Daily Tech Snippet: Thursday, March 9

• Wikileaks' CIA hacking dump sends tech firms scrambling for fixes: Tech companies must rapidly step up information-sharing to protect users from prying eyes, a security software executive said on Wednesday after WikiLeaks released a trove of data purporting to show that the CIA can hack all manner of devices. Dozens of firms rushed to contain the damage from possible security weak points following the anti-secrecy organization's revelations, although some said they needed far more information on what the U.S. intelligence agency was up to before they could thwart suspected but previously hidden attacks. Sinan Eren, vice president of Czech anti-virus software maker Avast, called on mobile software makers Apple and Google to supply security firms with privileged access to their devices to offer immediate fixes to known bugs. Avast, which counts more than 400 million users of its anti-virus software worldwide, was named in the WikiLeaks documents as one of the security vendors targeted by the CIA in a leaked page labeled "secret" but lacking further details. The leaks - which WikiLeaks described as the biggest in the Central Intelligence Agency's history - had enough technical details for security experts and product vendors to recognize that widespread compromises exist. However, they provided few specifics needed to offer quick fixes. The 8,761 leaked documents list a wealth of security attacks on Apple and Google Android smartphones carried by billions of consumers, as well as top computer operating systems - Windows, Linux and Apple Mac - and six of the world's main web browsers.

• Valuation Shell Game: Silicon Valley’s Dirty Secret: You want to know the dirty, little secret of Silicon Valley? It’s called the 409A valuation. Here’s how the process works: In order to attract and to retain high-powered employees, high-flying tech companies want to issue them common stock or options. To do so and to comply with Internal Revenue Service rules, they need to obtain an independent, third-party valuation of the company. This type of valuation allows hot, privately owned technology companies — like Uber, Airbnb or Nextdoor — to issue common stock or stock options to employees at a low price and, at the same time, or nearly the same time, sell preferred stock to outside investors at a price that is often three or four times higher. It’s also a way for company founders to control the market for the stock of their private companies while rewarding themselves and key employees with cheap shares that seem instantly worth a lot more than the price at which they were issued. Failure to comply with section 409A of the tax code would make employees receiving the stock grants personally liable for immediate taxation on the excess value embedded in the stock or options, plus a 20 percent penalty tax. The valuations also give the founders of technology companies extraordinary control over the market for the private sale of company stock. Whether employees realize it or not, the stock the company grants to them often explicitly prevents its sale to anyone, or in any private secondary market, without the express written consent of the founder, the chief executive or the board of directors. Obviously this becomes a problem when an employee wants to sell his or her private stock. And who wouldn’t, if for instance, the stock is issued to employees at a $500 million valuation, and then sold to outside investors at a $1.5 billion valuation. This is often the point where the founder steps in and says, sorry, no sale, or at least not at the higher valuation. Selling implies the person is no longer a true believer in the company or in its mission. This dynamic falls especially hard on early investors who are not company employees, those so-called “series A” or “series B” venture-capital investors who would like to sell at the higher valuation but can do so only with the founder’s or chief executive’s permission and only at the sanctioned valuation. Employees looking to diversify their wealth also often feel frustrated.

• Instacart, Now $400 Million Richer, Tries to Be Thrifty: Apoorva Mehta is thinking a lot about bottle deposits. Recycling fees vary by state and container size, but until recently, Mehta’s online grocery delivery startup Instacart Inc. hadn’t paid much attention to what it was charging customers purchasing soda or beer. Then they did the math and discovered that this oversight was costing the company on average 35 cents a delivery. Instacart now charges the correct amount for bottle deposits. In the last year, it made a similar adjustment to how it accounts for local sales taxes, which has saved another 20 cents per delivery, according to the company. The penny-pinching is part of a new strategy designed to show investors that Instacart can rise above the pile of on-demand startups that have bled venture capital. Enough VCs were convinced by Mehta’s pitch to contribute $400 million for Instacart’s latest round of funding. With the additional cash, the investment increases the company’s valuation to $3.4 billion, an unlikely harvest in a down market. “This is not what I’ll call ‘funny math’ here,” said Mehta, the co-founder and chief executive officer. “One of the things we’ve had as a result of this round is a lot of scrutiny from the smartest investors in the world, looking at a lot of these numbers in detail.” Mehta wants everyone to know that unlike a typical startup newly awash in cash, Instacart is going to spend it very carefully. The San Francisco-based company, which pays workers to pick up and deliver groceries from local supermarkets, is also eager to demonstrate that it’s taking in more revenue while spending less. Instacart cut its burn rate by more than half in the past year, Mehta said. In addition to the bottle deposit and sales tax adjustments, the company focused on driving down “time per delivery,” a metric that’s the source of some obsession within the walls of Instacart. For inspiration, the company filmed its most efficient shoppers to learn what they did differently and then taught those lessons to new recruits. Quicker deliveries translate not only into happier customers but cost savings resulting from higher productivity.