Private Equity's Billion-Dollar-Bid to Control Dot.Org Website Domains Faces Sharp Criticism
Tami Abdollah
Tami Abdollah is dot.LA's senior technology reporter. She was previously a national security and cybersecurity reporter for The Associated Press in Washington, D.C. She's been a reporter for the AP in Los Angeles, the Los Angeles Times and for L.A.'s NPR affiliate KPCC. Abdollah spent nearly a year in Iraq as a U.S. government contractor. A native Angeleno, she's traveled the world on $5 a day, taught trad climbing safety classes and is an avid mountaineer. Follow her on Twitter.
A private equity firm that's trying to purchase control of all dot-org domains for more than $1 billion said Friday that it is planning to put in place legally-binding measures to address concerns and ongoing criticisms about the deal by lawmakers, nonprofits and activists.
The latest announcement is the most recent turn of events in a complex, technical but important discussion over the future of a critical segment of the internet. In November, Boston-based Ethos Capital publicly announced the deal to acquire the nonprofit Public Interest Registry (PIR), which manages the dot-org domain, setting off public debate over the appropriateness of such a deal. The purchase would give The Internet Society, a nonprofit that controls and created PIR, a $1.135-billion endowment to continue its other good works it engages in to strengthen the internet, without having to rely solely on fees from dot-org registry users.
Earlier this month, California Attorney General Xavier Becerra stepped into the fray. His office said it wanted to review such a deal's potential impact to the nonprofit community. Though you don't need to be a nonprofit to own a dot-org domain, the registry is the online home to more than 10 million domain names registered worldwide including to well known organizations, nonprofits and media like Farm Aid, The Sierra Club, Amnesty International, Girl Scouts of the USA, The Associated Press and ProPublica.
The Internet Corporation for Assigned Names and Numbers (ICANN), which oversees what's essentially the address book of the internet from its Playa Vista, California offices, still needs to bless the deal. Ethos said Friday that PIR has agreed to push the deal back to March 20 to give ample time to review the additional terms.
Among the new initiatives announced jointly by Ethos, PIR and The Internet Society in a press release Friday are "legally-binding measures to enforce price limits, safeguard against censorship and protect personal data" by amending PIR's registry agreement with ICANN, which allows PIR to operate the dot-org domain. Such changes could not be unilaterally changed by PIR and would apply to dot-org regardless of who operates it, Ethos said.
"We have been listening closely to stakeholder feedback — both positive and negative — and have been working diligently to address these specific issues head on," said Erik Brooks, founder and CEO of Ethos Capital. He said the private equity firm was trying to address requests for measures that were strongly enforceable to ensure Ethos is accountable.
Per Ethos, the legally-binding provisions in the amendment include the following:
- Ensuring dot-org domains do not increase more than 10% annually on average for eight years under a formula that prevents "front-loading" of those increases. Right now it costs roughly $10 for an annual dot-org domain renewal fee.
- Establishment of a "stewardship council" to provide independent advice plus a binding right to veto modifications proposed by PIR to its policies regarding censorship, freedom of expression and use of user data.
- Creation of a $10-million "community enablement fund," contributed by PIR over the life of the current registry agreement, to support initiatives to benefit dot-org registrations that would be approved by the Stewardship Council
- PIR will publish an annual report on its own compliance with the above commitments and account for how it pursued activities to benefit dot-org registrants that year.
A review by dot.LA of the stewardship council's charter makes it clear that it serves as an independent body for advice and that its duties are to be requested and assigned by the PIR board, rather than proactively reviewed by the council.
More than 21,000 people, 660 organizations and six members of Congress have written letters to say they oppose the deal, which internet governance experts have worried will lead to unsavory efforts to make back the more than $1 billion to please investors at the expense of nonprofits doing good or monetize the data's registry at the expense of the public.
ICANN's President and CEO Göran Marby said that the nonprofit is in the process of analyzing information it has received and has no comment. The AG's office did not immediately respond to requests for comment. Representatives for the Electronic Frontier Foundation, a nonprofit defending digital privacy, did not immediately comment.
Ethos, PIR and The Internet Society will have representatives available to discuss and provide additional details on Feb. 27.
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This Test Prep Service has a Cult Following Among Med Students. Soon it Will Have an Animation Studio
Sep 24 2020
The unnamed king wears a crown and large pink robe as he grasps a tissue to his nose.
No, this isn't some Netflix show on the quarantine lives of the rich and famous; it's actually a method SketchyMedical uses to help students recall complicated concepts.
Such images by Los Angeles-based online education startup SketchyMedical have helped catapult the company to cult status among the med school set, who dress up in their drawings for Halloween. One fan even got a tattoo of SketchyMedical's pencil representing penicillin.
On Thursday, SketchyMedical announced its first outside investment stake, a $30 million shot in the arm from former Hollywood executive Peter Chernin's investment firm TCG to help establish an in-house animation studio that will bring to life those famous sketches and expand its team of 30 employees.
<p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQzNTQ2Ni9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYxMzI1NDcyOH0.9hyHaZlTsEIS2zmyYLbon3tCbPwadBCEw9I9N9wG2XQ/image.png?width=980" id="4c67a" class="rm-shortcode" data-rm-shortcode-id="2f5f0ff6c8902a4e35c2ff0743e618e8" data-rm-shortcode-name="rebelmouse-image" />
</p><p>The funds will also help SketchyMedical bring its symbolic characters and scenes to other health professions, as well as create new ones for students preparing for the MCAT in the short term and new subjects like law over the next few years.<br/></p><p>"We are reintroducing this method in modern education that's really been lost, and the students have noticed, and it works and they're using it," said CEO and cofounder Saud Siddiqui. "We're really looking forward to expanding our reach, making this accessible no matter what they're studying."</p><p>SketchyMedical's success is part of the recent trend toward the consumerization of education — a trend that has been rapidly accelerated by the pandemic.</p><p>Students pay thousands annually for medical entrance and licensing exams, flocking to big name test prep companies and paying thousands more to prepare. As the internet has provided myriad more ways to connect and learn, it's become a buyer's market for students looking to differentiate themselves from their peers and ace those exams. </p><p>The company was founded by medical students for medical students in 2013 after its four co-founders used similar techniques with great efficacy while preparing for their board exams.</p><p>SketchyMedical has been profitable since its early days through its subscription model, which offers tiered pricing — from roughly $230 to $550 for up to two years of programming — that includes video lessons, review cards and quizzes. The company currently has more than 30,000 active subscriptions.<br/></p><p>Sketchy Medical relies on the "memory palace technique," from an era when oral tradition meant memorizing long stories passed on from one generation to the next. Med students are given a simple visual way into the material through characters, storylines and humor. </p><p>For example, in one sketch <em>a naked Mona Lisa sits in a red-colored bathtub by the fire, petting a dalmatian and holding grapes.</em></p><p>She represents the bacteria known as pseudomonas aeruginosa, which thrives in aquatic environments and is classified as a gram-negative bacilli. It produces a fruity grape-like odor when plated and has swarming motility</p><p>In another four-minute coronavirus lesson, the crown represents the "coronaviridae" family of RNA viruses, the robe represents the fact that it is enveloped, while the tissue represents how they cause the common cold. The image shows up in pictures whenever a coronavirus becomes relevant.</p><p>Siddiqui said the company found students had a 30% improvement in recall using its method. Anecdotally, he said even the non-medical artists at the company are getting 100% on the preclinical quizzes from working on the images. </p><p>Cofounder Andrew Berg, speaking in front of a Zoom backdrop featuring the company's pencil (penicillin) drawing, said professors across the country have also integrated the company's sketches into lecture slides. </p><p>And Siddiqui said the company has seen more institutions using SketchyMedical during the COVID-19 pandemic as they've tried to find creative ways to supplement their traditional lectures.</p><p>"We argue that everybody is a visual learner, that our brain has evolved to be really good at visual spatial recall," Siddiqui said. "It's necessary for survival to know where that fruit grew or where that dangerous predator was, or our cave. This is the same for animals. This bird can remember the location of 30,000 seeds across the landscape."</p><p class="shortcode-media shortcode-media-youtube">
<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="a2a4b1513840e2a2463ec74b7ddfc52d"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/e0-VbzYCshY?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
</p><p>TCG vice president Michaela Venuti said the consumer-focused investment fund has been diving deep into the education space for the last year and a half and seen students take ownership of their education, picking and choosing among a wealth of new products tailored to their interests, area of specialty or aspirations.<br/></p><p>"Consumers can make decisions about what supplemental tools they want to use and build their own education," Venuti said. "A lot of that has been accelerated during the pandemic, and Sketchy fits well in this broader scheme of consumers choosing."</p><p>Venuti said TCG interviewed graduate and med school students as part of its work in the education space and 100% of the students they talked to mentioned Sketchy as a crucial tool to get through med school. That known brand name should help the company as it expands into other types of content and categories of education.</p><p>While it's hard to quantify exactly how large the market is for supplemental spending on education, TCG looked at another early leader in the direct-to-consumer space: Santa Clara, Calif.-based Chegg Inc. is a publicly traded company that began in the textbook rental space and now offers tutoring among other student services. </p><p>Venuti said she could certainly see SketchyMedical going the way that 2005-founded Chegg has, ultimately offering a suite of student services. <a href="https://s21.q4cdn.com/596622263/files/doc_financials/2020/q2/Chegg-Q220-Investor-Deck.pdf" target="_blank">Chegg reported 3.9 million subscribers</a> in 2019 and a current $8.7 billion market cap, but <a href="https://s21.q4cdn.com/596622263/files/doc_financials/2020/q2/Chegg-Q220-Investor-Deck.pdf" rel="noopener noreferrer" target="_blank">the company believes the total potential market opportunity for their services is 102 million students</a> in the U.S., Canada, Australia and the United Kingdom. The company has seen a 39% compound annual growth rate over the last five years, and its total revenue of $153 million is up 63% year over year for the second quarter of 2020.</p><p>TCG believes Chegg's outlook on market opportunity is similar to what SketchyMedical could expect, Venuti said. However, she added that SketchyMedical's "secret sauce" is the content the company has built, its method for teaching students and its passionate and engaged user base.</p><p>An internal analysis by TCG estimated a total addressable market of 93,000 medical students and adjacent medical specialties like dentistry and pharmacology, who are already using SketchyMedical's content for studying overlapping topics. TCG also discovered an "ever-increasing amount of global edtech unicorns — such as VIPKid, Coursera, Duoling, ByJu's, Quizlet and more — with consumer-facing supplemental tools valued in the billions.</p><p>The analysis also found that in the medical school market supplemental tools are becoming so important that "<a href="https://www.ama-assn.org/residents-students/medical-school-life/why-some-medical-students-are-cutting-class-get-ahead" rel="noopener noreferrer" target="_blank">students are skipping class</a> to instead <a href="https://www.statnews.com/2018/08/14/medical-students-skipping-class/" rel="noopener noreferrer" target="_blank">study via supplemental learning tools</a>."</p><p>___</p><p><em>Do you have a story that needs to be told? My DMs are open on </em><a href="https://twitter.com/latams" rel="noopener noreferrer" target="_blank"><em>Twitter @latams</em></a><em> You can also email me at tami(at)dot.la, or ask for my contact on Signal, for more secure and private communications.</em></p>
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Marlon Nichols has lately been wading through a lot of what he calls "diversity theater" - the performance that well-intentioned people do when they want to look "woke" without spending the money or doing the hard work to foster equality.
Since protests broke out over the police killing of George Floyd, there's been an outpouring of interest in his firm MaC Venture Capital, an early-stage venture capital firm focused on tech and consumer products that is particularly interested in founders of color.
<p>"Diversity is an interesting thing in this country because it tends to be important for a moment in time and then it becomes less important again," Nichols said. "This time around it feels a little bit different. It feels like people are genuinely realizing that there's a systemic problem. These aren't one-off occurrences. Things aren't equal."</p><p>On Wednesday, Nichols got a boost from the trade group that puts on the Las Vegas' Consumer Electronics Show (CES). The Consumer Technology Association announced that it would invest an undisclosed amount in MaC Venture Capital, as part of its $10 million diversity effort. </p><p>Nichols, a founding manager partner of the Los Angeles firm — which was created from the merger of Cross Culture Ventures and M Ventures — said the investment is significant given that venture funds led by women or people of color are mostly underfunded.</p>
<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzQ1OTQ5OS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYzNTE3MDgzM30.Oqm0VWWXqouhKqjCvSL6hxd8o7P4f56OAFQ9ZIY-t_g/img.jpg?width=980" id="7fedf" class="rm-shortcode" data-rm-shortcode-id="044874cb595f165e9e252e44c2bffd36" data-rm-shortcode-name="rebelmouse-image" alt="Marlon Nichols, MaC Venture Capital" />
MaC Venture Capital's Marlon Nichols
<p>Although the cash is not much more than an institutional investment, it marks a partnership between the trade giant and the up-and-coming firm, as venture capitalists and the tech industry struggle to overturn decades of institutional racism. Last month, another trade group, the National Venture Capital Association, <a href="https://dot.la/venture-top-industry-group-launches-nonprofit-to-diversify-its-ranks-2646175232.html" target="_self">launched a $5.5 million nonprofit dubbed Venture Forward</a>, aimed at diversifying its ranks. </p><p>"The amount of funding that goes to black and brown entrepreneurs, we are talking about one percent," Nichols said.</p><p>The problem, Nichols said, stems from <a href="https://dot.la/lots-of-talk-but-little-action-how-can-venture-capital-solve-its-whiteness-problem-2646188887.html" target="_self">the lack of diversity in venture capital</a> where investors tend to bet on people that look like them and have shared experiences. According to a survey by the NVCA, about 3% of investors are Black, though the numbers are likely much smaller.<br></p>
<p><br/></p><p>Launched last year, MaC has already invested in nine companies and with its inaugural fund aims to seed about 40 companies with funds of $500,000 to $1.5 million. Its focus on pre-seed and seed rounds is an acknowledgement that the initial round of funding is most difficult for founders of color to raise — in part, he said, because the bar is often higher for them.</p><p>Yet, diverse founders often give back greater returns and raise more money in subsequent rounds, said Nichols, who <a href="https://www.kauffmanfellows.org/journal_posts/the-pipeline-myth-ethnicity-fund-managers" target="_blank">co-authored a study by the Kauffman Fellows Research Center</a> that analyzed the profile images of more than 260,000 startup founders and executives in the United States using publicly available demographic models.<br/></p><p>"Founders of color that were successful raising capital in the early days, they raise significantly more money than all white teams in later rounds because the bar is so much higher in the early days," he said. "That's where the absence of capital is. Once they get beyond this stage there are tons of data that shows that they outperform and at that point it is solely based on merit.</p><p>"It's in the early days when you're still more betting on the idea, and proposition of the market, and the team where we're seeing that huge disparity," he said.</p><p>MaC is the fifth fund CTA has invested in as part of its commitment to venture firms and founders that invest in women, people of color and other diversity. Last year, it announced that it invested an undisclosed amount in Harlem Capital Partners, SoGal Ventures, Rethink Impact and Founders First Capital Partners.</p><p>MaC's portfolio includes more than 100 companies and several significant exits including Gimlet, which was sold to Spotify for $230 million. The other managing partner is former Washington D.C. mayor and special advisor at Andreessen Horowitz, Adrian Fenty.</p><p>"We are putting money in the hands of venture funds whose investment thesis is to focus on women and entrepreneur because they are traditionally underrepresented," said Tiffany Moore, an executive with the trade association. CTA developed the idea in 2018 and the money comes from its own budget. That year, CTA made $126 million in revenue.</p><p><em>Do you have a story that needs to be told? My DMs are open on Twitter <a href="https://twitter.com/racheluranga" target="_blank">@racheluranga</a>. You can also <a href="mailto:mailto:rachel@dot.la" target="_self">email me</a>.</em></p>From Your Site Articles
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