said.

Research conducted in 2015 by British life insurance firm Beagle Street found that more adults than ever are waiting to move out of their parents’ house, get married and have children. It’s not just because it’s economically harder, the research showed. Survey respondents also indicated that they don’t value living alone as much as earlier generations.

“The best way to describe the mentality that encapsulates where we’re at is the ‘modern nomad,'” said Benja Juster, 28, an interactive experience designer who lives in the Canopy, whose residents are all in their mid-20s to mid-30s. “It’s a desire to not be locked down to one physical location … to go with the wind and find where life may take you.”

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Ariana Campellone, 24, a nutrition and herbalism practitioner who also lives in the Canopy, said “traditional” adult responsibilities such as family planning aren’t a priority for her right now, and she much prefers to live with others who can help her grow.

“Our values here are creative empowerment and skill-share,” she said.

OpenDoor vets tenants beyond the usual credit history checks. Applicants have to answer questions such as what they could contribute to the house, what kind of environment they’re looking for, and if they were a non-human animal, what kind would they be.

“I said I was a raccoon,” Juster said. “I make do with scraps. I’m very resourceful and nimble.”

OpenDoor is testing a different ownership structure for each of its houses to see what works best. It rents the Farmhouse, its first business venture, and subleases it to tenants. It bought its second house, the Canopy, outright. OpenDoor operates the investor-owned Euclid Manor.

The company’s revenue comes from the rent it collects from tenants, usually $1,000 to $1,200 a month, depending on the room and house. Standish and Provan declined to reveal OpenDoor’s margins, but said the properties are profitable, and co-living provides better returns than traditional housing. For tenants, the rent is more expensive than sharing a home with 10 or so roommates, but comparable to living with fewer housemates in the same neighborhood.

Aside from the food program, which lowers the cost of groceries, Standish and Provan said residents also get access to appliances and facilities uncommon in shared apartments — at Euclid Manor those include West Elm furnishings, a grand piano, a Vitamix and a cafe-grade coffee machine. The Canopy has a soundstage, a woodworking studio, and large living rooms with projectors and musical instruments.

But what tenants are really paying for is the “community,” Standish said. “Living as family, basically.”

In New York City, a co-living business called Common has raised $7.35 million in venture capital funding to open two buildings in Brooklyn, with a third planned for this spring. Founded by serial entrepreneur Brad Hargreaves, the start-up holds master leases on its buildings and also plays a property management role.

Its apartments are fully furnished and stocked with items such as toilet paper and paper towels. Tenants share apartments within the building and have access to common areas. They communicate using the group messaging app Slack, and Common organizes building-wide activities like movie nights, yoga, breakfasts and dinners.

WeWork, the $16-billion start-up that has raised more than $1 billion in venture capital funding and leases co-working spaces in Los Angeles, San Francisco and New York, is also dipping its toes into co-living. Its building in New York City has 45 units, a mix of studios and one- and two-bedrooms, with communal events such as potluck dinners and fitness classes. It doesn’t own any real estate, opting instead to lease entire buildings.

Despite soaring rents in places where co-living companies have set up shop, these ventures can still be risky, according to real estate experts, especially if they try to expand too fast.

The best-known co-living failure is the venture capital-backed Campus, a San Francisco start-up that launched in 2013. Within two years it had 30 houses on master leases. But the company shut down last August because it was “unable to find a way to make Campus into an economically viable business,” founder Tom Currier said in an email to tenants. Currier could not be reached for comment.

It’s a mistake to think that the speediness that works for tech start-ups will also work for a real estate start-up, said Michael Yarne, a partner at San Francisco development firm Build Inc.

“The venture capital world is obsessed with speed and scale, but the world we’re in goes really damn slow,” Yarne said.

The slow return on real estate properties hasn’t put off investors with cash, though. Venture capital firm Maveron Ventures invested in Common because it believes that companies like Common fill a need.

“What we’re looking for are big industries where consumers, and especially millennial consumers, feel disconnected from the brands that exist,” said Jason Stoffer, a partner at the firm.

Millennials “expect a level of authenticity,” he said, “and the reality is an Avalon Bay apartment building is sterile. It’s not authentic. You don’t know your neighbors. People want a level of responsibility and a brand which has a soul.”

For Standish and Provan, co-living houses are the first step. But why stop there? The pair have a long-term vision of creating sustainable communities in different formats — maybe one for families too.

But first, they’re focusing on the three houses they have. And answering age-old questions of communal living, like who’s going to do the dishes.

“Well, if we can’t figure that one out, how are we going to solve climate change and economic inequality?” Standish laughs. “So let’s start with the dishes.”

VERIZON BUYS YAHOO FOR $4.8 BILLION, AND IT’S GIVING YAHOO’S BRAND ANOTHER CHANCE



Verizon Communications Inc. built its business on pipes and antennae. Now the nation’s biggest telecommunications company is assembling a different kind of network — one centered around eyeballs and advertisements.

With its $4.83-billion acquisition of Yahoo Inc.’s core business on Monday, Verizon continues its expansion beyond wireless and broadband by taking on a struggling tech giant far removed from its glory days.

Under Verizon, Yahoo will join its longtime rival, AOL, which the telecom snatched up last year for $4.4 billion. Both companies offer a cautionary tale of how an Internet titan can quickly turn into an also-ran. But together, analysts said, they provide Verizon a key foothold in digital advertising — a potentially lucrative revenue stream as the pool of new mobile and broadband customers dwindles.

“Yahoo is a company that changed the world,” Yahoo Chief Executive Marissa Mayer said in a note to employees. “Now we will continue to, with even greater scale, in combination with Verizon and AOL.”

The deal — which includes Yahoo’s email service; websites dedicated to news, finance and sports; advertising tools; real estate; and some patents — is expected to close in the first quarter of 2017. The Sunnyvale, Calif., company will continue to operate independently until then.

The sale does not include Yahoo’s cash or its shares in Alibaba Group and Yahoo Japan. After the deal closes, these assets will become a publicly traded investment company with a new name.

Yahoo’s Web business will be integrated with AOL, but AOL spokeswoman Caroline Campbell said “Yahoo brands [such as Yahoo Finance and Yahoo Sports] will not go away.” Instead, they will exist alongside AOL properties, such as the Huffington Post, TechCrunch and Engadget, and firms in which Verizon invests, such as AwesomenessTV.

The sale gives the New York telecom “high-quality Web content” and the advertising dollars that come with it, said Laura Martin, Internet analyst at Needham & Co.

The deal also includes Yahoo’s sizable and sophisticated digital advertising business — one that can be merged with AOL’s to cut costs and secure Verizon’s place behind industry leaders Google and Facebook.

The final price is a far cry from the $45 billion Microsoft offered in 2008 — an offer Yahoo famously rejected. But Yahoo’s brand has taken a beating in recent years, with some analysts saying the company should be happy to fetch anywhere near $5 billion.

“The state [of Yahoo] is troubled, clearly,” former interim Chief Executive Ross Levinsohn told CNBC last week, predicting a sale between $3.5 billion and $4 billion. “We can look back over the past four years and say the strategy did not pay off.”

The deal had been expected to end Mayer’s four-year tenure, but she said Monday that she intends to stay with the firm.

“I love Yahoo, and I believe in all of you,” Mayer said. “It’s important to me to see Yahoo into its next chapter.”

Yahoo’s troubles began well before Mayer took the reins.

The company churned through five CEOs in six years, unable to decide if it was a media company or a technology company — indecision that resulted in it doing neither particularly well. It largely missed the mobile revolution, catching only the tail end once Mayer joined.

As “Google” became the default verb for search, Facebook laid claim to all things social and everyone else snapped up what was left of photo sharing, video streaming and instant messaging, Yahoo was left out of the conversation.

“The old-fashioned definition for a ‘dying brand’ was when a company went out of business,” said Marlene Towns, a professor at Georgetown’s McDonough School of Business. “The more recent definition is we stop talking about them. That is the first sign of imminent death in this connected age.”

Although Mayer helped create revenue with mobile products, her own leadership was marred with foibles. Her acquisitions — including the $1.1 billion paid for Tumblr — have been a bust. Her turnaround strategies haven’t improved the company’s revenue decline. And her big spending on media personalities such as Katie Couric and David Pogue hasn’t drawn viewers as hoped.

This year, activist investor Starboard Value LP grew so impatient with Mayer that it wrote to shareholders, calling for an overhaul of the board of directors and a sale of the core business.

When Yahoo launched in 1994, it was the definitive guide to the Internet. But over the years, the company became complacent, said Kraig Swenrud, chief marketing officer of Campaign Monitor, who has spent nearly 20 years doing marketing for high-tech companies.

“You either embrace the constant, never-ending change as a brand, or you perish,” Swenrud said. “And that’s what’s happened to Yahoo.”

As Yahoo ping-ponged from a Web portal to a media company to a mishmash of both, it lost direction, said Nicole Ferry, a partner and executive director of strategy at branding firm Sullivan.

“If you look at a company like Facebook, their mission is to connect the world, so all its new products and acquisitions speak to that,” said Ferry. “Or Google’s mission to organize the world’s information — many of its products and acquisitions serve that mission.”

At Yahoo, there was no clear mission.

“What are they trying to do?” Ferry said. “What is their reason for being?”

Yahoo properties still attract about 1 billion users a month. Millions rely on Yahoo Mail, and Yahoo Finance is a stalwart for financial news. These products alone aren’t enough to return the brand to its peak, business analysts said, but in the right hands, people might care about Yahoo again.

“Look at Apple,” said Towns, referring to the hardware company’s reinvention under Steve Jobs.

“Or Microsoft,” said Swenrud, pointing to the company’s ongoing transformation under Chief Executive Satya Nadella.

“Or Hostess’ Twinkies,” said Towns. “They were going to go out of business, and news of that woke consumers up, and people started to remember the nostalgia of Twinkies, and the publicity helped them find a buyer and reinvent themselves.”

The Verizon deal could lead to a Twinkies-like revival. Or it could be a dud.

Telecoms such as AT&T and Comcast were rumored to have checked out Yahoo but opted against bidding. Maybe they were onto something, according to John Colley, a professor of Warwick Business School, who said wedding two unrelated businesses rarely works.

“The telecoms industry is maturing, and this acquisition appears to be more about finding future growth in unrelated diversification,” which, he said, is “always a high-risk path.”

WHERE YAHOO’S ENTERTAINMENT MEDIA PLAY WENT WRONG



When Yahoo announced last year that it had lost $42 million reviving NBC’s TV series “Community” and launching two other original shows, the company framed it as a failed experiment. It didn’t work, so Yahoo was cutting its losses.

But those in the entertainment industry were scratching their heads: How could the company call it quits without spending more?

Netflix, after all, had spent $100 million on its first attempt at original programming — two seasons of “House of Cards.” Amazon spent $3 billion last year on content for its Prime video and music streaming service, double what it spent in 2014.

“This is a go big or go home business,” said Brian Wieser, an analyst with Pivotal Research Group. “Call me when you’ve invested $4.2 billion in content, then it gets interesting.”

Yahoo’s comparably small expenditure differs from the strategy embraced by the companies that dominate streaming entertainment. But those familiar with the Sunnyvale, Calif., firm say it illustrates a recurring stumbling block.

The firm has long struggled with its identity, flip-flopping between its roots as a technology company and its ambitions of becoming a media giant.

With the company now up for sale — Yahoo is reportedly looking at a second round of bids sometime this month — it’s still unclear, after all these years, what Yahoo really is.

Yahoo started as a guide to the Internet, steering early explorers of the World Wide Web to the most interesting sites around. As the Internet matured, Yahoo grew into a portal, offering search, email, news, entertainment and anything else around which it could sell advertising. But when the portal model fell out of favor, firms like Yahoo struggled to adapt.

Newcomers have since eclipsed nearly every facet of Yahoo’s tech business. Google long ago won search. For nearly a decade, Facebook has owned social. Everyone else won mobile.

Media has been the place where Yahoo has staked, and then retracted, its claim.

The company has Yahoo Finance and News — long-running websites that for years have drawn huge amounts of traffic (the company’s collective websites drew 205 million visitors in March this year, according to Comscore, putting Yahoo behind only Google’s sites and Facebook). But each of Yahoo’s attempts to grow beyond that — to be a hub for original scripted entertainment — have ended with it pulling back and pivoting elsewhere.

“Yahoo had the ability to be a transformational media company,” said Peter Csathy, chief executive of consulting firm Manatt Digital. “It has all the assets you’d need to be successful — massive reach, globally known brand, some high-quality content, and a sales team that has been effective — but it was never able to tie those pieces together.”

In 2004, the company hired former ABC executive Lloyd Braun to head up its Santa Monica media group, which was tasked with creating original programming that could give Hollywood a run for its money.

Braun, who had green-lighted shows such as “Lost,” “Desperate Housewives” and “Grey’s Anatomy” at ABC, helped Yahoo launch original programming such as the daily video compilation show “The 9” and the multimedia website “Kevin Sites in the Hot Zone.”

But within two years, the company changed course. Its foray into television-style programming was now described by Braun in an interview with the New York Times as being “salt and pepper on the meal” as opposed to Yahoo’s main attraction. Instead of creating its own content, it would lean on other media companies and content generated by users.

Shortly after that, Braun left the company. He declined to be interviewed for this story.

Yahoo’s most recent attempt at entertainment media came after Chief Executive Marissa Mayer joined the company in 2012.

With revenue declining and mounting pressure from Wall Street to show financial and user growth, Mayer implemented a multi-pronged turn-around strategy that has included workforce cuts; product launches; a revamped email app; investments in mobile, social and advertising; and a $1.1-billion acquisition of Tumblr.

A key part of her strategy was a return to entertainment media.

She hired news anchor Katie Couric on a $10-million-a-year contract, secured an exclusive live-streaming deal with the NFL and committed funding to original programming: the revival of “Community” and two new series,” Sin City Saints” and “Other Space.”

On an earnings call with investors in 2014, Mayer said that “premium content draws premium advertisers” and, to that end, Yahoo was experimenting with original scripted shows. “We are thrilled by the positive response from ‘Community’s’ passionate following, and we are excited to welcome those fans to Yahoo,” she said.

A year later, all three shows were canceled.

“We couldn’t see our way to make money over time,” Kenneth Goldman, Yahoo’s chief financial officer, said during a 2015 earnings call, when he revealed the company had lost $42 million on those shows. “We’re not saying we’re not going to do these at all in the future, but in [these] three cases at least, it didn’t work the way we had hoped it to work, and we decided to move on and basically write off those assets.”

In January, Yahoo shut down its video portal, Yahoo Screen, and Mayer announced that the company was shifting away from original scripted content.

“While some investments have become essential to Yahoo’s transformation, others have not,” she said earlier this year. “We’ve taken an honest look at those bets, and have chosen to re-prioritize many sources towards more proven areas of growth.”

But Yahoo kept Couric, now on a $15-million contract, even though its news website remained a hodgepodge of links to other news providers. And it kept four digital magazines – with a focus on news, sports, finance and lifestyle — while shutting down the rest. It launched an e-sports portal this year.

“Again,” Csathy said, “a head scratcher.”

Yahoo insiders can point to a handful of smart bets the company has made — an exclusive licensing deal with “Saturday Night Live,” NFL streaming, live music streaming for instance. But its aversion to risk, they say, meant it always pulled back before it could see results.

“Ultimately, Yahoo had this opportunity,” Csathy said. “And the world passed it by.”

TAKE A BREAK FROM THE ELECTION AND READ THIS STORY ABOUT EMOJI KARAOKE



The soothing synths of Cyndi Lauper’s “Time After Time” filled a foam-lined karaoke room — but no one was singing.

For participants, emoji karaoke is a silent affair.

The half-dozen contestants kept their noses in their phones, thumbs moving frantically as they looked for the perfect pictographs to illustrate Lauper’s lyrics: “If you’re lost” and “You will find me.”

To passersby, it may have looked like a gathering of distracted people. But this was Emojicon, a first-of-its-kind San Francisco conference dedicated to celebrating the yellow smiley faces and cartoonish food items, animals and hand gestures that make up today’s digital language.

Far from being a festival for the Bay Area’s tech wonks, the two-day event, which took place this weekend at the Downtown Westfield shopping mall, was an invitation for ordinary people to learn more about a digital phenomenon they helped create, and to play an active role in shaping its future.

A Swift Key study last year found that 74% of Americans use emojis every day. A study from the U.K. found that 80% of Brits regularly use emojis. When the research focused on users younger than 25, that number was 100%. Not too shabby for a tool the Unicode Consortium — the nonprofit group that standardizes languages on computers — added only six years ago.

“This is the only language everyone in the world can speak,” said Kate Miltner, a USC researcher who traveled to San Francisco to host the emoji karaoke tournament. “But here’s the thing: Because they’re cute and funny, people don’t take them very seriously.”

Which is why Emojicon exists, according to organizers Jeanne Brooks and Jennifer Lee, who see the event as an opportunity to get people to pause and think about something they likely use every day, and lift the veil on how emojis are pitched, approved and designed.

“We wanted to support and open up the process of emoji,” said Brooks, who noted that even though the Unicode Consortium is one of tech’s most transparent nonprofit tech organizations — making public even its internal emails — its website is so dense and its profile so low that co-founder Mark Davis has taken to calling its committees “shadowy.”

Few people know, for example, that anyone can pitch an emoji. Fewer still know that once an emoji is accepted, it’s part of Unicode forever — no emoji has ever been revoked — which is why the consortium approves only 70 or so each year.

And most people who use emojis don’t realize that Unicode itself isn’t responsible for the appearance of emojis — it’s up to vendors such as Apple, Google, and Facebook to come up with their own designs. This accounts for why the peach emoji on iOS resembles a voluptuous rear-end, while the same emoji on Facebook looks more like a stone fruit. (Apple recently signaled intentions to change its peach to be more fruit-like in appearance, much to the dismay of those who prefer their emoji to stay cartoonish or sexual. One woman attended Emojicon dressed as the Rubenesque peach emoji with “R.I.P.” written across the back.)

“Emoji is permeating culture,” Brooks said, “so we wanted to bridge the gap between the people using emoji and the Unicode Consortium.”

The organizers pulled in sponsorship from companies that sit on the consortium, such as Google and Adobe, and firms that have lobbied for emojis relevant to their business, such as Taco Bell (taco emoji) and Panda Express (dumpling emoji). Tickets started at $10 for game events and film festival and went up to $500 for an all-access pass, including an invitation to its VIP dinner with members of the emoji subcommittee and a curator from the Museum of Modern Art in New York, which recently added to its collection the original set of emojis.

The event sold more than 500 tickets and attracted developers, artists, academics, and even passersby who dropped in while shopping at the mall to see what the fuss was all about.

“I have no idea what this is,” said Derrick Chang, 22, who attended Emoticon’s launch party the night before. “But I use emoji all the time — it’s how we communicate now.”

Mack Flavelle, 35, didn’t know what to expect from Emojicon. The Canadian software developer traveled from Vancouver to attend after first hearing about it on Twitter.

“It kind of blew my mind to learn that anyone can submit an emoji,” he said. “With emoji, I can make something that literally millions of people will use. Now I’m obsessed with it. This is going to be my legacy. I will design an emoji that my kids will use.”

Back in the karaoke room, a competitor with salt and pepper hair tapped away on his phone, interpreting the song through emojis. To represent the lyrics, “If you’re lost you can look and you will find me,” he chose a hand gesture emoji, a question mark, a pair of eyes, the emoji of a legal document (“will”), another pair of eyes and another hand gesture.

“What is this?” said the youngest competitor, an elementary school girl covered in face paint, who grimaced at the song only older people seemed to recognize.

“Cyndi Lauper!” her mom yelled from the audience.

The girl shrugged, and started tapping away on her phone, pulling up the clock emoji, then a rightward-pointing arrow emoji, and another clock emoji to represent “Time After Time.”

FAREWELL, HEADPHONE JACK. APPLE IS KILLING YOU, BUT WE’LL NEVER FORGET THE DECADES WE SHARED



When the Sony Walkman went on sale in 1979, music was stored on a cassette tape, power came from AA batteries and sound traveled through headphones plugged into a 3.5-mm audio jack.

Nearly 40 years later, smartphones double as personal audio players, music is stored in the cloud and rechargeable batteries are built into devices.

Sound, however, still travels through the same 3.5-mm audio jack — one of the last analog holdouts in an increasingly digital world.

The 3.5-mm jack is a miniaturized version of technology that’s been in use since 1878, when telephone operators manning switchboards started using its quarter-inch cousin to connect calls across the country. Scaled down in the 1950s, it helped give rise to the era of portable electronics and outlived many of gadgets it made possible: the pocket-sized radio, Walkman, Discman and MP3 player among them.

As years passed and headphones lost their novelty, the 3.5-mm jack became a frequently overlooked but convenient constant of the tech world — the rare piece of gadgetry that works with all kinds of accessories, that doesn’t require charging, that doesn’t require a second thought.

Being analog meant it was cheap, easy to make and reliable – plug in a 3.5-mm pin from a pair of high-end headphones or an airline freebie, and sound would travel through the wire.

But in 2016, being analog also meant that it was a remnant of the past.

Apple made the first move to retire the audio jack on Wednesday, announcing that it will eliminate the jack from its flagship iPhone 7 smartphones.

When the device ships Sept. 16, it will come with a pair of wired earphones that plug into Apple’s proprietary charging port and an adapter that works with 3.5-mm plugs. The company also announced a pair of wireless earbuds called AirPods, priced at $159. Beats, the headphone maker that Apple acquired in 2014 for $3 billion, will offer its own range of wireless headphones.

The jack won’t disappear from electronics overnight, according to tech experts, who said decades of being the standard consumer audio jack has made the 3.5-mm port and its earphones pervasive.

“[But] this is a very big deal,” said Vince Ponzo, senior director of the entrepreneurship program at Columbia Business School. “When the world’s largest phone distributor and seller eliminates that piece of technology from its phones, it’s a big step toward doing away with that technology entirely.”

And that’s not hyperbole, because when Apple moves, the industry typically follows. The company was one of the first to get rid of serial ports on computers and move to USB ports. It got rid of ethernet ports on laptops, forcing customers to use wireless Internet. It got rid of floppy disks and CD and DVD players. And it all but got rid of buttons from cellphones. These are now the norm. With the iPhone 7, a wireless music listening experience could become the new normal.

Apple executive Phil Schiller said the decision to ditch the port “comes down to courage” — a statement that drew snickers from the crowd gathered at the Bill Graham Civic Auditorium in San Francisco on Wednesday for the unveiling of the iPhone 7. He called the single-purpose technology “ancient,” taking up valuable real estate on an already compact device, and he spelled out hopes for a “wireless future.”

The move will no doubt frustrate many customers who currently use wired headphones from third-party headset makers, or those whose junk drawers are filled with tangled earbuds for use when the current pair vanishes.

If Apple’s shift makes wireless earbuds commonplace, it will be a change mourned by those prone to losing things (imagine the frustration of digging through a purse to find only a single earbud). It will also irk anyone who doesn’t want to charge another device at the end of the day (Apple’s AirPods will run for five hours per charge.)

But the loss of the 3.5-mm jack won’t be felt for long, said Simon Hall, the head of music technology at the Birmingham Conservatoire, who said consumers will adapt.

“It’s going to be a change, but eventually it may be viewed as a storm in a teacup,” he said.

That’s because “wires are also really annoying,” said Horace Dediu, an analyst and fellow at the Clayton Christensen Institute think tank, who believes that people will be better off in the long run without cords. “Look at Apple’s keyboards and track pads. They’re all wireless. They’ve eliminated every single cable except the charging cable. They’re allergic to wires.”

Dediu said the fact that we have any wires connecting our ears to our phones or our phones to our wall is “unacceptable,” especially given the prevalence of wireless technology.

Few audiophiles are lamenting the news. For professional recording, the quarter-inch jack on which the 3.5-mm jack is modeled remains the industry standard, said David Morton, director of communications technology at the Associated Colleges of the South.

Audiophiles “don’t have any love in their hearts for the little connector,” said Morton, who runs a website dedicated to the history of sound recording. “It’s too small and they want something big and substantial.”

With size comes sturdiness — and compatibility with professional amps.

The 3.5-mm jack, in some ways, lucked into its longevity. Like Goldilocks, electronic manufacturers found the quarter-inch jack too large for consumer use and the even smaller 2.5-mm jack too fragile. The 3.5-mm jack was just right.

Among professionals, though, “it doesn’t have an aura of respectability around it,” Morton said. “It’s got an aura of cheapness.”

Getting rid of the audio jack could someday let phone makers shave millimeters off the thickness of the devices, though the new iPhone comes in the same sizes as its predecessors. It’s also not too farfetched to imagine wireless earphones as the next phase in wearable technology, equipped with biosensors that can send data back to the user’s phone. A mass migration to wireless earphones could provide all kinds of interesting opportunities, Dediu said.

In the near term, headset makers might scramble to offer affordable alternatives. Some consumers might delay upgrading their iPhones. And soon, wired headphones could be considered quaint and old school.

The 3.5-mm audio jack is a good case study in how a piece of technology can be useful for a while, and then disappear as the world around it changes, Morton said. There’s nothing wrong with the jack. It’s perfectly capable of effectively passing audio signals. “But it may be too inconvenient,” he said.

Which is more or less the story of tech. Things get left behind in the junk drawers of history and the world moves on.

TECH INDUSTRY REACTS TO TRUMP’S EXECUTIVE ORDER ON IMMIGRATION WITH FEAR AND FRUSTRATION


The morning after Donald Trump won the presidential election, Silicon Valley entrepreneur Amr Shady called his immigration lawyer in a panic.

“My 10-year-old daughter asked me, ‘Does this mean we’re going to get kicked out?’” said the 40-year-old founder of analytics start-up Reveel, who emigrated from Egypt to the Bay Area in 2015. “I had to find out what Trump winning meant for my immigration status, but also what it meant for my chief data scientist.”

His lawyer, Los Angeles immigration attorney Ayda Akalin, was inundated with calls from similarly nervous clients who were either already living and working in the U.S. on visas, or had visa applications pending.

At the time, Akalin assured them that nothing had yet changed, and it was too soon to be worried. But after Trump signed an executive order Friday banning citizens of Syria, Iraq, Iran, Sudan, Somalia, Yemen and Libya from entering the U.S. for 90 days, Akalin had an update for her clients, particularly those from Muslim-majority countries: Stay inside the United States.

“All of my Muslim clients are scared, even those from other countries,” said Akalin, who herself is Iranian American, having immigrated to the U.S. when she was 5 years old.

The move blindsided the technology industry, which thought that its main battle on the immigration front was over the number of H-1B visas — granted to high-skilled foreign workers — that will be made available each year. The tech sector relies heavily on foreign-born software engineers to meet its staffing needs, and it has long lobbied for the government to lift the cap on the H-1B visa program to allow more foreign workers temporary employment with U.S. firms.

But H-1Bs took a backseat on Friday as tech workers and entrepreneurs already legally living and working in the U.S. worried about their own futures. Many were caught off guard by the order’s reach, which extends to lawful permanent residents — or green card holders — too.

“For those abroad, we are telling them to come back as soon as possible, and be prepared to face questioning and possible refusal,” Akalin said.

The order also compelled several big tech companies to break their silence about the Trump administration. Google Chief Executive Sundar Pichai slammed the order in a memo to employees.

“It’s painful to see the personal cost of this executive order on our colleagues,” Pichai wrote, according to Bloomberg News. “We’ve always made our view on immigration issues known publicly and will continue to do so.”

Bloomberg reports that the memo urged employees traveling overseas who are affected by the order to seek help from the company’s security and immigration teams. More than 100 employees are affected, Pichai said.

“We’re concerned about the impact of this order and any proposals that could impose restrictions on Googlers and their families, or that could create barriers to bringing great talent to the U.S.,” a Google spokesperson said. “We’ll continue to make our views on these issues known to leaders in Washington and elsewhere.”

Mark Zuckerberg, Facebook’s chief executive, also spoke out against Trump’s action, although in a less direct way, taking to his personal Facebook page to remind his millions of followers that his wife, pediatrician and philanthropist Priscilla Chan, is the daughter of refugees.

“My great grandparents came from Germany, Austria and Poland. Priscilla’s parents were refugees from China and Vietnam,” Zuckerberg wrote. “The United States is a nation of immigrants, and we should be proud of that.”

The chief executives of Netflix, Microsoft and Lyft similarly issued statements or internal memos opposing the president’s directive.

Even tech executives close to the Trump administration criticized the order.

Uber CEO Travis Kalanick — who serves on a panel advising Trump on business issues — said many drivers for the ride-hailing service are immigrants from the affected countries who often visit extended families abroad and might have trouble reentering the U.S. The company is considering compensating those drivers “over the next three months to mitigate some of the financial stress and complications with supporting their families and putting food on the table.” Kalanick said he would raise issue when the panel convenes for its first meeting Friday in Washington.

Tesla Motors and SpaceX CEO Elon Musk — who met with Trump at the White House last week — said on Twitter a “blanket entry ban on citizens from certain primarily Muslim countries is not the best way to address the country’s challenges.”

“Many people negatively affected by this policy are strong supporters of the US,” wrote Musk, who also serves on the panel. “They’ve done right, not wrong & don’t deserve to be rejected.”

The tech industry has in the past highlighted the value of immigrants to American culture and the economy: Steve Jobs was of Syrian descent, high-profile executives at Twitter, Yahoo, Google and eBay are of Iranian descent. Along with most of the world’s biggest technology companies, the Bay Area is home to some 250,000 Muslims, according to a study by the Institute for Social Policy and Understanding, of which 60% are foreign-born.

Venture capital firms see Trump’s move as a slap in the face, especially since it comes less than two weeks after the Department of Homeland Security passed a rule allowing eligible foreign entrepreneurs to work in the U.S. for up to five years. The rule change — which Silicon Valley saw as a boon, and is expected to take effect July 17 — was proposed by President Obama last summer.

“We felt that, finally, things were moving forward,” said Zafer Younis, a partner at venture capital firm 500 Startups, which prides itself on its international investments, many of which are in countries that are predominantly Muslim. “This new development really dampened it.”

The executive order increases the uncertainty and risk of investing internationally, Younis said. And while 500 Startups will continue investing abroad, there’s concern that other venture capital firms that were once eyeing international opportunities will now get cold feet.

“It changes the risk profile all of a sudden,” he said.

But for Younis, it’s personal, too. Originally from Jordan, Younis has lived in the Bay Area for the past two years on an EB-1 visa — a green card that is granted to those deemed to have “extraordinary ability.” Though Jordan is not on Trump’s list of countries whose citizens are banned from entering the U.S., it is a Muslim-majority nation, and it has given him pause.

“My wife is here. I have upcoming business trips to Japan and Europe. I’m not affected, yet I have to think twice — do I really need to travel or not?” he said. “It’s a feeling I thought I left back in the Middle East. It’s an anxiety, that things are beyond your control.”

That anxiety is shared by other technologists and entrepreneurs in the Bay Area. Shady, the Egyptian entrepreneur, is also in the U.S. on an EB-1 visa. He and his children have Canadian citizenship, but his wife is an Egyptian citizen.

“So what does that mean?” he said. “If Egypt is on the list three months from now, what does that mean for our family?”

The American Civil Liberties Union on Saturday filed a lawsuit against the Trump administration on behalf of two men who were detained at New York’s John F. Kennedy International Airport while traveling back to the U.S. after Trump’s immigration crackdown. Late Saturday night, a federal judge in the case issued an order halting the removal of refugees or others who hold valid visas to enter the U.S. The order appears to affect up to 200 people who were detained in transit to the U.S.

Silicon Valley venture capitalist Chris Sacca tweeted that he would match donations to the ACLU up to $25,000.

Tech CEOs are slowly raising their voices. Immigration lawyers are advising their clients to stay put. And in a Silicon Valley mosque where Shady attended Friday prayers, the sheikh preached that everyone needs to stand against injustice toward all communities, even if their own is not directly affected.

“This is the most important thing for me right now because, even though it doesn’t affect me directly, it’s important for us to all understand what it means to stand against unfairness and the splitting of families,” Shady said.

REFUGEES GETR JOBS — AND A TASTE OF AMERICAN CULTURE — AT BERKELEY COFFEE SHOP



A social icebreaker was perhaps the first giveaway that 1951 Coffee, a new coffee shop in Berkeley, is not your typical latte stop.

“Where are you from?” Nazira Babori, 26, a barista-in-training, asked her coworker, Tedros Abraha.

“Eritrea,” Abraha, 31, said. “Do you know Eritrea…?”

“Hmmm,” Babori said. “Is it democratic?”

With the exception of co-founders Rachel Taber and Douglas Hewitt, 1951 Coffee is entirely staffed by refugees, asylum seekers and special immigrant visa holders. The nonprofit establishment counts among its baristas people who left Eritrea, Afghanistan, Iran, Nepal, Bhutan, Uganda and Syria after facing political, religious or ethnic persecution. It’s a coffee shop with a cause, giving recent arrivals barista training and employing them in customer-facing roles so they can practice speaking English and engage with the community.

And, while it’s still early days, its founders believe it stands as a testament to the welcoming nature of American communities, particularly as President Trump takes office with his promise of a hard-line stance on immigration.

“It’s been difficult and tense,” said Taber.

When the coffee shop was first announced last year, commenters on articles questioned why she and Hewitt, who both previously worked for the International Rescue Committee and now run the 1951 Coffee Company — a refugee advocacy organization of which the coffee shop is a part — are creating jobs for refugees instead of those born in America.

“There’s this sense of, ‘Why aren’t we helping our own?’” Taber said. “But just because we’re doing this doesn’t mean we’re taking away from programs for Americans. There’s room for everyone.”

With immigration thrust into the spotlight during the recent election cycle, she sees it as an opportunity to educate. Many Americans, for example, think of refugees as outsiders who haven’t yet arrived in the country, Taber said. But thousands of refugees are resettled in California every year, and thousands more are already living and working as locals.

Los Angeles County last year resettled 2,250 refugees, according to data from the California Department of Social Services. In the East Bay counties of Alameda and Contra Costa, more than 400 refugees from Afghanistan, Bhutan, China, Eritrea, Iraq, Iran and Syria settled between October 2015 and September 2016. Those numbers don’t include asylum seekers, who aren’t as well-documented because many don’t receive formal resettlement services.

The Bay Area has so far welcomed 1951 Coffee’s arrival, with locals patronizing the coffee shop during its soft launch this week and hanging back to ask about its mission. Being in Berkeley — historically a bastion of liberal politics — has also helped.

The coffee shop looks and feels like neighboring trendy coffee houses, serving almond milk lattes, drip coffee and cold brews. But its walls are decorated with information about the plight of refugees — a feature its founders hope will make patrons stop to think.

Customers and staff chat at 1951 Coffee, a new shop where the baristas are refugees.
Customers and staff chat at 1951 Coffee, a new shop where the baristas are refugees. (David Butow / For the Los Angeles Times)
By its second day, 1951 was experiencing the morning and afternoon rushes typical of coffee shops.

“I was a bit nervous today,” said Meg Karki, 27, a barista at 1951 who had never worked in a coffee shop before. “But it was fun.”

Originally from Bhutan, Karki spent 20 years in a refugee camp in Nepal before resettling in Oakland five years ago. Even though he was eager to work, his lack of work experience in the United States hampered his job hunt. He did a stint at fast-food joints such as Little Caesar’s, where he barely interacted with customers. He also worked at Chipotle and Trader Joe’s. But none of those jobs prepared him to work with customers in the way 1951 Coffee has, he said.

Prior to the coffee shop’s opening, every employee received barista training, in addition to basic customer service training, and attended workshops on workplace and American culture.

“In some cultures, a person might have a job interview and never look their boss in the eye,” said Hewitt. “Whereas in the U.S., if you didn’t make eye contact with someone, they’d think something was wrong. We try to prepare them for that.”

The coffee shop pays its baristas $13 an hour, plus tips and benefits (minimum wage in Berkeley is $12.53).

“This is one of the best ideas, said Abraha, who resettled in Oakland last August after fleeing Eritrea five years ago, where he had been a political prisoner. His journey took him from Eritrea to Sudan, Angola, Brazil and finally to the United States. Quick to adopt the American hustle, he now works two jobs: one at 1951, and a food service gig at a mac ’n’ cheese restaurant in Oakland.

“It’s difficult to be a new person in a new country,” Abraha said. “But being here, in the U.S., you get respect and recognition. The most important thing is to live with dignity.”

For Karki, 1951 Coffee is also a source of purpose and pride. “It’s not just a job,” he said. “We are helping people, and that makes me happy.”

On Day 2, as Karki prepared to clock out from his morning shift, the afternoon rush started.

“Oh wow,” said Hewitt, as 10 customers walked into the coffee shop at the same time.

“Do you need my help?” Karki asked. No one heard him over the bustle. He looked at the line, put down his bag, and made his way back behind the coffee counter. “I’m gonna help,” he said.