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  • Flapping Airplanes on the future of AI: ‘We want to try really radically different things’ | TechCrunch

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    There’s been a bunch of exciting research-focused AI labs popping up in recent months, and Flapping Airplanes is one of the most interesting. Propelled by its young and curious founders, Flapping Airplanes is focused on finding less data-hungry ways to train AI. It’s a potential game-changer for the economics and capabilities of AI models — and with $180 million in seed funding, they’ll have plenty of runway to figure it out.

    Last week, I spoke with the lab’s three co-founders — brothers Ben and Asher Spector, and Aidan Smith — about why this is an exciting moment to start a new AI lab and why they keep coming back to ideas about the human brain.

    I want to start by asking, why now? Labs like OpenAI and DeepMind have spent so much on scaling their models. I’m sure the competition seems daunting. Why did this feel like a good moment to launch a foundation model company?

    Ben: There’s just so much to do. So, the advances that we’ve gotten over the last five to ten years have been spectacular. We love the tools. We use them every day. But the question is, is this the whole universe of things that needs to happen? And we thought about it very carefully and our answer was no, there’s a lot more to do. In our case, we thought that the data efficiency problem was sort of really the key thing to go look at. The current frontier models are trained on the sum totality of human knowledge, and humans can obviously make do with an awful lot less. So there’s a big gap there, and it’s worth understanding. 

    What we’re doing is really a concentrated bet on three things. It’s a bet that this data efficiency problem is the important thing to be doing. Like, this is really a direction that is new and different and you can make progress on it. It’s a bet that this will be very commercially valuable and that will make the world a better place if we can do it. And it’s also a bet that’s sort of the right kind of team to do it is a creative and even in some ways inexperienced team that can go look at these problems again from the ground up.

    Aidan: Yeah, absolutely. We don’t really see ourselves as competing with the other labs, because we think that we’re looking at just a very different set of problems. If you look at the human mind, it learns in an incredibly different way from transformers. And that’s not to say better, just very different. So we see these different trade offs. LLMs have an incredible ability to memorize, and draw on this great breadth of knowledge, but they can’t really pick up new skills very fast. It takes just rivers and rivers of data to adapt. And when you look inside the brain, you see that the algorithms that it uses are just fundamentally so different from gradient descent and some of the techniques that people use to train AI today. So that’s why we’re building a new guard of researchers to kind of address these problems and really think differently about the AI space.

    Asher: This question is just so scientifically interesting: why are the systems that we have built that are intelligent also so different from what humans do? Where does this difference come from? How can we use knowledge of that difference to make better systems? But at the same time, I also think it’s actually very commercially viable and very good for the world. Lots of regimes that are really important are also highly data constrained, like robotics or scientific discovery. Even in enterprise applications, a model that’s a million times more data efficient is probably a million times easier to put into the economy. So for us, it was very exciting to take a fresh perspective on these approaches, and think, if we really had a model that’s vastly more data efficient, what could we do with it?

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    This gets into my next question, which is sort of ties in also to the name, Flapping Airplanes. There’s this philosophical question in AI about how much we’re trying to recreate what humans do in their brain, versus creating some more abstract intelligence that takes a completely different path. Aidan is coming from Neuralink, which is all about the human brain. Do you see yourself as kind of pursuing a more neuromorphic view of AI? 

    Aidan: The way I look at the brain is as an existence proof. We see it as evidence that there are other algorithms out there. There’s not just one orthodoxy. And the brain has some crazy constraints. When you look at the underlying hardware, there’s some crazy stuff. It takes a millisecond to fire an action potential. In that time, your computer can do just so so many operations. And so realistically, there’s probably an approach that’s actually much better than the brain out there, and also very different than the transformer. So we’re very inspired by some of the things that the brain does, but we don’t see ourselves being tied down by it.

    Ben: Just to add on to that. it’s very much in our name: Flapping Airplanes. Think of the current systems as big, Boeing 787s. We’re not trying to build birds. That’s a step too far. We’re trying to build some kind of a flapping airplane. My perspective from computer systems is that the constraints of the brain and silicon are sufficiently different from each other that we should not expect these systems to end up looking the same. When the substrate is so different and you have genuinely very different trade-offs about the cost of compute, the cost of locality and moving data, you actually expect these systems to look a little bit different. But just because they will look somewhat different does not mean that we should not take inspiration from the brain and try to use the parts that we think are interesting to improve our own systems. 

    It does feel like there’s now more freedom for labs to focus on research, as opposed to, just developing products. It feels like a big difference for this generation of labs. You have some that are very research focused, and others that are sort of “research focused for now.” What does that conversation look like within flapping airplanes?

    Asher: I wish I could give you a timeline. I wish I could say, in three years, we’re going to have solved the research problem. This is how we’re going to commercialize. I can’t. We don’t know the answers. We’re looking for truth. That said, I do think we have commercial backgrounds. I spent a bunch of time developing technology for companies that made those companies a reasonable amount of money. Ben has incubated a bunch of startups that have commercial backgrounds, and we actually are excited to commercialize. We think it’s good for the world to take the value you’ve created and put it in the hands of people who can use it. So I don’t think we’re opposed to it. We just need to start by doing research, because if we start by signing big enterprise contracts, we’re going to get distracted, and we won’t do the research that’s valuable.

    Aidan: Yeah, we want to try really, really radically different things, and sometimes radically even things are just worse than the paradigm. We’re exploring a set of different trade offs. It’s our hope that they will be different in the long run. 

    Ben: Companies are at their best when they’re really focused on doing something well, right? Big companies can afford to do many, many different things at once. When you’re a startup, you really have to pick what is the most valuable thing you can do, and do that all the way. And we are creating the most value when we are all in on solving fundamental problems for the time being. 

    I’m actually optimistic that reasonably soon, we might have made enough progress that we can then go start to touch grass in the real world. And you learn a lot by getting feedback from the real world. The amazing thing about the world is, it teaches you things constantly, right? It’s this tremendous vat of truth that you get to look into whenever you want. I think the main thing that I think has been enabled by the recent change in the economics and financing of these structures is the ability to let companies really focus on what they’re good at for longer periods of time. I think that focus, the thing that I’m most excited about, that will let us do really differentiated work. 

    To spell out what I think you’re referring to: there’s so much excitement around and the opportunity for investors is so clear that they are willing to give $180 million in seed funding to a completely new company full of these very smart, but also very young people who didn’t just cash out of PayPal or anything. How was it engaging with that process? Did you know, going in, there is this appetite, or was it something you discovered, of like, actually, we can make this a bigger thing than we thought.

    Ben: I would say it was a mixture of the two. The market has been hot for many months at this point. So it was not a secret that no large rounds were starting to come together. But you never quite know how the fundraising environment will respond to your particular ideas about the world. This is, again, a place where you have to let the world give you feedback about what you’re doing. Even over the course of our fundraise, we learned a lot and actually changed our ideas. And we refined our opinions of the things we should be prioritizing, and what the right timelines were for commercialization.

    I think we were somewhat surprised by how well our message resonated, because it was something that was very clear to us, but you never know whether your ideas will turn out to be things that other people believe as well or if everyone else thinks you’re crazy. We have been extremely fortunate to have found a group of amazing investors who our message really resonated with and they said, “Yes, this is exactly what we’ve been looking for.” And that was amazing. It was, you know, surprising and wonderful.

    Aidan: Yeah, a thirst for the age of research has kind of been in the water for a little bit now. And more and more, we find ourselves positioned as the player to pursue the age of research and really try these radical ideas.

    At least for the scale-driven companies, there is this enormous cost of entry for foundation models. Just building a model at that scale is an incredibly compute-intensive thing. Research is a little bit in the middle, where presumably you are building foundation models, but if you’re doing it with less data and you’re not so scale-oriented, maybe you get a bit of a break. How much do you expect compute costs to be sort of limiting your runway.

    Ben: One of the advantages of doing deep, fundamental research is that, somewhat paradoxically, it is much cheaper to do really crazy, radical ideas than it is to do incremental work. Because when you do incremental work, in order to find out whether or not it does work, you have to go very far up the scaling ladder. Many interventions that look good at small scale do not actually persist at large scale. So as a result, it’s very expensive to do that kind of work. Whereas if you have some crazy new idea about some new architecture optimizer, it’s probably just gonna fail on the first rum, right? So you don’t have to run this up the ladder. It’s already broken. That’s great. 

    So, this doesn’t mean that scale is irrelevant for us. Scale is actually an important tool in the toolbox of all the things that you can do. Being able to scale up our ideas is certainly relevant to our company. So I wouldn’t frame us as the antithesis of scale, but I think it is a wonderful aspect of the kind of work we’re doing, that we can try many of our ideas at very small scale before we would even need to think about doing them at large scale.

    Asher: Yeah, you should be able to use all the internet. But you shouldn’t need to. We find it really, really perplexing that you need to use all the Internet to really get this human level intelligence.

    So, what becomes possible  if you’re able to train more efficiently on data, right? Presumably the model will be more powerful and intelligent. But do you have specific ideas about kind of where that goes? Are we looking at more out-of-distribution generalization, or are we looking at sort of models that get better at a particular task with less experience?

    Asher: So, first, we’re doing science, so I don’t know the answer, but I can give you three hypotheses. So my first hypothesis is that there’s a broad spectrum between just looking for statistical patterns and something that has really deep understanding. And I think the current models live somewhere on that spectrum. I don’t think they’re all the way towards deep understanding, but they’re also clearly not just doing statistical pattern matching. And it’s possible that as you train models on less data, you really force the model to have incredibly deep understandings of everything it’s seen. And as you do that, the model may become more intelligent in very interesting ways. It may know less facts, but get better at reasoning. So that’s one potential hypothesis. 

    Another hypothesis is similar to what you said, that at the moment, it’s very expensive, both operationally and also in pure monetary costs, to teach models new capabilities, because you need so much data to teach them those things. It’s possible that one output of what we’re doing is to get vastly more efficient at post training, so with only a couple of examples, you could really put a model into a new domain. 

    And then it’s also possible that this just unlocks new verticals for AI. There are certain types of robotics, for instance, where for whatever reason, we can’t quite get the type of capabilities that really makes it commercially viable. My opinion is that it’s a limited data problem, not a hardware problem. The fact that you can tele-operate the robots to do stuff is proof that that the hardware is sufficiently good. Butthere’s lots of domains like this, like scientific discovery. 

    Ben: One thing I’ll also double-click on is that when we think about the impact that AI can have on the world, one view you might have is that this is a deflationary technology. That is, the role of AI is to automate a bunch of jobs, and take that work and make it cheaper to do, so that you’re able to remove work from the economy and have it done by robots instead. And I’m sure that will happen. But this is not, to my mind, the most exciting vision of AI. The most exciting vision of AI is one where there’s all kinds of new science and technologies that we can construct that humans aren’t smart enough to come up with, but other systems can. 

    On this aspect, I think that first axis that Ascher was talking about around the spectrum between sort of true generalization versus memorization or interpolation of the data, I think that axis is extremely important to have the deep insights that will lead to these new advances in medicine and science. It is important that the models are very much on the creativity side of the spectrum. And so, part of why I’m very excited about the work that we’re doing is that I think even beyond the individual economic impacts, I’m also just genuinely very kind of mission-oriented around the question of, can we actually get AI to do stuff that, like, fundamentally humans couldn’t do before? And that’s more than just, “Let’s go fire a bunch of people from their jobs.”

    Absolutely. Does that put you in a particular camp on, like, the AGI conversation, the like out of distribution, generalization conversation.

    Asher: I really don’t exactly know what AGI means. It’s clear that capabilities are advancing very quickly. It’s clear that there’s tremendous amounts of economic value that’s being created. I don’t think we’re very close to God-in-a-box, in my opinion. I don’t think that within two months or even two years, there’s going to be a singularity where suddenly humans are completely obsolete. I basically agree with what Ben said at the beginning, which is, it’s a really big world. There’s a lot of work to do. There’s a lot of amazing work being done, and we’re excited to contribute

    Well, the idea about the brain and the neuromorphic part of it does feel relevant. You’re saying, really the relevant thing to compare LLMs to is the human brain, more than the Mechanical Turk or the deterministic computers that came before.

    Aidan: I’ll emphasize, the brain is not the ceiling, right? The brain, in many ways, is the floor. Frankly, I see no evidence that the brain is not a knowable system that follows physical laws. In fact, we know it’s under many constraints. And so we would expect to be able to create capabilities that are much, much more interesting and different and potentially better than the brain in the long run. And so we’re excited to contribute to that future, whether that’s AGI or otherwise.

    Asher: And I do think the brain is the relevant comparison, just because the brain helps us understand how big the space is. Like, it’s easy to see all the progress we’ve made and think, wow, we like, have the answer. We’re almost done. But if you look outward a little bit and try to have a bit more perspective, there’s a lot of stuff we don’t know. 

    Ben: We’re not trying to be better, per se. We’re trying to be different, right? That’s the key thing I really want to hammer on here. All of these systems will almost certainly have different trade offs of them. You’ll get an advantage somewhere, and it’ll cost you somewhere else. And it’s a big world out there. There are so many different domains that have so many different trade offs that having more system, and more fundamental technologies that can address these different domains is very likely to make the kind of AI diffuse more effectively and more rapidly through the world.

    One of the ways you’ve distinguished yourself, is in your hiring approach, getting people who are very, very young, in some cases, still in college or high school. What is it that clicks for you when you’re talking to someone and that makes you think, I want this person working with us on these research problems?

    Aidan: It’s when you talk to someone and they just dazzle you, they have so many new ideas and they think about things in a way that many established researchers just can’t because they haven’t been polluted by the context of thousands and thousands of papers. Really, the number one thing we look for is creativity. Our team is so exceptionally creative, and every day, I feel really lucky to get to go in and talk about really radical solutions to some of the big problems in AI with people and dream up a very different future.

    Ben:  Probably the number one signal that I’m personally looking for is just like, do they teach me something new when I spend time with them? If they teach me something new, the odds that they’re going to teach us something new about what we’re working on is also pretty good. When you’re doing research, those creative, new ideas are really the priority. 

    Part of my background was during my undergrad and PhD., I helped start this incubator called Prod that worked with a bunch of companies that turned out well. And I think one of the things that we saw from that was that young people can absolutely compete in the very highest echelons of industry. Frankly, a big part of the unlock is just realizing, yeah, I can go do this stuff. You can absolutely go contribute at the highest level. 

    Of course, we do recognize the value of experience. People who have worked on large scale systems are great, like, we’ve hired some of them, you know, we are excited to work with all sorts of folks. And I think our mission has resonated with the experienced folks as well. I just think that our key thing is that we want people who are not afraid to change the paradigm and can try to imagine a new system of how things might work.

    One of things I’ve been puzzling about is, how different do you think the resulting AI systems are going to be? It’s easy for me to imagine something like Claude Opus that just works 20% better and can do 20% more things. But if it’s just completely new, it’s hard to think about where that goes or what the end result looks like.

    Asher: I don’t know if you’ve ever had the privilege of talking to the GPT-4 base model, but it had a lot of really strange emerging capabilities. For example, you could take a snippet of an unwritten blog post of yours, and ask, who do you think wrote this, and it could identify it.

    There’s a lot of capabilities like this, where models are smart in ways we cannot fathom. And future models will be smarter in even stranger ways. I think we should expect the future to be really weird and the architectures to be even weirder. We’re looking for 1000x wins in data efficiency. We’re not trying to make incremental change. And so we should expect the same kind of unknowable, alien changes and capabilities at the limit.

    Ben: I broadly agree with that. I’m probably slightly more tempered in how these things will eventually become experienced by the world, just as the GPT-4 base model was tempered by OpenAI. You want to put things in forms where you’re not staring into the abyss as a consumer. I think that’s important. But I broadly agree that our research agenda is about building capabilities that really are quite fundamentally different from what can be done right now.

    Fantastic! Are there ways people can engage with flapping airplanes? Is it too early for that? Or they should just stay tuned for when the research and the models come out well.

    Asher: So, we have Hi@flappingairplanes.com. If you just want to say hi, We also have disagree@flappingairplanes.com if you want to disagree with us. We’ve actually had some really cool conversations where people, like, send us very long essays about why they think it’s impossible to do what we’re doing. And we’re happy to engage with it. 

    Ben: But they haven’t convinced us yet. No one has convinced us yet.

    Asher: The second thing is, you know, we are, we are looking for exceptional people who are trying to change the field and change the world. So if you’re interested, you should reach out.

    Ben: And if you have another unorthodox background, it’s okay. You don’t need two PhDs. We really are looking for folks who think differently.

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    Russell Brandom

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  • Why Deloitte is betting big on AI despite a $10M refund | TechCrunch

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    AI companies are making their much-anticipated enterprise plays, but the results are wildly inconsistent. Just this week, Deloitte announced it’s rolling out Anthropic’s Claude to all 500,000 employees. On the very same day, the Australian government forced Deloitte to refund a contract because their AI-generated report was riddled with fake citations. It’s a perfect snapshot of where we are: companies racing to adopt AI tools before they’ve figured out how to use them responsibly. 

    On this episode of Equity, Kirsten Korosec, Anthony Ha, and Sean O’Kane dig into the messy reality of AI in the workplace, plus funding news and regulatory drama across tech and transportation. 

    Listen to the full episode to hear more news from the week, including: 

    • Zendesk’s claim that its new AI agents can handle 80% of customer service tickets autonomously, and what happens in the other 20% 

    Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday.  

    Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. 

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    Theresa Loconsolo

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  • Startups and the U.S. government: It’s getting complicated | TechCrunch

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    The tie between startups and the U.S. government have strengthened in recent years, a shift buoyed by an interest in using AI, automation, space, robotics, and climate tech for defense. And while that has provided another welcome path to capital, the relationship is getting complicated.

    A growing share of startups have the U.S. government as customers, or are aiming for permits and defense-related contracts. When the government is operational, that connection can provide a needed boost and revenue to startups. But when the government ceases to function, as it did starting October 1, those close ties can stifle or even halt progress for startups.

    This week on Equity, Anthony Ha, Max Zeff, and I (Kirsten Korosec) talk about how a prolonged U.S. government shutdown poses more risk for startups than in the past — not to mention put a damper on an active IPO season. The three of us dug into a few other topics too, including the how AI companies are trying to monetize and the U.S. government’s latest push to take ownership stakes in the tech and industrial sectors.

    “This also feels like a reflection of how the startup landscape has changed in say the last decade and especially over the last few years,” Ha said during the Equity podcast, adding the focus was on consumer internet startups for a long time. “Obviously there’s a lot more going on in defense tech, a lot more in deep tech where you maybe need various kinds of regulatory approvals,” he continued. “And so, it feels like much broader swaths of the startup landscape now depend on the government in various ways, in ways that wasn’t necessarily true 10 years ago.”

    But it’s not just startups. The Trump Administration has also continued to extend its reach, and ownership, into the tech industry, too.

    The Trump Administration has renegotiated yet another federal loan — it’s third in recent months followed by one with Intel and rare earth miner MP Materials — and taken an equity stake as part of the newly hashed out deal.

    The U.S. government took a 5% stake in Canadian miner Lithium Americas and another a 5% ownership in a Lithium Americas-GM joint venture to mine lithium in Nevada. The equity stakes will be acquired through no-cost warrants, which are financial instruments that give the government the right to purchase shares at a set price. The new terms came out of a renegotiation with the DOE’s Loan Programs Office of a $2.26 billion loan that was awarded to Lithium Americas under the Biden Administration.

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    Watch the full episode to hear more about the government’s relationship with startups and tech companies as well as the entertainment industry’s reaction to AI-generated actress Tilly Norwood, and an eye-popping seed round for Periodic Labs.

    Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod.

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    Kirsten Korosec

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  • What’s behind the massive AI data center headlines? | TechCrunch

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    Silicon Valley flooded the news this week with headlines about wild AI infrastructure investments.

    Nvidia said it would invest up to $100 billion in OpenAI. Then OpenAI said it would build out five more Stargate AI data centers with Oracle and SoftBank, adding gigawatts of new capacity online in the coming years. And it was later revealed that Oracle sold $18 billion in bonds to pay for these data centers.

    On their own, each deal is dizzying in scale. But in aggregate, we see how Silicon Valley is moving heaven and earth to give OpenAI enough power to train and serve future versions of ChatGPT.

    This week on Equity, Anthony Ha and I (Max Zeff) go beyond the headlines to break down what’s really going on in these AI infrastructure deals.

    Rather conveniently, OpenAI also gave the world a glimpse this week of a power-intensive feature it could serve more broadly if it had access to more AI data centers.

    The company launched Pulse — a new feature in ChatGPT that works overnight to deliver personalized morning briefings for users. The experience feels similar to a news app or a social feed — something you check first thing in the morning — but doesn’t have posts from other users or ads (yet).

    Pulse is part of a new class of OpenAI products that work independently, even when users aren’t in the ChatGPT app. The company would like to deliver a lot more of these features and roll them out to free users, but they’re limited by the number of computer servers available to them. OpenAI said it can only offer Pulse to its $200-a-month Pro subscribers right now due to capacity constraints.

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    The real question is whether features like Pulse are worth the hundreds of billions of dollars being invested in AI data centers to support OpenAI. The feature looks cool and all, but that’s a tall order.

    Watch the full episode to hear more about the massive AI infrastructure investments reshaping Silicon Valley, TikTok’s ownership saga, and the policy changes affecting tech’s biggest players.

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    Maxwell Zeff

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  • Hugging Face’s new robot is the Seinfeld of AI devices

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    Hugging Face’s new programmable Reachy Mini bots launched this week. The AI robots are open source, Raspberry Pi-powered, and come with cartoonish antennae and big googly eyes. They don’t do much out of the box. And that’s kind of the point.

    Today, on TechCrunch’s Equity podcast, hosts Kirsten Korosec, Max Zeff, and Anthony Ha dig into the launch of Reachy Mini, which pulled in a surprising $500,000 in sales in its first 24 hours. As open source companies like Hugging Face explore physical products, Kirsten and Max agree that Reachy Mini might be the Seinfeld of AI hardware: the bots might do nothing in particular, but they’re still captivating. 

    Listen to the full episode to hear more news from the week, including:

    Equity will be back next week, so stay tuned!

    Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday. 

    Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. 

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    Kirsten Korosec, Maxwell Zeff, Anthony Ha, Theresa Loconsolo

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  • Could Congress actually pass a data privacy law? | TechCrunch

    Could Congress actually pass a data privacy law? | TechCrunch

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    Hello, and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. This is our Monday show, where we dig into the weekend and take a peek at the week that is to come.

    Now that we are finally past Y Combinator’s demo day — though our Friday show is worth listening if you haven’t had a chance yet — we can dive into the latest news. So, this morning on Equity Monday we got into the chance that the United States might pass a real data privacy law. There’s movement to report, but we’re still very, very far from anything becoming law.

    Elsewhere, the U.S. and TSMC have a new deal, there’s gaming news to consider (and a venture tie-in), and Spotify’s latest AI plans, which I am sure will delight some and annoy others. Hit play, and let’s talk about the news!

    Oh, and on the crypto front, I forgot to mention that trading volume of digital tokens seems to have partially arrested its free fall, which should help some exchanges breath a bit more easily.

    Equity is TechCrunch’s flagship podcast and posts every Monday, Wednesday and Friday, and you can subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

    You also can follow Equity on X and Threads, at @EquityPod.

    For the full interview transcript, for those who prefer reading over listening, read on, or check out our full archive of episodes over at Simplecast.

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    Alex Wilhelm

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  • Musk’s Grok goes open-source and Reddit updates its IPO filing | TechCrunch

    Musk’s Grok goes open-source and Reddit updates its IPO filing | TechCrunch

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    Listen here or wherever you get your podcasts.

    Hello, and welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

    This is our Monday show, in which we take a look back at the weekend and what’s ahead in the week. Over the weekend, we dropped an interview with Roger Lee that is well worth your time, and here’s our take on Reddit’s IPO financials.

    Here’s what we got into today:

    For episode transcripts and more, head to Equity’s Simplecast website.

    Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more!

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    Theresa Loconsolo

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  • How many startups shut down last year compared to the year before? A lot. | TechCrunch

    How many startups shut down last year compared to the year before? A lot. | TechCrunch

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    Listen here or wherever you get your podcasts.


    Hello and welcome back to
    Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

    This is our interview show, where we sit down with a guest, think about their work, and unpack the rest. This week, Mary Ann interviewed Roger Lee, an entrepreneur who’s spent the better part of a decade building tools for employees and employers alike. Lee is an angel investor as well the creator of Layoffs.FYI and co-founder of Comprehensive and Human Interest.

    Roger joined us on the show last year in the wake of 2022’s tech layoffs, but this week we’re focusing on the business of shutting down and why investors are lining up to back startups in the space, including Roger.

    We also talked about:

    • Just how many more companies shut down in 2023 compared to 2022 (spoiler alert, it was a lot!)
    • How many more layoffs we saw last year compared to years prior
    • The types of companies winding down and laying off
    • How his work is tied to all of it and the role of AI

    Equity will be back on Monday for our weekly kick-off show, but don’t forget to keep up with us in the meantime on X and Threads @EquityPod.

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    Theresa Loconsolo

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  • OpenAI fires back at Musk, and Monzo raises a megaround | TechCrunch

    OpenAI fires back at Musk, and Monzo raises a megaround | TechCrunch

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    Listen here or wherever you get your podcasts.

    Hello, and welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

    This is our Wednesday show, focused on startup and venture capital news that matters. If you are a founder or an investor, this one is for you!

    Here’s the day’s rundown:

    • OpenAI fires back at Musk: In the wake of a lawsuit from former backer Elon Musk, OpenAI is bringing receipts and an argument that Musk wanted to run the company’s for-profit arm. Hard to argue against something that you wanted to run, yeah?
    • Monzo raises megaround: Monzo’s latest round is proof that the worst of the fintech slump is behind us.
    • All eyes on Ema: With $25 million and a launch from stealth, Ema’s work to bring AI to the enterprise is notable. But in such a crowded market, are many startups aiming too high on the stack?
    • Accenture buys Udacity: The former unicorn’s final resting place is not what it had dreamed of before, but this deal does bring welcome liquidity to at least one venture-backed startup.
    • A climate boost? An upcoming regulatory choice could unlock a massive wave of demand for carbon-tracking startups.
    • And the latest from OpenView: The Information reports that OpenView is returning most of its latest fund to backers. A weird and slightly sad final chapter for the firm.

    For episode transcripts and more, head to Equity’s Simplecast website.

    Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more!

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    Alex Wilhelm

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  • Foundry is shutting down in slow motion | TechCrunch

    Foundry is shutting down in slow motion | TechCrunch

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    For episode transcripts and more, head to Equity’s Simplecast website.

    Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more!

    Transcript

    A special thanks to Ram Iyer for his help tidying up the original machine transcript.

    Alex Wilhelm: Hello, and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. Today is February 16, 2024. My name is Alex, and I’m joined today by two of my long-running work besties. In one corner, we have senior TechCrunch reporter on the fintech beat, Mary Ann!

    Mary Ann Azevedo: Hi, Alex. How are you?

    Alex: I had really good doughnuts today. So it’s been a pretty good day overall.

    Mary Ann: I’m jealous.

    Alex: Well, my stomach does not agree, because I need to go for a run. But we also have Karyne Levy with us! Hey, how are you?

    Karyne Levy: I’m doing very well. Thanks for having me on the show again.

    Alex: Oh my gosh, an absolute pleasure. This is just like all of our various meetings we’ve had over the last couple of years together, just now in a live, recorded format. So nothing bad will happen whatsoever.

    The good news is we have the right people today for this show. On the pod today, the deals of the week are Rasa, Ultraverse, and Hippo Harvest. A little bit of blockchain in there, a little bit of robots, even some fintech. It’s going to be great.

    So for the first theme, we are discussing venture capital’s transitional moment, and why this year is going to look very different from what we have seen in years before. And then we’re going to close off with what YC wants to see from startups today.

    Mary Ann, kick it off with Rasa, which just put together a very nice Series C.

    Mary Ann: So I wrote about Rasa this week. As you all know, I generally cover fintech, but with this one, there’s some fintech involved, because this is a conversational GenAI company that serves financial services companies. And it was interesting to me because, first of all, it’s been around since 2016. They’ve been doing this for a while. The startup actually started out as an open source platform for developers to build chatbots, voice apps and other services that would employ conversational AI.

    Then a few years ago, they decided to shift toward the enterprise, which seems like a very smart move for the company. They hired a former Oracle executive, Melissa Gordon, as CEO, and now they’re counting two of the largest banks in the U.S. as customers — two of the world’s three top banks, American Express and Deutsche Telekom. So their strategy seems to be paying off. They said their ARR doubled last year.

    And now what they’re doing is, they’ve developed infrastructure to give developers at these large enterprises the ability to build what they call robust, generative conversational AI assistants that are more human-like and have more personal and meaningful interactions with users.

    Alex: So just to kind of boil that down into idiot terms for myself: Essentially, in the world of financial services, a big chunk of the economy, there’s a lot of conversations. And so what Rasa is doing is building tailored AI chat tech to help companies in that particular niche better interface with customers, right?

    Mary Ann: So that when the customer is having the interaction with the bot, you know what it’s like — you can usually tell right away, this is a bot, right? But sometimes you actually kind of doubt it, because the bot’s talking to you in a way that feels more human-like, and that’s what Rasa’s goal is: to make it feel really almost human-like. And Rasa, again, it’s not building the chatbots directly. It’s giving these developers at these companies the infrastructure to do it themselves and to kind of more personalize and customize the chat so that they actually have a way to vet potential answers beforehand, things like that.

    So something that their chatbot can do is if you ask it to transfer money — not their chatbot, but a chatbot their technology would help develop. You could transfer money, check balances, and even reset a router in someone’s house if they’re having an internet problem. Things like that.

    Alex: So, Mary Ann, when I saw this, I had two main thoughts: One, it seems more tailored AI work on a vertical basis makes a lot of sense given that each industry is different. [And] the second thing was — haven’t we just talked about this a little bit with Bret Taylor, former co-CEO of Salesforce, [now at Sierra]?

    Mary Ann: So I asked Rasa about that. And what the CTO told me was that it’s different, because they said Sierra is more of an agent, whereas what Rasa is doing is not building an agent. It’s more of an LLM- powered chatbot.

    Alex: So this is when it gets a little dicey for me, because you said that the Rasa technology will allow them to create things that lets people do things like transfer money, reset their router, okay? Isn’t that kind of the same pitch that Sierra is making? That these AI agents will help take actions for the end user?

    Mary Ann: I think that the end result is the same, but the way they get there is different. That’s what he’s saying. But one thing they do have in common is they both claim to be addressing issues like hallucinations, where large language models sometimes make up an answer when it lacks the information to answer accurately. So that is something else they have in common.

    Karyne: Yeah, that’s what I was going to say. Imagine asking it to transfer money and it’s hallucinating how much money you have or where to transfer it. I don’t know how much I trust it yet, but at the same time, I also wonder how is this any different than the options that they give you right now? So if you’re using a chatbot, and it’s just instead of naturally talking to it, it’s like, “Here are three options. Click this button to transfer the money. I wonder why this is any faster or easier than just selecting it yourself rather than having a chatbot do it?

    Mary Ann: I haven’t used it. So I’m not going to be able to speak firsthand, but apparently they claim that . . . the developers are able to customize [the interactions] a lot more . . . accurately to what an actual person within the company would say. So that again, these are all their claims. Two quick asides that I have to point out before I forget. Two things that I also found interesting about this company: One, PayPal Ventures was an investor. Did I mention that they just raised a $30 million Series C? I don’t think I mentioned that.

    Alex: I teed you up with my intro by not saying the dollar amount, like, “There was a Series C,” and then you’re like “AI agents.” So I thought we were gonna go backwards.

    Mary Ann: Yeah, I forgot to mention that they raised $30 million in a Series C round of funding. That was co-led by Stepstone Group and PayPal Ventures, with participation from existing backers, including Andreessen, Accel and Basis Set Ventures.

    They said their valuation is up, of course. I don’t know what it is, because they wouldn’t say and PitchBook didn’t say, but it was PayPal Ventures’ first AI investment. I thought that was notable. I was surprised that it was its first — I would have thought that they had invested in something else that was AI-related prior. And another thing that’s totally unrelated to AI: I really love the story of the CEO, who was a former pole vaulter who used Title IX to compete with men before women could compete in the sport. I just love that.

    Alex: Well, that’s awesome. Also, pole vaulting is terrifying, because you take a large stick, and then you fling your body into the air, and then you go, “Wee, gravity!” How is that a game? Or sport? It’s cool. I mean, it’s awesome. I can’t do it. I’m not knocking it at all. It just feels kind of like a sport that we invented before we had cameras and balls to kick around, like, “Hey, I’ve got a stick. I’m gonna go over that tree.” Skilled but scary, says Theresa, our producer. I agree with that.

    Mary Ann: Right? Anyway, so there’s a lot of different things related to this company. Part of the problem, I think, is we’re seeing so many startups using AI, claiming they are AI-powered, building AI stuff. It is getting harder and harder to differentiate them and tell them apart, so I can understand why you would have these kinds of questions.

    Alex: We need better definitions for AI agents versus conversational AI bots. And I wonder if there are these distinctions without major differences, or if there are big differences and we’re simply missing the point. I think, probably in six months, we’ll all know the answer to that. But right now, it still feels a bit nascent. Not a fad, though, I don’t think this AI business [is a fad]. Everyone wants to save money on customer support costs, so expect more of this. But a place where there might be a fad, Karyne, is apparently the world of AI and crypto.

    Karyne: Yeah, so just this week, there was a company called Ultiverse. It’s based in Singapore, and they raised $4 million at a $150 million valuation led by IDG Capital, which has invested in other Chinese gaming brands, like Tencent, and Xiaomi, as well as crypto upstarts like Coinbase and Circle. And what Ultiverse does is it blends AI and crypto gaming, or blockchain gaming. And so I think the fad is the crypto gaming components, but maybe also the AI component. So it’s an AI-powered platform for crypto game production and publishing. So they publish their own games, but then they can have other companies build games on their platform. And so they’re using LLMs that already exist, like GPT-4, Llama and Stable Diffusion to train in-game, nonplayable characters, which I think is maybe the best use case for AI that I have heard of within the gaming community yet. And I will say that I’m a gamer, but not these types of games. So I’m not quite sure about blockchain gaming as a whole.

    But a bunch of people are playing this. They have a mobile cricket game that has about 200,000 Unique Active wallet addresses across all of their games. Right now, the monthly active users are about 830,000 people. Most of the people who are playing the cricket game are non-crypto users. So the game uses something called account abstraction, which means that even people who aren’t spun up on crypto-related things can play and then get paid out. But I think the main component here is the AI features that they’re trying to help introduce and trying to get others to use on their platform. (laughs) Tell me more.

    Alex: I’m a little skeptical of parts of this. That’s not to be rude because I do think that trying to bridge different nascent technologies or rapidly emerging technologies is a cool thing that could yield at the intersection of them — in this case, AI and crypto — something special. I also agree that the use of modern AI tools like LLMs inside of video games is super awesome, because then you can have more than three dialogue options. Of course, there’s voice acting and stuff to be considered there, but it’s possible to do cool things, especially with text. Huge fan. And crypto gaming to me — people like to speculate; they like to trade, like to invest. Okay, cool. It’s just when you smush them together, I get a little weird.

    So I was on the Ultiverse website and I was poking through their material on Terminus, which is “a decentralized virtual Metaverse platform that’s built on both the BNB chain,” so Binance’s chain, “and Unreal Engine 5.” And it just feels like a MMORPG-ish thing with some crypto crap slugged onto it. I just don’t want an NFC gallery in my game. I want to be left alone. And so that’s what I kind of struggle with. Maybe I’m just an old man shouting at a cloud. But that’s my advice.

    Mary Ann: I mean, I’ll be honest. I’m not super well-versed on gaming, or even crypto to be honest, even though I’m the fintech reporter. So it’s hard for me to visualize all of this and try to understand it. But my first thought is, it feels kind of gimmicky. And that could just be me talking out of my you know what. But in the company’s defense is that they use account abstraction, so that even if you’re not well-versed in crypto or have crypto knowledge, you can still play and it could still be fun. I just don’t know how many other games out there might be like this. I mean, are there other AI-powered games? Or you know, is this just the beginning of a trend, or what? I don’t know. Are we going to see more of this?

    Alex: People hope it’s a trend. People want it to be a trend, because they think crypto is the future. And so, to me, there’s a religious viewpoint here that, like, if you believe blockchains are the future, then you need to bring AI to them or vice versa, because they’re both the future. So the future has to come together.

    Karyne: Yeah, I think one of the most famous, maybe infamous, examples of a blockchain game and a crypto game gone wrong was the Axie Infinity debacle, where people were just scammed out of money and had to farm for coins or whatever was going on there. And so the implication of when you think of a blockchain game, you’re like, “Oh, great. It’s a scam.” I think this is based on an article that was written last month by one of Ethereum’s co-founders that is called “AI + Crypto.” And his points were that AI could really be used in crypto gaming in four different ways — with non-playable characters, you could use AI to judge the results of a game, or their various other applications. And so here is one way that they’re doing it, and in this case, they’re using AI to really speed up the production of the game. And it just happens to be a blockchain game on top of it.

    Alex: There are so many ways to approach gaming as a model. There are companies that produce free-to-play games that have in-app monetization. Even some new games like Stormgate, an RTS [real-time strategy], is approaching it that way. Very cool. There’s MMORPGs [massive multiplayer online role-playing games] that have subscription-based economics. There’s indie publishers that sell games for a discrete price and then also upsell you on the soundtrack. Then there’s the Paradox model, in which you make a game and then add DLCs [downloadable content] to expand the content over time. All of these models work for different types of titles, and I can see a place where AI fits into, essentially, all of them in time. Crypto gaming seems to always have an NFT gallery and some speculative currency, and people trying to grind out extra money.

    Karyne: Yes.

    Alex: And until blockchain brings something that isn’t that, I don’t care about it. When blockchain makes my games that exist already better; when it makes a better grand strategy game, a better city management game, a better RPG, then I’m here for it. But I don’t want fucking NFTs.

    Mary Ann: Yeah, I’m having flashbacks to like two years ago because you know how I feel about NFTs.

    Alex: Since we’re here now, I’m going to talk more about this. So, on the Ultiverse website, there’s this little thing about “Are you ready to meet your meta GF or meta BFF?” And it was this two-week long moonlight NFT mint, so I went on OpenSea and I looked it up. And it’s just like one woman’s head with different characteristics attached to her, and some of them are rare. I don’t know, is this what we’ve managed to accomplish in all these years of crypto? It just feels a little bit modest compared to the progress we’re seeing elsewhere in the world of technology.

    And that brings me to robots! Everyone’s favorite segment. My deal of the week is Hippo Harvest. They just raised a $21 million Series B. Tim De Chant had this for us as a TechCrunch exclusive. The company raised the money from Standard Investments, Congress Ventures, Amazon Climate Pledge Fund, Hawthorne Food Ventures, and Energy Impact Partners. The company is now worth $145 million, and it’s going to use small robots to run indoor farms, and it thinks it can do this much more efficiently — cut back on water usage, fertilizer usage. You know, I think we’ve all become accustomed to the idea of warehouses using cute little ’bots to zip around and move things. Why not use those same now-commoditized robots to grow lettuce and other goods? So I think this is awesome. But, Mary Ann, you are our skeptic-in-chief, so I want to know: What do you think?

    Mary Ann: I agree, I think it’s cool. Really, really cool, actually. They said that they can grow the greens using up to 92% less water — that’s huge! Thirty-five percent less fertilizer and no pesticides! So if it works, why not? This is great! So they want to stick with greenhouses rather than vertical farms. I guess, the angle of this is, it’s more of a robot startup really than just indoor farming. This sector has struggled. We’ve seen a few players in this space for bankruptcy — AppHarvest, Fifth Season. Iron Ox had some layoffs, and Bowery Farming, which was booming a few years ago, also had some layoffs and valuation cuts. But this feels like it’s a little different. It has real potential, from my humble perspective.

    Karyne: I have a question, though: Is this going to drive up the costs of, let’s say, lettuce? Because aren’t robots expensive to use?

    Alex: Well, commoditized robots are less so. So if you’re Amazon, and you’re gonna have — I’m gonna make up a number here — 1,000 warehouses across the United States [whispers, “That’s not the right number”]. You’re going to have a bunch of robots inside those warehouses. And when you start thinking about robots in the hundreds of thousands or millions of units, the costs are going to come down quite a lot. You’re going to figure out a way to build them.

    And so the idea here is take that commoditized tech and then apply it to the struggling area of indoor or vertical farming. And so the to your point, Karyne, is not only can those units be cheap enough to make this work when you purchase them, but also then to run and maintain them. And that’s going to be the gambit. But on the price point, here’s my pitch to you: Karyne, you’re at the store and you’re going to make your beautiful child a lovely salad for dinner because he’s a growing boy and needs to eat greens. And you’re staring down three lettuce options. The cheap version, which has no marks about where it was grown, how it was grown, etc. Then there’s an organic-ish version — you know, the lettuce was patted on the head and sung songs and so forth. And then there’s a third option: This was grown indoors; it saved water. If you buy this lettuce, you’re helping the planet. How much more would you pay for option three and option two?

    Karyne: Well, I’m from the Bay Area, so you know I’m going to go for the most woo lettuce that exists on the shelf. So I will go for the one that did. And being in California, we’re one drought away from being cut off from the rest of the country. I get it. And that makes sense. And I would pay a little bit more for that, I suppose. But with food scarcity, urban farming is trying to become a thing. I’m here for it.

    Alex: I mean, one thing I’d argue is that when we talk about food scarcity, and people being priced out of the standard goods of life, one thing you could also say, and this is not a positive, but maybe food is actually too cheap in terms of its impact on the planet, and we’re just pushing some cost to the future and not dealing with the now because just economically, it’s [easier] to do it this way. Hippo Harvest, I hope it does really well. I love this. I’ve always thought that urban farming makes a lot of sense — shipping stuff across rail lines is pretty efficient, but if you put it into a truck, it’s not. So I’m really into this. And also I don’t like farming. So let the robots do it. That’s just hard, not into it.

    Now, when we come back, my friends, we’re talking about some big ventures’ comings and goings. Mary Ann has all you need to know. We’ll be right back after this short break.

    [AD]

    Mary Ann: So this week, I wrote about the Foundry Group. This is a venture capital firm that’s been around for 18 years and done a lot of investing. Apparently it has a very impressive exit record: Some companies in their portfolio are Fitbit, Zynga, and AvidXchange. And the big news was they’ve decided to wind down operations and not raise any more funds.

    So this was a little unexpected to most of us, because the firm just announced a $500 million fund last May. Now, after I published the story, I had a lot of people cry out on Twitter that this was not unexpected. Everybody knew that this was the plan all along. Maybe you knew it if you were another venture capitalist and had talked to Seth Levine, for example, one of the co-founders and partners, and heard him tell you. Because apparently he had talked about his plans, which started to brew in his mind sometime in 2023, that he may decide not to invest anymore, and that turned into the fund deciding to wind down.

    But anyway, most of us did not know about this, so it was generally unexpected. And they wouldn’t talk to me directly about the decision, but I did get pointed to some blogs, and apparently they said that, yes, this is unusual, and VC firms rarely make decisions like this. But it’s something that they planned to do when they started back in 2006 — they decided not to build a legacy or generational firm; they wanted to focus just on the work of investing. And then they . . . kept saying, “Is this going to be our last one? Is this going to be our last one?” And they decided not to raise another one. So that’s basically it.

    But to be clear, when we say they’re shutting down or winding down, that doesn’t mean their doors are closed or they’re not doing anything. That’s not the case at all here unlike OpenView, which I think was in December or January — I lose track now — it did actually shut down and lay off partners. Foundry still has 33% to 40% left out of its $500 million fund to invest. So it’s planning to still continue to lead Series A and B financings out of that fund. The company says it will also continue to work with businesses in which it has investments for years to come.

    Alex: And that’s the critical thing. There’s two ways to shutter a business. One is to just close your doors, lock it and run away, and the other is to wind down new operations and then support what you have already in the market. For VCs, the product is investment, so they’re shutting down kind of in slow motion. This will slowly degrade in terms of total activity until it reaches zero at a point down the road.

    But here’s my thing. Mary Ann, I watched you get dragged on Twitter for this. And two things piss me off. Part of our job is to go into the weeds and pull things up so people can see them who didn’t already know that they were there. So simply because you, an insider in the VC world whose friends are VCs and founders, knew this does not mean that the TechCrunch audience did. A lot of people read TechCrunch, and there’s not that many VCs out there. And then also you didn’t get it wrong. I didn’t like it.

    Mary Ann: Well, thank you for defending me, Alex. I was pretty shocked by the number of people who got really upset by the wording of the story, I guess. They actually, I feel, misinterpreted the intentions in my reporting. It was a very fact-based article. I had no malicious intentions, no hidden agenda. But I will say I was touched and impressed by the number of people who rushed to defend Foundry. The firm clearly has a lot of supporters and fans and portfolio companies, other VCs, or general observers. And to me that says a lot about the firm and the character of the partners. So I was very impressed by that. Yes, I was actually pretty touched by that, to be honest with you.

    Alex: There is a way, though, to show respect without crapping on someone else. I’m just saying.

    Mary Ann: Yeah, I appreciate that. Thank you. Yeah, you have to have a thick skin as a reporter. I know my intentions; I know what I set out to do when I wrote the piece. So I can take comfort in that. I will also say that while there were a number of people kind of declaring this to be a negative piece, I didn’t hear any negative feedback at all from the firm itself. I would like to point that out.

    Karyne: So . . . if the firm was happy with the reporting, then who cares about the haters? You know, you got it correct, and they’re okay with it, then I think that means it’s a really good, solid story.

    Alex: To take it one step further: If the firm is happy with the reporting, we should have been meaner?

    Mary Ann: Well, I don’t know if “happy” would be the word, but they didn’t refute any of it. And they seemed comfortable with the language used. But anyway, overall, it was a big deal in the venture world. This is a firm that’s been around for a long time — almost two decades — had made over 200 investments, and had a really great reputation [and] it seems like . . . a lot of exits. So they were prolific investors and well-regarded ones. So it is a loss for the venture world. So that is news.

    Alex: But think about how long a venture fund lasts, right? I mean, we used to think of these as 10-year instruments? Now they’re more like 12. And so you know, get piles of money and you’re doing a big fund, and maybe you’re looking around and thinking to yourself, “What if I opened my long-hoped-for miniature golf course-cum-personal bar/indoor farm that I’ve always wanted to on my property. I don’t want to do 12 more years of work?” I kind of get it. I mean, if I had one-tenth of the money of these partners, I would not be working. So I don’t know, it’s weird to see a firm shut down. But on a personal basis, I get it.

    Mary Ann: I do, too. I totally get it. So I think we just have to be careful to understand that this sounds like apparently a thought-out decision. It isn’t one where it feels like in the case of OpenView, [which] really kind of was very abrupt, shutting down and having to lay off people. They seem to be two very different cases. But what we are seeing overall, and what I keep hearing from others is that the venture world is shrinking. And regardless of what the reasons are, there are a lot of firms that seem to be either scaling back, winding down, cutting staff. So it’s an overall, and I hate to use the word “trend,” but this is something we’re probably going to be seeing more of in different forms.

    Alex: Yeah, but there’s some good news out there as well, Karyne, for both Earlybird Health and Homebrew. What’s going on there?

    Karyne: I mean, it looks like they are growing. So you know, even within the shrinking of all the firms that we talked about, there are a few that are still growing up and down.

    Alex: Yeah. Earlybird Health is a Europe-focused health tech fund, and they doubled essentially from Fund I to Fund II. If memory serves, I think they put together like €175 million for their new fund. And then Homebrew, which is mostly now working with Partner Capital, is putting together a $50 million fund that we don’t quite understand yet, Mary Ann, I don’t think? But the gist is, from our guess, it’s probably an opportunity fund or something similar along those lines.

    Mary Ann: Yeah, exactly. From what I understand, what I heard is that they didn’t want to use SPVs anymore for follow-on, pro rata investments. So they are targeting this new fund.

    Alex: Mary Ann, I knew exactly what you just said, but not everybody has been so enmeshed in venture things. So SPVs are special purpose vehicles. Essentially, it’s like a micro venture capital fund you put together for a single deal. Let’s say you have allocation but don’t have enough capital. You can put together an SPV, raise some more money and put that in. It’s a single check. Pro rata rights essentially allow a prior investor to defend their current percentage ownership in a company over time. They need to put in more capital for that, usually at higher prices. Pro rata rights are a big deal in venture land, both in terms of how people use them or abuse them. And I think that should cover it.

    Mary Ann: Thank you, Alex. You’re so good. Like putting things in everyday language.

    Alex: Well, Mary Ann, isn’t that what we do all day?

    Mary Ann: You know, it is what we’re supposed to do.

    Alex: All right. Yeah. Well, wait till you see the post I wrote with Ron. It’s full of complete jargon, and I can’t wait to get it down. All right, Karyne: I want to talk about Y Combinator, everyone’s favorite, or least favorite accelerator. Controversial, certainly. At times, very popular and very successful. And they have a new call for startups out there. Walk us through what they’re looking for.

    Karyne: So they are putting out a call for startups in areas like AI, spatial computing, climate tech, and health tech, among other things. I don’t think that the AI and spatial computing aspects of their list are very surprising considering that AI is hot, hot, hot, and Apple’s Vision Pro just came out, and so they are expecting a lot of startups to be working on spatial computing-type apps, I suppose?

    They haven’t done a request like this since 2018. Of course, they updated the list a little bit during the pandemic, when they were looking for COVID-related startups. Healthcare startups are still on their list, but this time they’re focusing on cancer treatment, and other kinds of help in the healthcare industry, such as eliminating the middleman when it comes to certain aspects of healthcare.

    Alex: Mary Ann, I’m curious. The Vision Pro is out, and some people have bought it. It got some good reviews, some mixed reviews. Do you think that’s gonna be a big enough niche to launch startups on top of in the coming years?

    Mary Ann: That’s a good question. I don’t know. Like, how about with Meta’s? Did startups launch off its comparable device? Because I don’t know.

    Karyne: I don’t think in this way.

    Alex: Yeah, not like this. I mean, there are some games that have been made that are VR-compatible, that I presume work with Quest headsets. But no, not like the similar boom we saw with the launch of the App Store for iOS, for example, which did lead to generations of new companies. I just think it’s still too small, the space. Like Microsoft tried this with HoloLens. Name a company that built a killer HoloLens app. Silence.

    Mary Ann: I would agree. I mean, I was a little surprised to see that as one of its main areas of focus. Of course, obviously, climate tech and applications of AI were not surprising. But yeah, I thought it was interesting, too, that this is the first time they’ve done this really since 2018, except as Karyne mentioned, when COVID hit. So I’m just wondering, what drove them to start this back up again?

    Alex: Well, I mean, gosh, I feel like we’ve almost gotten done digesting, at last, the excesses of 2021. And so maybe after you finally finish your heartburn and indigestion, you begin to kind of look at the menu again. And then this analogy started for cheeseburgers.

    Mary Ann: Yeah, maybe it wants to be more targeted now and hoping to entice startups in these areas. Not that it’s trying to deter startups that aren’t doing these things, but I guess it just wants to be more targeted in its approach, and then who applies for its cohorts.

    Alex: Okay, I’m gonna throw in somebody else here, because I think we should broaden our context. If Tim, our resident climate genius, was here, he would mention things like the Inflation Reduction Act, changes to green energy financing. And I’m saying climate words. Trees. Things like that, Tim would talk about those. So I think there has been a top-down national shift and focus toward more climate tech that could unlock spending from both governments and private corporations. So climate tech, as a new theme for YC, kind of fits in there for me.

    And then defense technology has certainly become much less disliked in venture circles — guns used to be kind of under a vice clause, but now people want to make really big guns and sell them to the government. Cool, fair enough. And then space. I really think that now the space costs have come down so much on a launch basis, especially with shared launches and larger rockets coming from SpaceX, there’s a lot more stuff you can do there. And this week, just because I wanted to bring it up somewhere, Varda Space, which makes drugs in space, because there’s less gravity so you can do cool stuff. Got permission to bring them back! So we’re soon gonna have space drugs on the market. So I think this YC list makes a lot of sense. I mean, look, they’re kind of dissing crypto a little bit, but I’m not shocked.

    Karyne: And maybe that’s fine. And I don’t remember where I read this, but when they were creating this list, they’re thinking of it as like a conversation starter, like a prompt for people who are working on something and don’t know quite yet where it’ll fit in the market. This could be directionally helpful for them. Yeah, I’m really looking forward to Demo Day as well. When is Demo Day?

    Alex: I think it’s April 3 or April 4. So coming up. And of course, we are going to have all things Demo Day on this show. Sometimes we even do an extra episode just to dig into the coolest companies that we saw. So Mary Ann, Karyne and I will be bringing you that very soon.

    But that’s all the time we have for today. Equity comes out three times a week: on Mondays, on Wednesdays, and on Fridays. And if you’re a social person, come socialize with us, because we are @equitypod on X and Threads, and we are @techcrunchpod on TikTok. All right, bye, everybody. Talk to you soon!

    Equity is hosted by myself, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azevedo. We are produced by Theresa Loconsolo, with editing by Kell. Bryce Durbin is our illustrator. A big thank-you to the audience development team, and Henry Pickavet, who manages TechCrunch audio products.

    Thank you so much for listening, and we’ll talk to you next time.

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    Theresa Loconsolo

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  • OpenAI’s DevDay, reinventing the REIT and good actors in crypto | TechCrunch

    OpenAI’s DevDay, reinventing the REIT and good actors in crypto | TechCrunch

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    Listen here or wherever you get your podcasts.

    Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

    This is our Friday show, and we’re talking about the week’s biggest startup and tech news. This time ’round we had Kirsten Korosec, Mary Ann Azevedo, and Alex Wilhelm on the job to chat through a massive pile of news:

    And with that, we’re going to go rest for the weekend and come back Monday at full steam!

    For episode transcripts and more, head to Equity’s Simplecast website.

    Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more!

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    Theresa Loconsolo

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  • It’s been a long time since we’ve seen such positive signals in fintech | TechCrunch

    It’s been a long time since we’ve seen such positive signals in fintech | TechCrunch

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    Listen here or wherever you get your podcasts.

    Hello, and welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

    This is our Wednesday show, where we sit down with a key topic and dive deep into it. Mary Ann and Alex today looked at nascent but encouraging signs from the fintech startup market. Here’s what they got into:

    • Solid results from Klarna are on top of Alex’s mind. The company’s ability to continue growing while staying profitable is a reminder that one down-round does not a company kill.
    • Fintech fundraising results were on Mary Ann’s mind as we wait for venture capitalists to re-accelerate their investments in the space. Sure, no one wants to return to 2021-era insanity, but after so long in the valuation doghouse, perhaps fintech has reached its nadir?
    • And we leaned on data. Here’s the American consumer debt information Alex referenced, Affirm results will drop here, and the CB Insights venture data we cited is here.

    More to come in our Friday news roundup! Talk to you then!

    For episode transcripts and more, head to Equity’s Simplecast website.

    Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more!

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    Alex Wilhelm

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