Scale, whose army of humans annotate raw data to train self-driving and other AI systems, nabs $18M

The artificial intelligence revolution is underway in the world of technology, but as it turns out, some of the most faithful foot soldiers are still humans. A startup called Scale, which works with a team of contractors who examine and categorise visual data to train AI systems in a two-sided marketplace model, announced that it […]

The artificial intelligence revolution is underway in the world of technology, but as it turns out, some of the most faithful foot soldiers are still humans. A startup called Scale, which works with a team of contractors who examine and categorise visual data to train AI systems in a two-sided marketplace model, announced that it has raised an additional $18 million in a Series B round. The aim will be to expand Scale’s business to become — in the words of CEO Alexandr Wang, the 21-year-old MIT grad who co-founded Scale with Lucy Guo — “the AWS of AI, with multiple services that help companies build AI algorithms.”

“Our mission is to accelerate the development of AI apps,” Wang said. “The first product is visual data labelling, but in the future we have a broad vision of what we hope to provide.”

Wang declined to comment on the startup’s valuation in an interview. But according to Pitchbook, which notes that this round actually closed in May of this year, the post-money valuation of Scale is now $93.50 million ($75 million pre-money).

The money comes on the back of an eventful two years since the company first launched, with revenues growing 15-fold in the last year, and “multiple millions of dollars in revenue” from individual customers. (It doesn’t disclose specific numbers, however.)

Today, Scale’s base of contractors numbers around 10,000, and it works with a plethora of businesses that are developing autonomous vehicle systems such as General Motors’ Cruise, Lyft Zoox, Nuro, Voyage, nuTonomy and Embark. These companies send Scale’s contractors raw, unlabelled data sets by way of Scale’s API, which provides services like Semantic Segmentation, Image Annotation, and Sensor Fusion, in conjunction with its clients LIDAR and RADAR data sets. In total, it says it’s annotated 200,000 “miles of data” collected by self-driving cars.

AV companies are not its only customers, though. Scale also works with several non-automotive companies like Airbnb and Pinterest, to help build their AI-based visual search and recommendation systems. Airbnb, for example, is looking for more ways of being able to ascertain what kinds of homes repeat customers like and don’t like, and also to start to provide other ways of discovering places to stay that are based not just on location and number of bedrooms (which becomes more important especially in cities where you may have too many choices and want a selection more focused on what you are more likely to rent).

This latest funding round was led by Index, with existing investors Accel and Y Combinator (where Scale was incubated), also participated in this Series B, along with some notable, new individual investors such as Dropbox CEO Drew Houston and Justin Kan (two YC alums themselves who have been regular investors in other YC companies). This latest round brings the total raised by Scale to $22.7 million.

When Scale first made its debut in July 2016 as part of YC’s summer cohort, the company presented itself as a more intelligent alternative to Mechanical Turk, specifically to address the demands of artificial intelligence systems that needed more interaction and nuanced responses than the typical microtask asked of a Turker.

“We’re honing in on AI broadly,” Wang said. “Our goal is to be a pick axe in the AI goldrush.”

Early efforts covered a wide spread of applications — categorization/content moderation, comparison, transcription, and phone calling as some examples. But more recently the company has seen a particular interest from self-driving car companies, and specifically the ability to look at, understand and categorise images of what might appear on a road with the kind of recognition that only a human can provide for training purposes. For example, to be able to identify a scooter versus a wagon, a piece of asphalt or an article of granite-colored clothing on a person that could potentially look like asphalt to an unsuspecting camera, or whatever.

“This sub-segment of AI, autonomous vehicles, really took off after we launched, and that segment has been the killer use case for us,” Wang said.

My experience in talking with autonomous car companies and those who work with them has been that many of them are extremely guarded about their data, so much so that there are entire companies being built to help manage this IP standoff so that no one has to share what they know, but they can still benefit from each other.

Wang says that the same holds for Scale’s clients, and part of its unique selling point is that it not only provides data identification services but does so with the assurance that its systems retain none of that data for its own or other companies’ purposes.

“We don’t share across different silos and are very clear about that,” Wang said. “These companies are very sensitive, as are all AI companies about their data and where it goes, and we’ve been able to gain trust as a partner because will not share or sell data to any other parties.”

Scale uses AI itself to help select contractors. “We have built a bunch of algorithms and AI to vet and train contractors,” Wang said. In the training, “we provide feedback and determine if they are getting good enough to do the work, and in terms of ensuring the quality of their work, our algorithms go through what they are doing and verify the work against our models, too. There are a lot of algorithms.”

For clients who are calling in data from the public web — for example Pinterest or Airbnb — Scale uses a broader contractor pool that could include stay-at-home moms, students or others looking for extra money.

For clients who are sensitive about the data that’s being analysed — such as the car companies — the conditions are more restricted, and sometimes include centres where Scale controls the machines that are being used as well as how the data sets can be viewed.

This is one reason why Scale isn’t simply focused on growing the numbers of contractors as its only route for growing business. “We’ve noticed that when you have people who spend more time on this they do better work,” Wang said.

Wang said the Series B funding will be used to expand the kind of work Scale does for existing customers in the area of visual data analysis, as well as to gradually add in other categories of data, such as text.

“Our first goal is to improve algorithms for customers today,” he said. “There is no limit to how accurate they want to make their systems, and they need to be constantly feeding their AI with more data. All of our customers have this, and it’s an evergreen problem.”

The second is to diversify more outside driving and the visual data set, he said. “Right now, so much of the success has been in processing imagery and robotics or other perception challenges, but we really want to be the fabric of the AI world for new applications, including text or audio. That is another use of funds to expand to those areas.”

“Fabric” is the operative word, it seems: “Scale has the potential to become the fabric that connects and powers the Artificial Intelligence world,” said Mike Volpi, General Partner, Index Ventures, in a statement. “For autonomous vehicles in particular, Scale is well-positioned to take over an emerging field of data annotation regardless of which players ultimately come out on top. Alex…has recruited a highly talented and technical team to tackle this challenge and their progress is evident in the marquee list of customers they’ve won in such a short amount of time.”

RiskRecon’s security assessment services for third party vendors raises $25 million

In June of this year, Chinese hackers managed to install software into the networks of a contractor for the U.S. Navy and steal information on a roughly $300 million top secret submarine program. Two years ago, hackers infiltrated the networks of a vendor servicing the Australian military and made off with files containing a trove […]

In June of this year, Chinese hackers managed to install software into the networks of a contractor for the U.S. Navy and steal information on a roughly $300 million top secret submarine program.

Two years ago, hackers infiltrated the networks of a vendor servicing the Australian military and made off with files containing a trove of information on Australian and U.S. military hardware and plans. That hacker stole roughly 30 gigabytes of data, including information on the nearly half-a-trillion dollar F-35 Joint Strike Fighter program.

Third party vendors, contractors, and suppliers to big companies have long been the targets for cyber thieves looking for access to sensitive data, and the reason is simple. Companies don’t know how secure their suppliers really are and can’t take the time to find out.

The Department of Defense can have the best cybersecurity on the planet, but when that moves off to a subcontractor how can the DOD know how the subcontractor is going to protect that data?” says Kelly White, the chief executive of RiskRecon, a new firm that provides audits of vendors’ security profile. 

The problem is one that the Salt Lake City-based executive knew well. White was a former security executive for Zion Bank Corporation after spending years in the cyber security industry with Ernst & Young and TrueSecure — a Washington DC-based security vendor.

When White began work with Zion, around 2% of the company’s services were hosted by third parties, less than five years later and that number had climbed to over 50%. When White identified the problem in 2010, he immediately began developing a solution on his own time. RiskRecon’s chief executive estimates he spent 3,000 hours developing the service between 2010 and 2015, when he finally launched the business with seed capital from General Catalyst .

And White says the tools that companies use to ensure that those vendors have adequate security measures in place basically boiled down to an emailed check list that the vendors would fill out themselves.

That’s why White built the RiskRecon service, which has just raised $25 million in a new round of funding led by Accel Partners with participation from Dell Technologies Capital, General Catalyst, and F-Prime Capital, Fidelity Investments venture capital affiliate.

The company’s software looks at what White calls the “internet surface” of a vendor and maps the different ways in which that surface can be compromised. “We don’t require any insider information to get started,” says White. “The point of finding systems is to understand how well an organization is managing their risk.”

White says that the software does more than identify the weak points in a vendor’s security profile, it also tries to get a view into the type of information that could be exposed at different points on an network,

According to White, the company has over 50 customers among the Fortune 500 who are already using his company’s services across industries like financial services, oil and gas and manufacturing.

The money from RiskRecon’s new round will be used to boost sales and marketing efforts as the company looks to expand into Europe, Asia and further into North America.

“Where there’s not transparency there’s often poor performance,” says White. “Ccybersecurity has gone a long time without true transparency. You can’t have strong accountability without strong transparency.”

Wonga investors inject £10M so cash-strapped payday lender can fund claims

If you were at Disrupt London four years ago you may remember more than a little awkwardness during an investor panel when two VCs that had invested in European payday loans firm Wonga declined to comment on what had gone wrong at their portfolio company in the wake of a £220M write down. Yesterday Sky News reported that those same […]

If you were at Disrupt London four years ago you may remember more than a little awkwardness during an investor panel when two VCs that had invested in European payday loans firm Wonga declined to comment on what had gone wrong at their portfolio company in the wake of a £220M write down.

Yesterday Sky News reported that those same two, Accel Partners and Balderton Capital, are among a group of Wonga investors that have agreed to inject a further £10M (~$13M) into the business to help fund compensation claims related to its past censured practices.

We’ve reached out to Accel and Balderton for comment.

Prior to the latest emergency funding, Wonga had raised a total of around £145.5M, according to Crunchbase. Its 2011 Series C round was backed by investors including Accel, Oak Investment, Meritech Capital, 83North; while a 2009 Series B included Accel, Balderton, Dawn Capital, HV Holtzbrinck Ventures and 83North. It was founded in the UK in 2006.

By 2014 rising concern about the rates of interest being charged to vulnerable customers on short term loan products led to a regulatory intervention to clean up the sector, and Wonga agreed to write off the loans of 330,000 customers.

It also agreed to waive the interest and fees for a further 45,000 after admitting its automated checks had failed to adequately assess affordability. The algorithmic technology it had touted as its core IP had been lending money to people who did not have the income to pay it back.

The company was also censured by the Financial Conduct Authority (FCA) for sending fake lawyers’ letters to customers in arrears — and had to pay out a further £2.6M in compensation for that.

Four years later Wonga is still paying the bill for its past conduct — in the form of increasing numbers of individual compensation claims.

In a statement issued to Sky News, a Wonga Group spokesman said there has been a “marked increase” in compensation claims for legacy loans driven by claims management companies.

“Wonga continues to make progress against the transformation plan set out for the business. In recent months, however, the short-term credit industry has seen a marked increase in claims related to legacy loans, driven principally by claims management company activity,” the spokesman said.

“In line with this changing market environment, Wonga has seen a significant increase in claims related to loans taken out before the current management team joined the business in 2014. As a result, the team has raised £10M of new capital from existing shareholders, who remain fully supportive of management’s plans for the business.‎”

According to Sky News, Wonga was on the brink of insolvency when its investors agreed to inject more capital into the business, with CEO Tara Kneafsey‎ warning its institutional shareholders in late May the company risked becoming insolvent without a capital injection.

Following the shredding of its original business model — with the FCA’s cap of 0.8 per cent per day for all high-cost short-term credit loans applying from January 2015 — Wonga has been loss making for the past several years, reporting a £65M loss for 2016 and just over £80M for 2015.

And Sky reports that its latest emergency fundraising took place at valuation of just $30M (£23M) for the business.

This represents a swingeing haircut for a company that, in 2012, had believed it was on a three-year growth path to a £15BN valuation, i.e. off the back of short term loan products that charged annual interests rates as high as 5,853% that were sold to hundreds of thousands of people who couldn’t afford to pay them back.

Wonga’s website now lists as “representative” an APR of 1,460% in an online FAQ — and further claims: “We’ve introduced lots of changes at Wonga to make sure we offer better, fairer loans to customers. We take a responsible approach and lend only to those we believe can reasonably afford to repay.”

As part of this process of ‘transformation’ — i.e. from algorithmic loan sharking to regulatory compliant short term lending — one recent focus for Wonga’s executive team to try to drum up ethical business has been on offering more flexible loan products.

Sky says Wonga’s board has previously expressed confidence it can build a sustainable business, and notes the company had been targeting a return to profitability last year but has yet to report its results for 2017.

According to its sources, Wonga’s cashflow situation has become so tight its board is evaluating the sale of some of its assets in addition to raising more debt.

Already last year wonga sold off its German payments business, BillPay, to Klarna — raising around £60M.

Freshworks raises $100M

Freshworks, a company that offers a variety of business software tools ranging from IT management to CRM for sales and customer support software, today announced that it has raised a $100 million funding round co-led by Sequoia and Accel Partners, with participation from CaptialG. The company’s last funding round came in the form of a […]

Freshworks, a company that offers a variety of business software tools ranging from IT management to CRM for sales and customer support software, today announced that it has raised a $100 million funding round co-led by Sequoia and Accel Partners, with participation from CaptialG.

The company’s last funding round came in the form of a $55 million Series F round led by Sequoia in 2016. Today’s round brings the San Bruno-based company’s total funding to $250 million, at a valuation that’s now north of $1.5 billion, the company tells us. Freshworks also today noted that it now pulls in over $100 million in annual recurring revenue.

In addition to the new funding, Freshworks also today announced that it has hired a former AppDynamics VP of finance and treasury Suresh Seshardi as its CFO. Seshardi helped AppDynamics prepare for its IPO, so it’s a fair bet that he’ll do the same at Freshworks. AppDynamics, of course, famously didn’t actually IPO but was instead acquired by Cisco only hours before the team was supposed to ring the bell on Wall Street.

Freshworks CEO Girish Mathrubootham tells us we shouldn’t hold our breath waiting for his company to IPO. “Freshworks hasn’t started the IPO process but we do feel that we will eventually go public in the U.S.,” he said. “With that said, our primary focus right now is on growing the business and investing in our platform. When the timing is right, we’ll make that decision.”

Freshworks, which launched its first product back in 2010, also tells us that it plans to use the new cash to invest in its platform and especially in looking at how it can use AI to bring new innovations to its tools.

Current Freshworks users include the likes of Sling TV, Honda, Hugo Boss, Toshiba and Cisco. In total, the company’s tools are now in use by about 150,000 businesses, making it one of the larger SaaS providers you have probably never heard of.