Financially troubled startup helped power Trump campaign

GARANCE BURKE
·6-min read
FILE - In this Oct. 24, 2020, file photo, President Donald Trump speaks during a campaign rally in Circleville, Ohio. Trump’s 2020 reelection campaign was powered by a cell phone app that allowed staff to monitor the movements of his millions of supporters, and offered intimate access to their social networks. The app lets Trump’s team communicate directly with the 2.8 million people who downloaded it and if they gave permission, with their entire contact list as well. (AP Photo/Evan Vucci, File)

Digital Startup Trump Reelection

FILE - In this Oct. 24, 2020, file photo, President Donald Trump speaks during a campaign rally in Circleville, Ohio. Trump’s 2020 reelection campaign was powered by a cell phone app that allowed staff to monitor the movements of his millions of supporters, and offered intimate access to their social networks. The app lets Trump’s team communicate directly with the 2.8 million people who downloaded it and if they gave permission, with their entire contact list as well. (AP Photo/Evan Vucci, File)

SAN FRANCISCO (AP) — President Donald Trump’s 2020 reelection campaign was powered by a cellphone app that allowed staff to monitor the movements of his millions of supporters, and offered intimate access to their social networks.

While the campaign may be winding down, the data strategy is very much alive, and the digital details the app collected can be put to multiple other uses — to fundraise for the president’s future political ventures, stoke Trump’s base, or even build an audience for a new media empire.

The app lets Trump’s team communicate directly with the 2.8 million people who downloaded it — more than any other app in a U.S. presidential campaign — and if they gave permission, with their entire contact list as well.

Once installed, it can track their behavior on the app and in the physical world, push out headlines, fundraise, sell MAGA merchandise and sync with mass texting operations, according to the app’s privacy policy and user interface.

Yet the enterprise software company that built a tool to propel Trump’s mass movement is in financial distress and has received key support from the administration and the president’s campaign, according to interviews with former employees, financial filings and court documents.

Austin-based Phunware Inc., whose stock is trading for pennies, recently agreed to pay Uber $4.5 million as part of a settlement over claims of fraudulent advertising and earlier this year risked being delisted from the Nasdaq. In April, the company got a $2.9 million loan under the Coronavirus Aid, Relief and Economic Security Act as it was building the Trump campaign app.

Campaign watchdogs and former employees alike marvel at how a struggling startup known more for building apps for hospitals and a Manhattan-based astrologer became a juggernaut in Trump’s reelection bid, facilitating an ongoing data and fundraising effort that threw the company a financial lifeline.

While activity on the app slowed recently, the enriched data it gathered on Trump’s supporters, which can include everything from their contacts to their IP addresses to their locations, can serve many purposes going forward, said Adav Noti, a former Federal Election Commission attorney now with the nonpartisan Campaign Legal Center.

Congress and the FEC have not set rules governing how campaigns can use people’s personal data and or to whom the campaign can sell its lists, he added.

“You can definitely buy the data and the campaign can sell it to you, the trickier question is how much do you have to pay for it,” Noti said.

Phunware declined to respond to questions about the app, the company’s financial status, its internal culture and its relationship to the campaign.

“Phunware has absolutely no role in the constitutional processes tied to US elections at any level ... and also has no role in the content created or used by our customers specific to our mobile software or enterprise cloud platform for mobile,” CEO Alan Knitowski said in an email.

The campaign declined to answer questions about possible future uses for the supporter data it collected via digital platforms, including the Phunware app.

“The data is owned by the campaign and limited whatever hit their servers,” said a senior Trump campaign official who spoke on condition of anonymity to discuss campaign specifics.

As Phunware has hit challenging financial times, it has shed employees, clients and investors, 10 of whom agreed to speak with The Associated Press, some on condition of anonymity because they signed non-disclosure agreements or feared retaliation.

Phunware sued its client Uber in 2017, accusing the ride-sharing company of failing to pay its fees, court records show. But after Uber filed suit against Phunware, alleging the software company committed fraud by among other things, allowing ads for the ride-sharing app to show up on porn sites, former employees said the startup looked to diversify its revenue stream.

Karl Rove, President George W. Bush’s former advisor, told The Associated Press that he brokered a relationship between Phunware staff and Trump’s 2016 campaign digital director Brad Parscale.

“I thought it had lots of implications for politics so in a subsequent conversation I mentioned it to Brad Parscale,” Rove said. “He said ‘interesting’ and that was it, he never told me he had hired them.”

Knitowski said in an email that he built the relationship with the campaign.

“Phunware met the Trump Campaign through me directly after a 1:1 introduction from a Silicon Valley CEO who requested our consideration and participation in an RFP that also had Salesforce as a finalist,” Knitowski said.

By early 2019, after Phunware went public, former colleagues said Knitowski spoke of wanting to court the Trump campaign. In April, 15 percent of Phunware’s staff was laid off under “organizational restructuring and cost reductions,” per a Securities and Exchange Commission filing.

In August, there was something new to announce: work with American Made Media Consultants, “otherwise known as the ‘Trump-Pence 2020’ and ‘Keep America Great’ Campaign,” Knitowski said in an earnings call.

According to a document filed with Federal Communications Commission two months later, the company’s directors included campaign operations director Sean Dollman and campaign counsel Alex Cannon.

Phunware would later reveal more details about its work on the Trump app, which would include location-based tools and other features to help the campaign crowdsource new users. Plus, there would be a gamified loyalty system, where supporters could accumulate points to spend on signed MAGA hats or pose for a picture with Trump.

By September 2019, 18 percent of the remaining staff was laid off after client Fox Networks Group left, taking a large percentage of Phunware’s sales with them, according to filings.

In April, as coronavirus cases surged, Phunware got a $2.9 million loan from the U.S. Small Business Administration’s Paycheck Protection Program, a relief fund Congress created to help small businesses keep workers employed.

Phunware COO Randall Crowder denied political favoritism netted Phunware the loan in a recorded interview.

The next month, Nasdaq notified the company it could be delisted over its finances. To stay listed, firms must meet standards to reassure investors that since the initial public offering, they remain a credible company.

SEC records reveal that by July, American Made Media Consultants accounted for one-third of all Phunware’s sales, paying Phunware more than $1.6 million in the first half of 2020.

As the pandemic kept people home, Trump’s campaign used the app to acquire new users remotely. By mid-November the app hit 2.8 million downloads, according to online data provider Apptopia.

That could give the campaign hundreds of millions of phone numbers, enabling it to reach people whose digits were stored in their friends’ contact lists but didn’t consent to being contacted, Apptopia’s CEO Eliran Sapir estimated. A Carnegie Mellon University researcher, however, estimated the total would be near 27 million due to duplicate phone numbers.

In a Thursday SEC filing, Phunware suddenly stopped disclosing its top customers by name. But by matching the accounting figures to past filings, AP derived that American Made Media Consultants is Phunware’s largest customer, and paid Phunware $2.4 million over the first 9 months of 2020, accounting for nearly one-third of Phunware’s revenue.

Two former employees concurred. The app developer also disclosed sizable debt and expressed “substantial doubt about its ability to continue as a going concern.”

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Associated Press writer Bernard Condon and researcher Jennifer Farrar in New York contributed to this report.

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Follow Garance Burke at http://twitter.com/garanceburke. To contact AP’s investigative team, email investigative@ap.org.