A proposed AI ‘kill switch’ and why it’s rough out there for VCs | Equity Podcast

This episode is presented by infest Puerto Rico if you believe your business Can go anywhere Puerto Rico is the [Music] Place hello and welcome back to equity Techcrunch's Flagship podcast about the Business of startups today is Friday May 24th 2024 I'm marann aavo and joining me Today is senior TC reporter haa comps How's it going haa you know what I'm Doing really well I had so much fun Working with an accelerator this morning And working on a bunch of fundraising Stuff so it's a really good way to wake Up keeps me on my toes well haa you and I are not alone today we have not one But two co-hosts joining us as well Senior TC reporter Becca scac is on What's new with you hey uh not much is New which is not necessarily a bad thing But I will say dear listeners I only Here for a good time today not a long Time but you can catch me in a longer Format next Tuesday and next Friday on Equity and you can always find me over On found where we interview the founders Behind the startups about why they built Them but thanks as always for having me On we'll take what we can get Becca we Also have Rebecca balain a senior Reporter at the TC Transportation desk Rebecca we're so excited you're here how Are you you today thanks I'm so excited

To be here yeah I'm doing great I'm in The middle sorry no I'm nearly finished With a deep investigative scoop that I've been working on for a couple of Months I'm so excited to be done with it So yeah feeling pretty good can't wait To read it for those of you listening You've likely heard each of these voices Popping up in the equity feed over the Past few weeks and we realized we hadn't Really formally introduced my new Co-hosts to the world or as we like to Call them now the new Equity crew so I Want to give everybody a chance to kind Of just say hi and tell you a little bit More about themselves so Rebecca share With our listeners what exactly do you Do here at TechCrunch and how long have You been here yeah so I'm on the Transportation desk I've been on the Transpo desk for about three years so I've been covering everything from Autonomous vehicles to ril to batteries A lot of the companies I cover are Uber Lift weo Cru and of course all things Tesla I also have a lot of coverage of Micromobility companies due to personal Interests and yeah recently I've taken Over being one of the co-hosts of equity Monday and then I also have taken over Doing Tech crunch's morning newsletter So that's been a really great way to Kind of span across all the cool work That my colleagues are doing you're

Doing an awesome job oh Rebecca I have To ask the question what do you drive oh I drive an analog bicycle yes that's the Only right way to be on the Transportation desk I love it that's Awesome I actually don't love driving You you'll notice I didn't say EES That's Shan oain is our Eevee guy I mean I I get what's going on in the business But I uh prefer smaller Vehicles myself Love it yeah love it love it love it Becca can you share a little bit more About what you do here besides record Found every week mhm so I'm on the Venture desk so that means you can find Me covering anything within the Venture Umbrella whether that's startup news Whether that's a trend about what Venture investors are up to or some fun Little Scoopy details about companies or Venture funds doing a lot of work with Emerging managers and things with Climate companies as well it's a little Bit of everything that's the way I like It a PR nightmare but fun for me yeah Well hi and you you wear many hats here At TC can you share with our listeners The many things you do yeah I've been at Tech since 2016 or so disappeared for a While to work in VC and start a startup Because clearly that was a good idea it Wasn't dear listeners it really wasn't But yeah so I've been kind of around the The ecosystem for a while and this time

Around I'm doing a bunch of kind of Fundraising advice and the pitch te tear Down series that I'm working on and I'm Attached to the Hardware desk my first Startup was a hardware startup I used to Work at a hardware VC and so I've got a Pretty good view of what's happening in That world and what it takes to build Physical products which famously Hardware is hard and uh it's it's really Interesting to be able to talk to a Bunch of Hardware Founders again um this Is great I love how you all have like Unique and interesting backgrounds that Will bring very different and cool Perspectives to the show by the way Kiron corc will be back as a guest host But she has a ton of travel coming up so It won't be as often as we might like But we'll still have her on the show so Hia can you take us through the show Today yeah we've got a hell of a show There's been a lot of interesting things Happening in the world of startups Techar CEO M gavette she just announced That she's leaving the accelerator and The old boss is back in charge so that's Pretty exciting we're covering two deals We're looking at farcaster and majority And we've got a couple of fun themes We're going to be talking about in some More detail we're talking about a Proposed AI kill switch which I have a Lot of opinions about and we're also

Looking at the Reckoning coming for Emerging Venture funds the series a Crunch is real and I think it's going to Get dark so I'm I'm super psyched to Dive into all this stuff yeah I know me Too super excited as well so text our CEO stepping down were we shocked by This is not really yeah not really great Summary let's move on just kidding I Mean it's been Grim in Tech Stars world For a while right they shut down a whole Bunch of the accelerators there's been a Bunch of infighting I've spoken to a Whole bunch of stups who are like H Tech Star is great and or Tech Stars is great But so there's always something that Gets added to the end and I'm not that Surprised yeah Dominic madori Davis for Those of you who didn't catch it did a Very in-depth investigative look at what Was going on behind the scenes at Tech Stars over the past couple of years that Published a couple of weeks ago myel had Posted on LinkedIn that she was leaving Mainly due to health reasons and of Course we we wish her well and hope that She will be okay uh healthwise what's Next for Tech Stars the the co-founder And board chairman David Cohen is taking Over we'll have to see what happens it's There's been a lot of upheaval there so I'm very curious to see the direction The accelerator goes in from here yeah There seems to have been a lot of that

Kind of thing going around like lots of Accelerator shutting down or shifting or Changing and there's something in the Air yeah something is definitely in the Air but let's move on to our deals of The week we have a couple of really Interesting ones Rebecca tell us about Farcaster sure so farcaster this is a uh A crypt based social network founded by Two coinbase alums they have raised $150 Million which you might be thinking That's actually a lot of money for a Social media company to raise that only Has 80,000 daily active users and 350 Signups as a reference blue sky has Raised I think like 21 million per Crunch based data and has had about 5.6 Million signups but you know from what I Can tell foraster isn't just any Social Network I guess you could say it's Technically called a social protocol That's built partly on ethereum's Blockchain and its whole thing is that It invites developers to build other Apps on top of it so you might have Heard of its most popular app called Warcast which is sort of like Twitter SLX you can like add text images and Video and earlier this year forcaster Added frames which I think is really Cool have you guys heard of frames no It's this ability to like add an a mini App as an interactive post onto a user's Warp cast feed so users can like

Interact with this other app right in The post rather than going you know Exiting and going to another app and They say that this makes it easier for Developers to find users and get natural Distribution through recasts which are Essentially retweets I have to say I was Really kind of stunned to see this Number $150 million round these days is Not something we see very often but Especially not in the crypto space I Mean Venture funding in crypto last year Was down 68% last year so I'm wondering if this $150 million round like what percentage Of last year's total raise this would be Because this is just such a large number It makes me wonder is is crypto like is It back I mean we've seen Bitcoin go up We've got this raise Paradigm LED this Round along with a16z crypto Han Ventures some big names so I don't know Y'all is is crypto back so I suspect That I mean I'll be super honest Whenever I hear crypto I glaze over and I just I lose my will to live but I'm Curious if there is something here where We're seeing a maturing of the crypto Market right so yes this is Blockchainbased but we're actually Seeing more applied blockchain rather Than infrastructure blockchain and so This means that they found use cases for Where the blockchain makes sense where

It actually has a better use case than Databases does and in that case I'm like Okay if you squint it kind of starts Making sense I need to do a lot more Reading about this before I'm fully Bought in but this is actually one of The more interesting platforms but I'm Getting a little bit curious yeah I mean It's interesting that you say this like Applied blockchain thing because we say It's you know partly based in ethereum What does that actually mean forecasters Taking a hybrid approach and one of our Reporters Amanda silberling broke down What that means exactly so it's Essentially user identities are stored On the blockchain and then data like Public posts follows reactions are Stored offchain so it's very much like a A mullet right web two business in the Front web 3 party in the back so this Makes it slightly more user friendly Because not everyone has a crypto wallet And having to go get one would create Unnecessary friction so I actually Signed up for warcaster today and it Seems like it created a crypto wallet For me as part of the sign up it cost me $5 you know I paid with apple wallet Whatever which it said it was an annual Fee to cover the web 2 side of things so That's interesting it's an interesting Type of business model I think you're Getting to something really important

Right so the the fact that all the posts And follows and reactions and stuff are Offchain I think that's a good thing Because if you think about some of the Stuff that get posted on things like Twitter you don't want that to be Immutable occasionally you want to be Able to make stuff go away there's a lot Of horrible stuff and the other Interesting thing is I think Twitter's Kind of evolution into X and what Elon Musk is trying to do it seems like he's Basically going back to his old PayPal Days right he wants to build a banking System and Twitter happens to have an Incredible user base right so if you can Create Twitter accounts that match to Real human beings and then Implement Some sort of a blockchain type solution Underneath then actually you have a Really expansive banking system what Farcaster seems to be doing is kind of a Similar thing just from the other angle And if farcaster pitch was like Hey We're actually doing what Elon Musk is Trying to do with X except the way it Should have been done in the first place That's a really compelling pitch now I'm Saying that without having any inside Information so maybe I'm horribly wrong But seeing it through that lens the 150 Million actually sort of makes sense Yeah this isn't the only social media Network that's made headlines this week

There's also Maven Rebecca can you tell Us more about that yeah I'm actually Working on a piece about Maven I spoke To one of the co-founders Ken Stanley Who's the former open AI researcher and Maven is backed by Sam Alman it's backed By F Williams who was a Twitter Co-founder and it's very interesting it Wants to do away with the likes of Followers CL chasing things like that in Favor of more serendipitous internet Exploration so you go on the platform It's like what kind of interest do you Have Consciousness gardening parenting Computers whatever and you can follow These topics and then you just kind of Leave comments and then the novelty Seeking algorithm that's running it Connects you with not only other Comments or posts or whatever that are Within that topic realm but also with Things that are related right so you Might be looking at a post on San Francisco and then it'll be talking About architecture and then you can Learn about architecture right so yeah It's really interesting not sure how They're going to monetize that but You're going to be writing more about That right soon yes so yeah keep an eye Out yeah stay tuned for her deeper dive On Maven we're going to move on to the Fintech space because there's always Fintech news this week Christine wrote

About an immigrant banking platform Called majority securing $20 million in Funding following 3x Revenue growth okay So I have thoughts first of all there Are so many immigrant banking platforms To be honest with you I was a little bit Surprised that majority was able to Raise more money in this environment Because I feel like there's just so many Startups in this space and no offense no Shade to majority but it's getting Harder and harder to tell them apart but Anyway majority uh describes itself as a Mobile banking service for migrants to The US like many of these others they Don't require social security number or Us documentation just an international Government issued ID and proof of us Residents to sign up members pay $5.99 a Month to open a bank account and get a Debit card they get fee-free International money transfers discounted International calling I love of course The premise Behind These sort of Platforms I don't know exactly how or Why it's different to be honest with you But majority seems to be doing something Right because they told Christine they Reached $40 million in annual recurring Revenue as of April so I was impressed First of all that they share the numbers With us because that so rarely happen But that's that's a pretty good amount Of AR for a company in this space yeah

I'm curious about that it sounds like a Really cool platform speaking as someone Whose partner has just immigrated here And now I'm like oh maybe I should look Into this but how familiar are you with The platform do you know if they have I Know it's called an immigrant banking Platform but I'm curious if there's Almost a B2B aspect of it like a like Foreign businesses able to use it to Grow I don't know I think it's for now It's focused strictly on individuals Immigrants or or migrants to the US not So much businesses but yeah I mean I Think they really want to just help People to your point help people who Have moved to this country get Established financially be able to Hopefully build credit they have access To what they call an advisor program What they they describe as a network of Train support staff Nationwide who are Also immigrants so the founder himself Was an immigrant and he I think it was From Sweden uh Magnus ARS he's an Immigrant from Sweden and he said that's That's why he started the company Because he you know he went through These problems himself so some of the Others in this space are Maza ala Welcome Technologies like I said there There are a number of them but majority Is one of the few I have to admit that Really is showing significant and like

Substantial traction here so kudos to The company oh I would like to mention Of the 20 million in capital that They've secured 12 a half million of That was equity and the round was led by A bunch of Founders including clar's Co-founder Victor Jacobson Valar Ventures participated Avid Ventures also Put money in what are they using the the Money for do we know they said they want To continue developing new products and Including helping users establish a Credit score and gain access to credit Products which can be very challenging When you're new to this country it's Also building products for redundancies To better manage risk it said and they Claim that the recent funding is the Final step toward profitability so while I could talk about fintech all day long I am going to have to move on from this One cuz we're running a little bit long But before we stop talking about fintech Alt together I do want to mention that I Also wrote this week about another Fintech that's not doing quite as well And that's copper it was a team focused Digital bank that had to abruptly Discontinue its Banking and debit Products last week and that was largely Due to the implosion of synapse a Banking as a service startup which we've Written quite extensively about copper Claims that this moved to discontinue

Banking and debit products has been Planned for about a year but was Accelerated in a big way when synapse Imploded it's not shutting down all Together it's going to remain Operational and focus on its earned Product and try to shift to White Labeling it's banking products to larger Established Banks which is interesting In and of itself so anyway just kind of Wanted to put that out there as well Because that's an ongoing story so so Stay tuned for more on the Fallout from Synapse so for now we're going to have To take a break but after the break We'll be talking about a few things Including of course Ai and our Reckoning Is coming for emerging Venture Funds what's next in Tech that's not the Right question it's where Puerto Rico Where an entrepreneurial ecosystem Pulses with connectivity capability and Possibility we the most competitive tax Incentives in the US FASTT track success Uccess and hard work is rewarded with Sunsets and turquoise Waters if you Believe your business can go anywhere Puerto Rico is the place invest pr.org [Music] TechCrunch all right welcome back so We're going to do some talking about AI I know it's a shock we rarely talk about AI on the show but yeah there's been Some interesting movements here around

AI safety so it seems like a whole bunch Of companies have grouped together to Try and put a little bit of a safety net Around some of this AI stuff so Microsoft Amazon open Ai and other Tech Giants they made a whole bunch of Commitments to the safe development of Their AI models including a potential Kill switch as a Sci-Fi nerd it's been Really interesting to see how this Conversation is continuing when in Parallel also you know there's been a Bunch of conversations in AI about how Do you develop this kind of thing Ethically and how do you keep an eye on AI potentially getting out of hand yeah I thought this was great it's really Important because while AI can be you Know is obviously seen as being Revolutionary technology with a a lot of Awesome applications there are also you Know some scary things that could happen Through the use of artificial Intelligence so I was happy to see this This is being described as a landmark International agreement because these Are companies from all over the world Pledging to do this so yeah I was happy To see it I'm happy to see it I'm also a Little skeptical because often you see I Mean it's not it's not uncommon for Companies to come together in a little Coalition when they're you know Launching this kind of pioneer Tech and

Say we are really thinking about safety And here are all of the guidelines that We've set up so government doesn't have To necessarily right like government's Really slow to regulate this kind of Tech so I think people are often like oh Thank God there're at least the Companies are thinking about it and they Might be but to what extent like what Are the the risks that would enable this Kill switch I mean per the CNBC article Risks include but aren't Limited to Automated cyber attacks and the threat Of bioweapons but you know there are Other less really intense but still Pretty intense threats that come from AI I mean look no further than for example India's recent election and all of the Deep fakes that were kind of Pumped on Social media platforms and that you know We're coming into an election year we're Going to experience the same thing so Yeah great Point Rebecca so are you kind Of saying this is like the kids making Their own rules sort of thing I am not Saying it's not That yeah I mean it's always it's always Smart to remain skeptical ha what do you Think so I I think it's hard to regulate things When it's unclear what we're actually Regulating right it feels like we're in This world where nobody really knows the Extent of what AI can do and the

Regulation only works on the things that You can regulate right in a world where You actually get General artificial Intelligence that is to some degree Self-aware like the nightmare scenario Is what happens if this thing starts to Defend itself like to make itself unturn Off right and I think that's the whole Point of a killer switch like is there Is there a way where something is Centralized enough that if everything Goes to hell you cut a cable or you you Turn it off and so like okay pause let's Figure out where we're going to go with This but I would also like to think that If if this is the world where we end up In where where an AI actually is smart Enough and powerful enough to defend Itself it would also be smart enough to Hide its tracks I think right so in Theory it's great that this exists in Practice if we ever have to use a kill Switch I have zero faith that we'll be Able to pull the plug early enough Interesting and given the fact that so Much is being run by this type of AI What so let's say you do have a kill Switch what else does that turn off Right does it turn off you know Functions that are that are being run by AI that are necessary and not just this Potential Existential threat look it's good to see That you know the companies are thinking

About this and talking about this but I Think we also just have to continue to Do our job as as reporters and and hold Them accountable to the things that they Promise yeah absolutely there was of Course other news in the AI world this Week meta AI advisory Council was Announced and unsurprisingly or Surprisingly depends on who you ask it Was made up excuse me of five white men No women no people of color there was Also the GPT controversy where Scarlet Johansson got really pissed off because She felt like the Open ai's Sky voice Sounded a whole lot like her and she Claims that that she was asked if they Could use her voice and she said no so Hm if that's really true if open AI went Ahead with that knowingly that's just Not cool yeah I actually just a quick Note on that I read a really interesting Piece in the Atlantic about this and it Was very much kind of looking at Ai and Consent and clearly there was a paper Trail here like open AI asked carlet J Hansen can we use your voice she said no And then they were like we're just going To do it anyway so and pretend we didn't Yeah and pretend we didn't and act like We didn't and so he said she said it's Very icky and and that's just you know It's like a little microcosm of how this Will continue to play out as all of the Data that open aai and other companies

Are using is you know scraped Consensually or not mostly not from Creators all over the world from all of Time yeah and that kind of goes with a Bunch of other stuff too like one of the Previous open AI data sets that was used To train a massive model The Writer's Guild was like hey where did this data Set come from you had a massive set Called books. zip or whatever and it's Like okay what was that data set where Did all of this stuff come from and they Say they deleted the data set it's like Wow it's not like you don't have enough Storage on your servers guys you clearly My personal opinion is that somebody did Something dumb and then the researchers That build a data said are no longer With the company and I think this is Where a lot of this stuff gets a little Bit icky right the whole moast and Break Stuff ethos that Facebook and meta are Famous for is one thing but guys haven't We learned anything no the answer is no And speaking of not always learning Anything we're going to start talking About venture capitalist So Christine Also did this deep dive which was really Interesting looking at emerging Venture Funds which I was surprised by a stat She uncovered pitchbook is tracking over 10,000 funds currently trying to raise Money and 45% of them are actually Emerging fund managers and for those of

You who are not familiar emerging fund Managers are defined as firms with less Than three funds so much smaller I was Surprised that there were that many of Them and I know we've talked about this On the show recently that despite this Environment there are a lot of new Emerging funds trying to raise money Right now so this is kind of fascinating To me it it's it's very ambitious it's a Very ambitious time to be trying to Raise an emerging fund and I think only A very small percentage are going to be Very successful what do you think Totally I think there's a couple of Really interesting things at play in in Kind of the major Heyday of 2021 when Everybody was like throwing as much Money as they could at VC if you are a Talented operator and you're able to Spin some yarn around you having Differentiated deal flow and having Access to deals that nobody else did Some of the LPS got excited and started Deploying cash and the truth is VC is Hard like it's not just about finding The right companies and deploying money It's also about doing board work that is Fidu responsible right and so I feel Like a lot of the emerging fund managers They were like hey we can get access to Deals that nobody else can and they Raised the first round of funding but Then they realized wait a minute the

Sheare amount of admin and you know this Is this is fintech right and people Forget that this isn't just throwing Money at startups this is actually Building financially responsible models And doing all the work that goes with it And I think a lot of that skill set is Missing among the uh emerging fund Managers and so when the money dries up I am unsurprised that people say oh Actually maybe this wasn't the best idea My personal opinion but I I'm seeing Some chatter about that happening out in The ecosystem yeah and it feels like a Lot of these new managers are are trying To differentiate themselves by like by Specializing and targeting various Certain or specific Industries where Their General Partners might have Expertise to give I mean that makes Sense too because otherwise if you're Just broadly raising and investing Broadly it's it's harder and harder to Differentiate yourself right especially If you're trying to raise money so I Think that it's probably just as hard or Even harder to try to raise money as an Emerging fund manager than as a startup Founder right now I mean last year According to research from Rays only 20% Of emerging man managers were raising $100 million or more funds last year 2022 that was 29% so definitely most of The actions taking place in the between

Z and $49 million range I wanted to Touch on something you just said about Kind of specializing and needing to Specialize because we had another story On TC this week Andreas and horowitz's American dynamism fund they established A new fellowship program aimed at Introducing top engineers and Technologists into Venture funding so I Guess the goal there is to to maybe have Fewer Finance Bros getting into VC and More people with actual technical Experience because maybe they'll be able To pick out better startups to invest in Yeah I was actually really interested in That I thought it was a pretty good Strategy I mean the technologists really Understand obviously the technology in a Way that a finance expert might not so I Thought well this makes sense and has Why hasn't this not been a bigger deal Before yeah and I think to to build on That the American dynamism Fund in Particular is investing in kind of the Murkier side of the world right it's National Security it's defense it's Space Tech and this is somewhere where VCS traditionally haven't really played As much right and so I think if you're Going to build that kind of fund you do Need people who really deeply understand How National Defense National Security Law Enforcement Justice Reform all those Kinds of things my personal opinion is

That the world would be kind of better Off if this if they weren't deploying This cash but if you're going to then Make sure that you have the people who Can do the due diligence to actually Deploy this cash in ways that make sense Yeah and like as we see you know VCS When they're looking at Founders and Founding teams they want people who've You know maybe done the job before who Have expertise in the subject matter and The same should be true I think for a Lot of VCS and you can really tell the Difference you know as a reporter when We reach out to VCS to ask for their Advice or information about an industry You can tell the difference between Someone who really understands the Subject versus someone who it kind of Has more of like a bird's eye view of The funding landscape for that subject Right and that makes all the difference For knowing whether or not a company is Going to be successful yeah one other Point just as an example of how Challenging or difficult the current Venture Capital fundraising environment Is even Peter teal founded Valar Ventures raised a much smaller fund this Year compared to previous ones Specifically they raised $300 million Which was half the size Of their last fund and even Peter Himself said that he feels bad for funds

Going out this year on that note we do Have to wrap up the show but hey we'll Be back on Tuesday next week due to a Holiday weekend here in the US until Then you can still find Equity under the Handle Equity pod on X and threads and Don't forget to check out our sister Show found which Dives deep into the Stories behind startups with the Founders who built them thanks for Listening and talk to you soon Equity is produced by Teresa Lo cons Solo with editing by Kell Bryce Durban Is our illustrator and we'd like to give A big thanks to our audience development Team and Henry pet who manages Tech Crunch audio products thanks so much for Listening and we'll talk to you next Time

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