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Also in this newsletter: severe floods in Germany claim several casualties

The first polls open in two days for a continental vote that will shape the EU’s next five years — and campaigning is reaching its peak.

Today, Nicolas Schmit, the lead candidate for the centre-left bloc, tells our parliament correspondent that centre-right rival Ursula von der Leyen has an “unacceptable” leadership style. And our Berlin bureau chief reports from deadly floods in southern Germany.

Interested in how the elections will change the EU? Join me and my colleagues in Paris, Rome and Germany for a subscriber-exclusive webinar on June 12 and put your questions to our panel. Register for your subscriber pass now. Your pass also gives you access to a recording of the event.

Enter the ring

Socialist candidate Nicolas Schmit has finally taken off the gloves with a direct attack on his boss-turned-rival ahead of the weekend’s elections, writes Andy Bounds.

Context: Schmit, employment commissioner in the current European Commission, is running as the Socialist’s lead candidate for the commission presidency — against incumbent Ursula von der Leyen, the European People’s party candidate and favourite to win the race.

In an interview with the Financial Times, Schmit said von der Leyen had quashed dissent in the 27-strong college of commissioners and took decisions “in some hidden room” without discussions.

Schmit singled out a controversial deal with Tunisia, negotiated by von der Leyen together with autocratic leader Kais Saied, in which the EU offered money in return for stopping migrants leaving its coast for Europe.

“This came on a Friday afternoon [to the college] and we had one hour to say no. If after one hour you hadn’t said anything it was yes. This is unacceptable,” Schmit said.

Tunisia’s security forces have driven thousands of migrants into the desert on the borders with Algeria and Libya, and faced widespread accusations of human rights abuses and even human trafficking.

“The way refugees are treated is just shocking,” Schmit said about Tunisia, contrasting it with a 2016 agreement between the EU and Turkey. According to him, refugees were treated more benignly there, including because of EU funding for NGOs rather than security forces.

Schmit said von der Leyen consistently excluded her commissioners from decision making. “This is about the governance of Europe,” the Luxembourger said. “You cannot just keep that under the table in some hidden room. We need a real debate in the commission. And you need a president that faces criticism.”

Commission spokesperson Eric Mamer said the “process was collegial” with “ample opportunity for members of the college to request a discussion in the college”.

Despite Schmit’s criticism, von der Leyen’s EPP is on track to win the elections, giving her the first chance to get the job — provided most of the 27 EU leaders back her.

She must then get a majority in parliament.

Italy’s Giorgia Meloni and France’s Marine Le Pen represent two different shades of Europe’s far-right. If they can find a way to work together, they could determine the EU’s short-term future.

Washed away

Floods in southern Germany are claiming a rising number of casualties, as Chancellor Olaf Scholz yesterday travelled to the region to inspect the damage and promise federal support, writes Guy Chazan.

Context: Heavy rains in the states of Bavaria and Baden-Württemberg over the weekend have caused severe flooding, resulting in the disruption of train services in the region and forcing dozens of schools and businesses to close.

Firefighters yesterday discovered the bodies of a man and a woman in the village of Schorndorf, just east of Stuttgart, an area that has been particularly affected by the floods. Another body was found in Schrobenhausen, north-west of Munich.

On Sunday, the body of a fireman was found, who died when his rubber dinghy capsized. A second fireman is still missing.

Speaking to reporters in the Bavarian town of Reichertshofen, Scholz said more had to be done to tackle the climate crisis, noting that it was the fourth time he had visited a flood-affected area in Germany this year.

“We cannot neglect the task of stopping man-made climate change,” Scholz said. “That is the message we must take from these events and this disaster.”

The floods seen in recent years were no longer singular events, he said. “That’s why the government has to act.”

Video footage published by local media showed rivers transformed into fast-flowing torrents, and cars left piled up on each other as the floodwaters in some villages receded.

Thousands of volunteers filled sandbags as river levels remained elevated and an important dam on the river Paar between Munich and Nuremberg burst in three places.

But officials said it was too early to give the all-clear, with heavy rains expected to continue falling.

The company’s backers include Reid Hoffman, Richard Branson and the Chainsmokers

AI mortgage startup LoanSnap is facing an avalanche of lawsuits from creditors and has been evicted from its headquarters in Southern California, leaving employees worried about the company’s future, TechCrunch has learned.

LoanSnap, founded by serial entrepreneurs Karl Jacob (pictured above) and Allan Carroll, has raised around $100 million in funding since its 2017 seed round, $90 million of which was raised between 2021 and 2023, according to PitchBook. Investors include Richard Branson’s Virgin Group, the Chainsmokers’ Mantis Ventures, Baseline Ventures, and Reid Hoffman, LoanSnap says. The startup also took on around $12 million in debt, PitchBook estimates.

Despite the capital it raised, since December 2022, LoanSnap has been sued by at least seven creditors, including Wells Fargo, who collectively alleged the startup owes them more than $2 million. LoanSnap has also been fined by state and federal agencies and nearly lost its license to operate in Connecticut, according to legal documents obtained by TechCrunch.

While LoanSnap has not yet shut down, according to two employees, the vibe inside the company is harrowing as workers wait for clarity on the company’s future. Between December 2023 and at least January 2024, the company missed payroll and headcount has dwindled. At its high point, LoanSnap employed more than 100. After layoffs and attrition, that number has diminished to less than 50, according to a source.

“The current state is a result of terrible leadership, overspending on futility, and institutional investors falling for the charming facade that Karl can show,” one former employee, who asked to remain anonymous due to fear of retaliation, told TechCrunch. The person’s identity is known to TechCrunch.

Given the scope of the company’s problems beginning in 2021, the situation begs the question of why investors poured money into the company as late as 2023 — and what will happen next.

Reid Hoffman was not available for comment, and his office declined comment. (LoanSnap is not a Greylock Partners investment, the VC firm confirmed.) Virgin Group, Mantis VC, and Baseline Ventures also did not respond to requests for comment.

Jacob and Carroll, who are LoanSnap’s CEO and CTO, respectively, did not respond to multiple requests for comments over several days, via email and texts. LoanSnap’s press line deferred to the CEO in the matter and declined to offer comment.

In 2021, LoanSnap originated nearly 1,300 loans for a total value of almost $500 million, according to data filed with federal regulators — both records for the startup. By 2023, LoanSnap reported to the Consumer Financial Protection Bureau (CFPB) that it had originated only 122 loans for the year (though the data may not be final.)

Despite the record number of loans, trouble was already brewing in 2021. Legal documents show that in May 2021, the same month LoanSnap announced its $30 million Series B with investors like Hoffman, the U.S. Department of Housing and Urban Development Mortgagee Review Board entered into a settlement agreement with the company. While LoanSnap did not admit to wrongdoing, the agency alleged that it violated Federal Housing Administration (FHA) requirements for failing to notify the FHA of an operating loss that exceeded 20% of its fiscal 2019 quarter-end net worth. It agreed to pay a $25,000 fine.

Since 2021, at least three complaints have been filed against LoanSnap with the Better Business Bureau, and the company now has an F rating. Those complaints allege that the startup charged non-refundable fees and then failed to close on loans in a timely manner or failed to pay taxes from an escrow account. Additionally, in four complaints filed to the Consumer Financial Protection Bureau and reviewed by TechCrunch, consumers accused LoanSnap of selling a paid-in-full loan to another lender instead of properly closing it out, misleading consumers about mortgage approvals and shorting escrow accounts.

Between December 2022 and May 2024, at least seven creditors sued LoanSnap, and the company went through at least three CFOs, a source says. Near the end of 2022, Baseline Ventures’ Steve Anderson stepped down from the board, according to someone familiar with the matter.

Four of the lawsuits were from vendors claiming that the startup had fallen behind or completely stopped making contractual payments for services. LoanSnap has not yet filed a formal response with the courts for any of these suits, according to public records.

For instance, Wells Fargo filed a lawsuit in August 2023 for $431,000, alleging a loan it bought from LoanSnap violated the bank’s income-to-debt-ratio policies. Because LoanSnap defaulted on the lawsuit (meaning it failed to respond in a timely manner), the judge ordered LoanSnap to pay.

In mid-2023, LoanSnap was facing a California Department of Financial Protection and Innovation investigation stemming from a complaint filed against it, and the company was fending off threatened litigation from at least one investor, according to records viewed by TechCrunch. (A spokesperson for the California Department of Financial Protection said it “does not comment on investigations even to confirm or deny their existence.”)

Then, 2024 brought more legal troubles. In January, Connecticut’s Department of Banking alleged the company was partaking in “systemic unlicensed mortgage loan” activity by employing unlicensed people. One employee told TechCrunch that the company was eager to hire those without much mortgage experience, with the idea of training them so they could one day get licenses.

Connecticut also claimed that LoanSnap violated the Fair Credit Reporting Act, the SAFE Act, and the Fair Lending Act, among other state statutes, and threatened to revoke its license. Ultimately, LoanSnap paid a $75,000 fine without admitting fault and promised not to use unlicensed people for mortgage loan officer work in the state.

“It’s a really big deal for them to threaten that,” said Andrew Narod, a partner in the Banking and Financial Services Practice Group at the law firm Bradley. But Narod noted that the settlement wasn’t “particularly onerous,” adding, “Pay $75,000 and stop doing illegal things, which, candidly, really should have been the business model from the start.”

In February, LoanSnap was sued by its Costa Mesa landlord, who alleged the company stopped paying rent and owed nearly $405,000. When LoanSnap didn’t answer the suit, the judge ruled that it defaulted on the complaint, and the landlord was given the OK to evict LoanSnap in mid-May, according to court filings. (LoanSnap had a second office in San Francisco, though it is unclear if that office is still in use.)

In May, a new suit was filed. A tax company that loaned LoanSnap $5 million alleges that LoanSnap stopped making payments and owes more than $900,000.

Many of these lawsuits were filed in late 2023. But even before then, internal problems were clear: LoanSnap’s finances had seen trouble, according to the FHA settlement; it had gone through layoffs; complaints had been filed to the BBB and the CFPB; and a known Silicon VC had, internal sources say, resigned from the board.

Still, in July 2023, LoanSnap raised another $19 million in venture funding from new investor Forté Ventures, according to Pitchbook. (Forté Ventures did not respond to a request for comment.)

One employee attributes the company’s venture fundraising success to CEO Jacob.

Jacob has the kind of résumé that attracts Valley VCs, having founded and exited multiple startups since 1997, when he sold a company called Dimension X to Microsoft. His LoanSnap bio proudly says he’s “raised 23 rounds of financing” and “generated hundreds of millions of dollars in investor returns.” His co-founder Carroll has also had repeat successes. He’s a former Microsoft research engineer who launched three previous startups and sold two of them.

But many questions remain, such as where all the millions that LoanSnap raised went. The employees we spoke to don’t have answers. When times were good in 2021, and headcount was at its highest, Jacob engaged in expenditures like authorizing an expensive open-bar holiday party for employees in 2021 at a beachside resort. One year, he gifted employees with Meta Portals and hosted a party in Denver for the Web3 ETH event.

The company was also operating two offices, both in pricey rental areas. The rent in Costa Mesa (from which it was evicted) was around $55,000 a month, and the office in San Francisco charged at least $30,000 a month rent, according to court documents obtained by TechCrunch.

Employees were told that the multimillion-dollar Newport Beach town house where Jacob and Carroll stayed when visiting the Costa Mesa office was also owned by the company. LoanSnap hosted its 2022 holiday party there.

Despite all of the now-obvious problems, LoanSnap is still earning public accolades from investors, the media, and industry players.

In mid-May, Newsweek named LoanSnap among its list of America’s Best Online Lenders, and one of its VCs, True Ventures, applauded the startup on LinkedIn for the inclusion. That same month, LoanSnap and Visa announced that LoanSnap had joined Visa’s fintech program, which helps startups use its payment programs.

And just last month, LoanSnap announced it entered into Nvidia’s free Inception program, which gives benefits to AI startups. One former employee called these recent announcements odd, as the company appears to be trying to either pivot or move on as if nothing is wrong.

“It’s really not hard to find numerous lawsuits and complaints, some of them from governmental agencies, with a quick Google search,” the employee said, wondering how Nvidia and Visa let LoanSnap into the programs.

The Saysh x Ba&sh collaboration will launch on July 9, and come in two color variations, a brownish-red and vibrant green.

With the Olympics just two months away, the French women’s clothing brand Ba&sh is in the mood to move and has teamed with the women’s sneaker specialist Saysh on a limited-edition style called Saba.

The Saysh x Ba&sh collaboration will launch on July 9, and come in two colors, terracotta, a brownish-red similar to the color of clay tennis court, and vibrant green. The sneakers are priced at 195 pounds.

Saysh cofounder Allyson Felix is an 11-time Olympic medalist and a member of the International Olympic Committee.

Barbara Boccara and Sharon Krief, cofounders of Ba&sh, said their clothing brand is about “energy, confidence and joy,” which is why connecting with Saysh, and Felix, felt like a natural move.

“It’s been special to partner with such a standout woman who exemplifies those qualities on and off the track…and to bring Saysh to more Ba&sh women,” they said.

The sneakers combine “1990s influences and 1970s style in a design that’s made for the city,” according to Boccara and Krief.

They’re sold in a specially designed box with a matching pouch. The swirling infinity symbol appears on the sole, representing “both the universe of possibilities open to women and the osmosis between Saysh and Ba&sh.”

The sneakers feature the Saysh Eva sole, which is light, flexible and cushioned. The shoes‘ suede inserts are certified by the Leather Working Group (LWG Gold), which promotes a responsible leather manufacturing process.

The use of recycled mesh on the upper, and recycled polyester for the lining, is meant to encourage the reuse of materials and reduces the ecological footprint. “Born to move,” the slogan of the collaboration, appears on two pairs of socks in the Saba colours.

Felix cofounded Saysh with her brother Wes Felix to fill what she saw as a gap in the market for sneakers designed specifically for women’s feet. The siblings have built a lifestyle brand on their unique designs, and run their company with the aim of empowering female customers and employees alike.

As reported, Saysh has a Maternity Returns Policy to support women’s changing shoe sizes during pregnancy, and a customer community called Saysh+, which offers various perks, virtual events and run clubs.

“All that matters is that when we encounter challenges, we understand how to push through, learn from these tests and, when we can, use our voice to encourage each other to question the status quo and ourselves,” Felix said.

“And there’s no reason not to wear something that makes us feel and look good while we’re doing it,” she added.

The Saba Sneaker will be sold on ba-sh.com and in selected Ba&sh stores, stockists and department stores.

Ba&sh is sold in more than 70 countries, including in Europe, China and North America, and has more than 320 stores. Investors include L Catterton, Groupe Arnault and the French firm HLD. In 2022, the label achieved 310 million euros in revenue, up 22 percent on the previous year.

Japanese conglomerate to integrate Microsoft Cloud and GitHub Copilot into Lumada, Hitachi’s core digital, software and services business

Hitachi and Microsoft MSFT -0.39%decrease; red down pointing triangle announced a multibillion-dollar collaboration to accelerate the adoption of generative artificial intelligence, the latest in a series of partnerships and investments the two companies are undertaking.

As part of the three-year partnership, the Japanese conglomerate will integrate Microsoft products including Microsoft Cloud and GitHub Copilot into Lumada, Hitachi’s core digital, software and services business, according to a joint statement by the two companies.

Hitachi aims to hit $18.9 billion in revenue from its Lumada business in the current financial year that began in April. The business generated revenue of $15.0 billion in the last financial year.

Late last month, Hitachi announced a partnership with Google that would see the Japanese company establish a business unit focused on helping businesses solve industry problems with Google’s AI technology.

For its part, Microsoft has been pursuing billions of dollars in investments in Asia, especially in Southeast Asia, a fast-growing region of more than 670 million people where demand for data centers and cloud-computing businesses is rising.

Last month, the U.S. tech giant announced plans to invest $2.2 billion in cloud and AI infrastructure in Malaysia after disclosing similar plans in Indonesia and Thailand.

“We are entering a new era of AI with the promise to deliver transformative business outcomes across every role and industry,” said Microsoft Chief Executive Satya Nadella.

Hitachi also plans to train more than 50,000 generative AI professionals, enabling them to acquire advanced software-development skills using GitHub Copilot and Azure OpenAI Service, and use Azure OpenAI Service to enhance its customer service.

Microsoft’s cloud-computing business, Azure, has been expanding rapidly amid rising demand for AI computing. Last quarter, Azure’s cloud business grew 31% compared with the same period a year earlier, with 7 percentage points of the growth coming from its AI services, helping to fuel the company’s 17% top-line growth.

Hitachi plans to invest 300 billion yen, equivalent to $1.92 billion, on generative AI in fiscal 2024 to capture new growth opportunities, Hitachi Chief Executive Keiji Kojima said.

The two companies have been working on various projects, including the development of digital solutions for the manufacturing and logistics sectors, Kojima added.