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Data Sheet—Tuesday, May 31, 2016

May 31, 2016, 12:07 PM UTC

There are two reasons startups fail, according to Y Combinator founder Paul Graham. They run out of money, or the founders give up.

We know when the former happens because it’s usually sudden. The surprising demise of cleaning service startup Homejoy sent shock waves through the “on-demand” category of startups. Likewise for virtual assistant startup Zirtual, which ran out of money and shut down over a weekend.

But such overnight failures are rare. Instead, startups often die painful, drawn-out deaths, because Paul Graham’s second reason for failure—giving up—goes against the nature of most entrepreneurs. It takes a lot of grit and determination to start a company. Even the basics—raising capital, building a team, launching a product, and signing customers—require overcoming monumental odds. The “hero’s journey” mythology of famous, successful founders always describes the way they ignored everyone who said their idea would never work.

That explains why so many startup founders hang on to their dreams long after everyone else knows they’re doomed.

Exhibit A is Jawbone. The company has achieved many impressive feats in its 17 years of existence. It has raised hundreds of millions of dollars in funding, something very few companies do, and it created and launched a number of successful consumer products, including the Jambox wireless speaker, its namesake wireless Bluetooth headsets, and the Up fitness band. But in recent years the “can’t-miss” company has struggled with product delays; executive reshufflings; increased competition from Apple and Fitbit; costly lawsuits with its supplier, Flex, and Fitbit; and a “down round” of funding that cut the company’s valuation in half. From the outside, it all adds up to an ugly picture.

Plenty of people close to founder and CEO Hosain Rahman have probably advised him to give up and make a graceful exit. Instead, his company continues to fight for its life. Over the weekend, Fortune’s Leena Rao reported that Jawbone is attempting to sell its wireless speaker business to focus on its fitness tracker business. At the same time, Business Insider reported that the company is apparently liquidating its inventory of Up fitness bands.

It’s yet another ominous sign for Jawbone’s survival. But it’s the sort of thing that shows Rahman’s determination: If Jawbone fails, it won’t be because he gave up.

Erin Griffith is a writer at Fortune. Follow her on Twitter or drop her an email.

This essay is part of “A Boom With a View.” Find past editions of Data Sheet.



Tech giants sign 'code of conduct' on hate speech. Facebook, Microsoft, Twitter, and YouTube have all promised the European Commission that they will review and take action on reports of violent or discriminatory commentary related to race, ethnicity, religion, and other factors within 24 hours. Digital rights groups, which were apparently left out of the discussions, are concerned the deal won't protect free speech. (Fortune)

Verizon workers should return to work Wednesday. Unions representing nearly 40,000 striking workers—mainly associated with its land-line and Fios Internet operations—reached a tentative deal with the telecommunications giant. The contract includes about 1,500 new union positions, along with pay raises of more than 10% over the next four years. (Reuters, New York Times)

Oracle is back in court this week, this time as defendant. The case brought five years ago by Hewlett-Packard centers on whether the giant database software company—once a close partner—damaged sales of the hardware company's high-end Itanium computer server line when it bought HP competitor Sun Microsystems. Hewlett Packard Enterprise inherited the case after its corporate breakup. It is seeking $3 billion in damages. (Wall Street Journal)

New Microsoft Ventures group will focus on early stage investments. The division, led by the former head of Qualcomm Ventures, Nagraj Kashyap, will seek out “bleeding-edge companies” working on products or services that complement Microsoft's various cloud services or that are working on applications for the HoloLens augmented reality headset, among other things. (Fortune)

Facebook and Google may be behind attempt to derail Illinois privacy law. Draft legislation introduced last week would amend the state's tough biometrics law, which protects consumers from having their fingerprints or face scans used without permission. The law runs counter to photo-tagging technology being developed by Google and Facebook, which are both reported to be lobbying for changes. (Fortune, New York Times)

Don't expect quick resolution in Google's French tax case. It could take years for authorities to sift through the data collected in last week's secret raid on the Internet giant. (Reuters, Bloomberg)

Qualcomm's Chinese joint venture could start producing chips next year. The company is working with a government-owned venture to create and produce customized technology for data center computer servers, a growth area that will help it diversify beyond smartphones. The first fruits of its labor should reach market in the second half of 2017. (Wall Street Journal)

Magic Leap may be working on robots too. The secretive augmented reality company is suing two former employees over their new startup. The lawsuit alleges that they're using proprietary company information related to artificial intelligence and deep learning for robotics. (MIT Technology Review)


Crucial U.S. privacy deal won't stand up in court, says EU adviser. The deal that’s supposed to give U.S. companies an easy(ish) way to handle the data of European customers and employees is—as it stands—a dud. That’s according to EU data protection supervisor Giovanni Buttarelli, who issued his official opinion on the beleaguered pact on Monday.

Buttarelli doesn’t have the power to kill the “Privacy Shield” deal, which was announced earlier this year as a replacement for the struck-down “Safe Harbor” arrangement. However, he is the top data protection adviser to EU lawmakers, and his rejection of the current Privacy Shield draft is shared by privacy regulators from across the bloc, as well as the European Parliament. (Fortune)


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Gawker finds ally in privacy lawsuit. First Look Media, which was started by eBay founder Pierre Omidyar, plans to file a "friend of the court" briefing in the ongoing case, citing concerns over free speech. Gawker was ordered in March to pay $140 million in damages in a privacy case brought by wrestler Hulk Hogan and backed by another prominent Silicon Valley billionaire, Peter Thiel. Many high-tech insiders have little sympathy for Gawker's cause. (Bloomberg, New York Times)

This edition of Data Sheet was edited by Heather Clancy.