Co-living European startup Colonies raises $34M

French startup Colonies has raised a $34 million funding round (€30 million). In addition to that, LBO France is committing to spend $168 million (€150 million) in real estate projects over the next couple of years. Those new buildings will eventually be managed by Colonies.

Idinvest Partners, Global Founders Capital and La Financière Saint James are participating in today’s funding round.

Colonies targets young people who are looking for an apartment without all the hassle involved in actually looking for an apartment. When you rent a place on Colonies, you get your own room with a private bathroom. You then share your living room and kitchen with 8 to 12 persons.

Some buildings have additional perks, such as a rooftop or outdoor area, a gym, a spa, etc. “Our thing works a bit like a service,” co-founder Alexandre Martin told me. “Everything that is shared is managed by us.”

For instance, Colonies makes sure that kitchens remain clean and that you don’t have to worry about all the basics, from sponges to dishwashing tablets. You just pay a fixed monthly fee and you get your room, those basic supplies and cleaning services as well as utilities. It feels a bit like babysitting-as-a-service but I guess it could be attractive for foreigners moving to a new city for instance.

The startup tries to make sure people pay their rent by using direct debits instead of letting renters issue bank transfers. So far, Colonies says that unpaid rent hasn’t been an issue.

When it comes to Colonies’ business model, the company doesn’t own buildings directly. Instead, the company partners with real estate investment firms. It then acts as the managing partner for those buildings, signing leases directly with renters.

That’s why the partnership with LBO France is significant as buildings have been the bottleneck so far. There’s a waiting list to get an apartment in a Colonies building.

There are currently four buildings in the Paris area and two in Berlin. Up next, Colonies is working on more projects in Paris, Lille, Bordeaux, Marseille, Toulouse and Germany.

Robinhood offers $15 discount, blames outage on record trades

It wasn’t the leap year, a coding blip, or a hack that caused Robinhood’s massive outages yesterday and today that left customers unable to trade stocks. Instead, the co-CEOs write that “the cause of the outage was stress on our infrastructure — which struggled with unprecedented load. That in turn led to a ‘thundering herd’ effect — triggering a failure of our DNS system.”

Robinhood was offline from Monday at 6:30am Pacific to 11pm Pacific, then had another outage this morning from 6:30am Pacific until just before 9am Pacific.

The $912 million-funded fintech giant will provide compensation to all customers of its Robinhood Gold premium subscription for borrowing money to trade plus access to Morningstar research reports, Nasdaq data, and bigger instant deposits. It’s offering them three months of service.

A month of Robinhood Gold costs $5 plus 5% yearly interest on borrowing above $1,000, charged daily. Before a pricing change, the flat fee per month could range as high as $200. However, compensated users will only get the $5 off per month, for a total of $15. That could seem woefully insufficient if Robinhood users missed out on buying back into stocks like Apple that went up over 9% on Monday. Robinhood is calling it a “first step”.

Impacted Robinhood users can contact the company here to ask for compensation. Below you can see the email Robinhood sent to customers late last night.

Robinhood’s email to customers late last night

Robinhood is also working to contact impacted customers on an individual basis, and it’s looking into other forms of compensation on a case by case basis, company spokesperson Jack Randall tells me. It’s unclear if that might include cash to offset what traders might have lost by having their money locked in inaccessible Robinhood accounts during the outage.

Compensation could become a significant cost if the startup assesses that many of its 10 million users were impacted. The markets gained a record $1.1 trillion yesterday, but some Robinhood traders may not have been able to buy back in as the rebound occurred following mass selloffs due to fears of coronavirus.

Now the startup, valued at $7.6 billion, will have to try to regain users’ trust. “When it comes to your money, we know how important it is for you to have answers. The outages you have experienced over the last two days are not acceptable and we want to share an update on the current situation . . . We worked as quickly as possible to restore service, but it took us a while. Too long” wrote co-founders and co-CEO Baiju Bhatt and Vlad Tenev (disclosure: who I know from college).

As for exactly what triggered the downtime, the founders wrote that, “Multiple factors contributed to the unprecedented load that ultimately led to the outages. The factors included, among others, highly volatile and historic market conditions; record volume; and record account sign-ups.” There’s been a frenzy of retail trading activity in the wake of coronavirus. There’s also been sudden spikes in stocks like Tesla amidst mainstream media attention. 

Robinhood Schwab ETrade Ameritrade

Going forward, Robinhood promises to “work to improve the resilience of our infrastructure to meet the heightened load we have been experiencing. We’re simultaneously working to reduce the interdependencies in our overall infrastructure. We’re also investing in additional redundancies in our infrastructure.” However, they warn that “we may experience additional brief outages, but we’re now better positioned to more quickly resolve them.”

The outage comes at a vulnerable time for Robinhood as old school brokerages like Charles Schwab, Ameritrade, and E-Trade all recently moved to eliminate per-trade fees to match Robinhood’s pioneering zero-comission trades. Though some of those brokerages experienced infrastructure troubles recently, Robinhood’s massive outages could push users towards those incumbents that they might perceive as more stable. 

Five, the self-driving startup, raises $41M and pivots into B2B, away from building its own fleet

We are still years away from a time when fully-autonomous cars will be able to drive us from A to B, and the complexity of getting to that point is likely going to need hundreds of billions of dollars of investment before it becomes a reality.

That hard truth is leading to some shifts in the self-driving startup landscape. In the latest move, England’s Five (formerly known as FiveAI), one of the more ambitious companies in the space in Europe, is moving away from its original plan, of designing its own fully self-driving cars, and then running fleets of them in its own transportation service. Instead, it now plans to license its technology — starting with software to help test and measure the accuracy of a vehicle’s driving systems — that it has created to others building autonomous cars as well as the wider service ecosystem that will exist around that. As part of that pivot, today it’s also announcing a fresh $41 million in funding.

“A year and a bit ago we thought we would probably build the entire thing and take it to market as a whole system,” said co-founder and CEO Stan Boland in an interview. “But we gradually realised just how deep and complex that would be. It was probably through 2019 that we realised that the right thing to do is to focus in on the key pieces.”

The funding, a Series B, includes backing from Trustbridge Partners, insurance giant Direct Line Group and Sistema VC, as well as previous investors Lakestar, Amadeus Capital Partners, Kindred Capital and Notion Capital. The company has now raised $77 million and while it’s not disclosing its valuation, Boland said that it was definitely up on its last round. (Its Series A, in 2017, was for $35 million, and it didn’t disclose its valuation then, either.)

Five’s change in course is a significant development. The high-profile startup, founded by a team that had previously built and sold several chip companies to the likes of Broadcom, Nvidia and Huawei, had been the leading partner for a big government-backed pilot project, StreetWise, to test and work on autonomous driving systems across boroughs in London. The most recent phase of that project, running driver-assisted rides along a 19-km route across south London, got off the ground only last October after initially getting announced in 2018.

Five might continue to work on research projects like these, Boland said, but the primary business aim for the company will no longer be ultimately to build cars for themselves, but to work on tech that will be sold either to other carmakers or those building services catering to the autonomous industry.

For example, Direct Line, one of Five’s new investors and also a participant in the StreetWise project, could use testing and measurement to determine risk and pricing for insurance packages of different vehicles.

Autonomous and assisted driving technology is going to play a huge role in the future of cars,” said Gus Park, MD of Motor Insurance at Direct Line Group, in a statement. “We have worked closely with Five on the StreetWise project, and we share a common interest in solving the formidable challenges that will need to be addressed in bringing safe self-driving to market. Insurers will need to build the capability to measure and underwrite new types of risk. We will be collaborating with Five’s world-class team of scientists, mathematicians and engineers to gain the insight needed to build safe, insurable solutions and bring the motoring revolution ever closer.” Park is also joining Five’s board with this round.

There were already a number of big players in the self-driving space when FiveAI launched — they included the likes of Waymo, Cruise, Uber, Argo AI and many more — and you could have argued that the writing was already on the wall then for long-term consolidation in the industry. Indeed, there have been some significant casualties in the meantime, including Drive.AI (which Apple acquired after it ran out of money), Oryx Vision and Quanergy.

Five’s argument for why a U.K. startup was in a good place to build and operate self-driving cars, and the tech underpinning it, was because of the complexity behind building localised systems: a big U.S. or Asian company might be able to map the streets in Europe, but it wouldn’t have as good of a feel for how people behaved on those roads. Added to that, Five firmly believed the economics of building and operating these cars would prove to be too high for wide-scale private ownership. Hence, the strategy (one adopted by many in the autonomous space) of building the technology for fleets, where transportation businesses, not individuals, would own the cars and recoup their investments by charging private individuals for rides.

Yet while it may have been easy to see the potential, the process of getting to that point proved to be too challenging.

“What’s happened in the last couple of years is that there has been an appreciation across the industry of just how wide and deep the challenges are for bringing self driving to market,” Boland said. “Many pieces of the jigsaw have to be assembled…. The B2C model needs billions [of investment], but others are finding their niche as great providers of technology needed to deliver the systems properly.”

As a ballpark figure, Boland believes that to get to a self-driving, Level 5 reality, we’ll need to see “hundreds of billions” of dollars of investment. But so far, collectively, self-driving startups have raised a mere $15 billion, according to figures from Crunchbase — significant money, but nowhere near the amounts that will be needed, and one argument for why only a very few, backed by huge automotive giants, will ever make it.

As FiveAI (named after the “Level 5” that self-driving systems attain when they are truly autonomous), the company built (hacked) vehicles with dozens of sensors and through its tests managed to build a significant trove of vehicle technology.

“We could offer tech in a dozen different areas that are hard for autonomous driving companies,” Boland said. Its testing and measuring tools point to one of the toughest challenges among these: how to assure that the deep learning software a company is using is correctly identifying objects, people, weather, and other physical factors when it may have never seen them before.

“We have learned a lot about the types of errors that propagate from perception into planning… and now we can use that for providing absolute confidence” to those testing the systems, he said.

Self-driving cars are one of the biggest AI challenges of our time: not only is the requirement to essentially build from the ground up computer systems that behave as well as (or ideally better) than multitasking humans behind the wheel; but the consequence of doing that wrong is not just a strange string of words, or some other kind of non sequitur, but injury or death. No surprise that there appears still a very long way to go before we see anything like Level 5 systems in action, but in the meantime, investors are willing to continue placing their bets. Partly because of how advanced it got with its car project on relatively little funding, Five remains an interesting company to investors, and Boland hopes that this will help it with its next round down the road.

“We invest in category-leading companies that are delivering transformational change wherever they’re located,” said David Lin of Trustbridge Partners in a statement. “As Europe’s leading self-driving startup, Five is the furthest ahead in developing a clear understanding of the scientific challenges and novel solutions that move the needle for the whole industry. Five has successfully applied Europe’s outstanding science and engineering base to create a world-class team with the energy and ambition to deliver safe self-driving. We are delighted to join them for this next phase of growth.”