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The Morning Download: SoftBank Fund Set to Transform Enterprise Tech; Capital One Reports Hack
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Good morning, CIOs. SoftBank Group Corp. rewrote the script on tech startup funding with its $100 billion Vision Fund launched two years ago. This summer's sequel, Vision Fund 2, advances the plot slightly with a focus on AI startups. As investors tell CIO Journal's Sara Castellanos and Angus Loten, the fund's influence on the VC industry and the enterprise tech startup scene could reach blockbuster proportions.
Big backers. Ed Sim, founder and managing partner of seed-stage enterprise technology fund Boldstart Ventures, predicts "massive ripple effects.” Startups backed by SoftBank could use their “massive balance sheets” to drastically expand their sales teams and potentially undercut competitors on price, changing the enterprise technology startup landscape.
Startups as spectacle. The new fund also has the potential of making companies highly dependent on large cash infusions, said Lu Zhang, founder and managing partner of early-stage investor Fusion Fund, based in Palo Alto, Calif. Founders of enterprise-technology companies that bring in so much capital could later find it hard to justify their valuations, she added.
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The backstory. SoftBank’s first megafund, launched two years ago, had nearly $100 billion in investment capital. By investing a minimum of $100 million per venture, the fund raised valuations for many tech startups, enabling companies to continue growing without going public or offering themselves as an acquisition target.
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Capital One Financial is the fifth-largest U.S. credit-card issuer. PHOTO: KEVIN HAGEN FOR THE WALL STREET JOURNAL
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Capital One reports data breach. A former systems engineer at Amazon Web Services was arrested in Seattle Monday in connection with a data breach at Capital One Financial Corp., the fifth-largest U.S. credit-card issuer. The Wall Street Journal's Nicole Hong, Liz Hoffman and AnnaMaria Andriotis have more.
The hack. The breach, which occurred in late March, compromised approximately 140,000 Social Security numbers and 80,000 bank account numbers, as well as some customers’ credit scores, payment histories and credit limits. Capital One first learned about the leak of its data this month through an ethical hacker—a person who hacks into a network to test its security.
The suspect. Paige A. Thompson is a former employee of Amazon Web Services, according to people familiar with the matter. The criminal complaint says Ms. Thompson’s résumé showed she worked at a cloud-computing company, which the government didn’t name, as a systems engineer from 2015 to 2016. Ms. Thompson allegedly accessed the bank’s data through a misconfigured firewall.
Cloud security concerns. In general, banks have moved cautiously to the cloud, partly because of security concerns. But Capital One has been an enthusiastic adopter of the cloud. The bank has also been public in its embrace of Amazon Web Services with its executives speaking at AWS events. In an April earnings call, Richard D. Fairbank, the bank’s chairman and chief executive, talked about the bank’s technology transformation over the past 25 years. “What we’re doing at Capital One is building a technology company that does banking, instead of a bank that just uses technology,” he said.
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Technicians inspect electronic equipment at the Sims facility. PHOTO: ALYSSA SCHUKAR FOR THE WALL STREET JOURNAL
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Dealing with cloud waste. Investment in cloud infrastructure is exploding. So too is the resulting detritus of plastic, metal and other garbage, the result of said equipment's limited shelf life—about three years. Two U.S.-based recyclers, Sims Metal Management Ltd. and Electronic Recyclers International Inc., see opportunities.
But security concerns makes recycling iffy. Some firms demand that all equipment be shredded and melted entirely, even if it contains components that could be used again. (WSJ)
Google Cloud partners with VMWare. In the pursuit of enterprise customers, Alphabet Inc.'s Google will now support VMWare Cloud Foundation, a popular system for running hybrid clouds. (TechCrunch)
Defense Department has words for Oracle. The Pentagon in a strongly worded statement over the weekend said Oracle Corp. has been misinformed in its claims that a $10 billion Defense Department cloud contract has been rigged in favor of front-runner Amazon.com Inc. (Washington Post)
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People use computers at an internet cafe in Beijing. China’s proposed cybersecurity rules reflect multiple factors shaping the country’s cybersecurity landscape, including growing consumer awareness over data privacy. PHOTO: ROMAN PILIPEY/EUROPEAN PRESSPHOTO AGENCY
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China releases new draft of rules and standards for use of foreign tech. Trade experts say the rules, which flesh out an existing cyber law that the U.S. and many foreign businesses already consider draconian, could further deter Chinese companies from procuring foreign equipment if they fear these products would be subject to lengthy reviews. (WSJ)
Huawei shows resilience in the face of U.S. blacklisting. In Huawei Technologies Co.'s first financial report since it was added to the Commerce Department’s entity list in May, the company said its first-half revenue rose 23% from a year earlier. (WSJ)
Ride-hailing companies experience staff shake-ups. Uber Technologies Inc. cut about a third of its 1,200-strong marketing arm amid a cutback and reorganization. Rival Lyft Inc. announced Monday the departure of COO Jon McNeill—a former Tesla Inc. executive who was hired a year and a half ago. (WSJ)
Robot umpires. A small professional baseball league is letting technology determine balls and strikes. The Atlantic League recently began using a setup where a 3-D Doppler radar determines the verdict to each pitch which is then delivered via a secure Wi-Fi network to an iPhone-toting umpire behind the plate. (WSJ)
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Everything Else You Need to Know
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The U.S. government expects to borrow more than $1 trillion in 2019 for the second year in a row. (WSJ)
The Federal Reserve is prepared to cut interest rates this week for the first time since 2008, but the biggest source of debt for U.S. consumers—mortgages—has been getting cheaper since late last year. (WSJ)
European stocks largely fell after an upbeat session in Asia, while the British pound continued to drop as Brexit fears took center stage. (WSJ)
U.S. farmers are reeling after unrelenting rain delayed planting, adding to challenges posed by trade issues. Now, the farmers’ pain is spreading to the suppliers, traders and food makers that depend on them. (WSJ)
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