National / International News
An influential figure in Spanish banking and politics, Rodrigo Rato was the predecessor of Dominique Strauss-Khan, who has also had extensive legal troubles.
As this week comes to an end, we have a consensus that the fed will not raise the cost of borrowing in June anymore. But then came some inflation data today. For more on that, we consult Christopher Low, chief economist at FTN Financial in New York.
Next, Yale University's med school is weighing its next move failing to win accreditation for an online version of its Master's program for physician assistants.
Finally, Coachella is wrapping up in Southern California this weekend. The shows are about having a good time listening to music, but it's also about what people are wearing, and it's a big business.
If you’re not watching HBO's "Silicon Valley," it may be because you think it’s a weekly half hour of puerile, sexist drivel about a bunch of nerds blundering their way up the most elitist food chain on earth. And you may be right about that. But if you’re not watching, you’re missing one of the most vivid, granular and entertaining explainers out there of the way venture capital works.
Take episode one of season two, which just aired last week. The boys of hot startup Pied Piper are doing a tour of venture capitalists, to get funding for their first round. Early stage companies raise the money they need in several chunks. After entrepreneurs have maxed out their credit cards, raided their 401(k)s and drained their parents’ bank accounts, the first place they go is the “angel round,” which Pied Piper secured last season. Angel investment are kids’ stuff in the startup world: it’s literally like wee Janie on your block getting fifty bucks from her parents’ work colleagues to buy lemons and a Sodastream and open a lemonade stand. The “first round” is more serious. In this phase of the money-raising process, the wannabe CEO has to go to begging, or pitching, to a real institution – a venture capital fund.
And "Silicon Valley" nails this process. For one thing, the dress codes are dead on. The startup guys are dressed in grubby jeans, nerdy T-shirts and, of course, hoodies. The VCs are all wearing half-zip lightweight sweaters, or golf shirts adorned with crocodiles or ponies. And we all know what that means.
Next, the money: Pied Piper’s tour of the Valley VCs shows how hot and sweaty the startup scene is right now. VCs are literally throwing money at startups, valuing them at crazy prices. The valuations Pied Piper gets are ludicrous, but no more ludicrous than those bestowed upon real early stage companies. In the past, startups valued at $1 billion by the VC market before they go public were called unicorns, because they were so rare. Today there are herds of them.
Finally, the deal details: I don’t know who the technical advisor is on "Silicon Valley," but he or she sure is doing the business. Episode 1 showcased one of the biggest issues facing startups right now: the down round.
A quick explainer: when you get venture money, the fund gives you a big chunk of cash, but in return takes a huge share of your company. It also takes a number of seats on your board.
But that’s cool! For just 10 percent of your company you’ve snagged $100 million in cash! That makes your company worth a billion dollars! Dude! You’re a unicorn!
Unfortunately, you’re not making money yet, and over the next six months, you a) burn through half your money and b) read in TechCrunch that a class of Singaporean schoolgirls have just built a similar prototype to yours that looks as though it may do the same job in half the time.
Your partners panic. Why? Because they’re worried about a down round. They think that when you go to VCs for your second round of financing, they might say that they want to buy a ten percent stake in your company, but because of this new competition, maybe they’ll only give you $50 million. That would mean that your existing VC investor’s stake would be cut in half. It would also make those investors look kinda stupid. And while VCs don’t like losing money, they really, really hate looking dumb.
In the show "Silicon Valley," we hear what happens to a young entrepreneur called Javeed. His VC investors react to the possibility of his company getting a down round by forcing him into a $200 million acquisition. Remember, VCs get a seat on the board - at least one seat - which gives them a great deal of say in the way the company is run. Javeed would rather not sell his company, but the VCs have panicked, and want to cash out now. They are, in the vernacular, looking for an exit strategy. And because they are on the board, they are in a great position to arm-twist. So they force Javeed to agree to sell his company for $200 million. The VCs get a check, and avoid being embarrassed. Javeed, on the other hand, loses control of his company, and has to accept a reverse-vest, with no triggers. And what the hell does that mean? Well, let’s just say he got screwed.
Oil prices dropped, and jobs had to go. The first ones were at the oil service companies like Halliburton and Schlumberger. "They've quickly moved to reduce their amount of operations in the field, and the first phone call they make is to that service company," Jeff Bush, president of CSI Recruiting, which places workers in oil and gas jobs, says.
Next come layoffs at the major oil companies. And now, Bush says, job cuts are trickling down to the independents—companies that just focus on oil and natural gas extraction.
"It just follows the course of who feels the pain the first," he says.
In Texas, just in the last three weeks, more than 500 workers—from drillers to crane operators— have lost jobs, according to the Texas Workforce Commission. And since November, the unemployment claims keep coming, Lisa Givens, spokeswoman for the commission says.
"We have just over 50,000 claims filed for that time period," Givens says."And then last year for this same time period we saw just over 23,000 claims filed."
Kathleen Somerset-Fields has something she whispers to herself when her hands start to sweat and the doubts crowd in.
I'll be fine. I'll be fine. I'll be fine.
She picked up the habit almost a decade ago, in a GED class. When she was worried about a new challenge, she says her teacher would tell her the same thing: “Go ahead Kathleen, you'll be fine. You'll be fine!”
“Every time, she’s been fine,” said Diane Brogan-Adams, remembering those days back in the GED class she taught.
When student and teacher first met, Somerset-Fields was a struggling young mother, whose own mother was battling drug addiction.
“You get people that look at you and think, ‘She's only 16 with two kids? Oh my god. She's a trouble maker,’” Somerset-Fields says. But “Miss Diane,” as she called her teacher at the time, was different.
“She was welcoming.”
Miss Diane remembers their first meeting well.
“Kathleen pulled up in a station wagon with wood trim and came in with these two children, very confident, I remember later after she filled out paper work and I saw how old she was, I was kind of surprised.”
Brogan-Adams took a special interest in her student. Somerset-Fields remembers that whenever she missed class, her teacher would call to find out what was going on, and when she was coming back.
Eventually, Somerset-Fields did come back and graduated. Then they lost touch, until several years later, when Somerset-Fields walked out of a parenting class she was taking at a community center. Her old teacher was now working at that center. They saw each other in the parking lot.
“Seriously I think god had me walking across that parking lot because he knew I needed guidance at that time,” Somerset-Fields says of that reunion with her teacher. “Honestly she has been my guidance.”
By that point, Somerset-Fields had worked a series of low-paying jobs: nursing aid, quality control at a bacon factory. Eventually Brogan-Adams offered her old student a job at the community center. Today, Somerset-Fields is the Assistant Manager of a youth program there.
“Kathleen is like one of my children,” Brogan-Adams says of her former student. “She just adds a lot to my life.”
The networks of support and community that Somerset-Fields found when she met “Miss Diane” teacher long ago at that GED class, and that she passes on now to a new generation of kids at the youth program—they are key parts of what economists call social capital. And research shows that places high in social capital have better rates of upward mobility for kids born in to poverty.
Here's the big news so far from the Coachella music festival. Madonna made out with Drake and Justin Bieber was reportedly escorted out in a headlock.
For many festival-goers though, what's more important than the gossip or the music, is what everyone is wearing.
Coachella draws hundreds of thousands of people into the desert east of Los Angeles for two weekends. Sure there are big names in music like AC/DC, Jack White, and Ryan Adams. But as Pret-a-Reporter fashion writer Kathryn Romeyn puts it, the fans are as concerned about their image as hearing the bands.
“They want to Instagram good pictures of themselves,” Romeyn says.
In other words, selfies.
Yes, the festival is chock-full of teens and twenty-somethings, many from LA. Picture this—a hoard of impressionable minds with disposable incomes and social media followers, all transported to the blank desert landscape for two weekends of pop-music-infused, millenial partying. It's a marketing opportunity that makes the fashion industry salivate.
Coachella has become big business, says PR-firm-owner Lori Riviere, and fashion brands have jumped on the bandwagon.
The handbag giant, Coach, hosts backstage performances. Cosmetics colossus Sephora brings a tent for beauty touch-ups. Need eyewear? Glasses.com is there too.
Sarah Call is Glasses.com's director of content. She says the festival is part of the company's brand relaunch strategy.
“We felt it was sort of the perfect place to celebrate self-expression,” she says.
Fashion companies see dollar signs in the festival's free-spirit-Woodstockian vibe. H&M now has its own Coachella clothing line. The festival style is a hippie-LA-Boho mishmash. Think fringe shirts, big sun glasses, and lots of skin.
Music festivals are a great place to see and be seen says Jim Andrews of sponsorship consultant IEG.
“There's lots of downtime,” he says. “Lots of walking around time.”
Andrews says festivals are better than say a sporting event—where fans could get distracted by actually watching the game. At festivals “there's a lot more time for quality interaction,” Andrews says.
Everyone is cashing in. Celebrities and musicians get paid to wear clothes. Fashion magazines stuff their pages with glossy Coachella photos and articles about how to preserve your beauty in the hot desert. Nobody wants to be sweaty and gross. It's not Woodstock.
Music critic Jim Farber says the audience doesn't seem to care that festivals have gotten super corporate.
“If they are offended by it they generally are pretty quiet about it,” he says, “or else they enjoy it.”
It hasn't always been this way. Farber remembers when he want to the first Lollapalooza music festival back in 1991. There was just a bunch of bands and one guy with a falafel stand.
It's time for Silicon Tally! How well have you kept up with the week in tech news?
This week, we're joined by Annalee Newitz, Editor-In-Chief of Gizmodo, and author of Scatter, Adapt, and Remember: How Humans Will Survive a Mass Extinction.
Click on the multimedia player above to hear more.