AI-powered drug development, VW teams up with Rivian, and the DEI debate | Equity Podcast

This episode is presented by invest 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 June 28th 2024 I'm marann aavo and joining me Today as senior TC reporter haa camps Haa how's it going you know what I made An incredibly dumb decision which was to Go camping in the depth of the desert so I've been trying to survive in 115 Fahrenheit which for my parents I ended Up calculating it's 46 Celsius oh my Goodness and at night it was 90 Something and I just gave up so now I'm In a hotel I'm in the AC call me a wimp But clearly I'm not cut out for camping Into Wilderness 115° fah that does not make you a win in A tent not a great idea oh my goodness Well I'm glad you're here we're also Joined today by senior reporter and Editor Kiren corus set Kirsten how is it Going in your world I imagine it's hot Also where you are right yeah as a Dweller of the desert I can tell you Officially it's hot it's summer AC is Necessary haa I'm not going to say dumb Because you called yourself that but I'll say misguided and naive perhaps but You've learned now you say dumb we're Friends you've learned now and so happy

That you're poolside and able to chat About equity in a more comfortable Environment yes and I'm glad you didn't Like dehydrate or get eat exhaustion or Anything like that yes anyway we've got Lots to talk about today deals of the Week include formation bio Volkswagen And rivan's big deal and and new bank Acquiring hyper plane we're also going To be talking about a fun feature that Ha have put together on the fediverse And a look at Dei and meritocracy in Tech as well as the latest at Fearless Funds so haa formation bio is your deal Of the week they just raised $372 million tell us more about this Company that's a lot of money that is a Lot of money it is a series D so they've Been added for a while they've raised More than 600 million to date at a hell Of Val valuation too the company last Was valued at the last round at over a Billion and this time around they want This close devaluation but it's Significantly higher they say it's a Really interesting company right it's a AI focused drug development startup that Is really trying to make drug Development faster and easier and dreon Wrote A Little Piece about it and they Basically described it as an AI native Pharma company focused on drug Development and they describe it as Arguably the consequential bottleneck in

Bringing new medicines to patients and I Think it's a really interesting piece Right making medicines has for so long Been incredibly expensive but then the Drug trials clinical trials and all that Kind of stuffs makes it exponentially More expensive and then the crazy thing That happens is if the trial fails I.E It's not safe or it doesn't work all of That is down to toilet and so the aite Tech is trying to fail fast if it needs To fail or develop the right drugs I was Curious about that I was curious about Where AI came into this I know it can Take a very long time to figure out if a Drug is going to work or not so Basically what you're saying is it helps Kind of speed up that time so that a Company's losing perhaps less money if It doesn't work out or getting something To Market faster if it does yeah I think It's both I mean the the whole point of This is to help with patient recruitment So find out who should you test these Drugs on but much more importantly using Recommendations based on AI for the R&D Process so that predicts the toxicity of The drugs the tolerability and the Efficacy and so with all of those things It just really helps the the speed of Drug Discovery and it means that they Can stop development much sooner if it Turns out wait a minute this is never Going to work rather than get several

Years and millions and millions of Dollars in so a point of clarification Here when you say AI what bucket do we Want to put this in is this a AI model That is pulling from let's say a very Specific M if that is the case it's very Reminiscent of this startup that I Covered in EV Battery tech which is Using generative AI specifically for its Own form of drug development in in their Case the electrolyte that's going to be Used in a battery and what they're doing Is they're kind of creating these custom Llms that are only pulling from Scientific data it's not like to to Avoid those hallucinations and things Like that so is this similar yeah so It's really interesting because in General what they do is they say hey Based on all of these chemical and Biochemical markers and features of These particular small molecules this is The effect it has on bodies based on Like a really broad data set and so they Can actually use like a huge data model Based on things they found about Previous drugs and previous interactions And previous everything and spit out Potential improvements now they also Have a massive deal in place with open AI so clearly they using large language Models that way and in fact s Alman is One of the investors in this as well so There's a whole mange here but the

Company's been around since 2016 and you Know that is a long time ago in AI terms And I think they've seen a lot of Evolution in what kind of AI models They're using and and how they're being Used it sounds like that in their Pipeline they've got a few different Drugs like one looking at hand eczema One looking at sensory neuropathy and One at knee Osteo arthritis once again I I really love where when artificial Intelligence is you know doing something More meaningful than just helping kids Write essays in school so this is a Fascinating company and hey anytime you Can get needed drugs to Market faster or Help companies you know move quicker in General in this space I'm all for it and Drug Discovery AI you know they're Expecting to find about $5 billion worth Of investment by 2020 8 so it's a super Hot Market there's a whole bunch of Companies in this all over the world Raising hundreds of millions of dollars So and it makes sense right drug Discovery is incredibly expensive and This is such a good use case for Basically making up for boring lab leg Work and being able to do that with Computers instead yeah yeah some of the Competitors include or other companies Working in the space evolutionary scale Isomorphic Labs profluent yeah a bunch Of others but let's move on to another

Deal in a different space but still also Very interesting nonetheless this one Caught my attention because I was Impressed with how much rivian stock Shot up when Volkswagen announced it was Going to invest a billion dollars into The company as part of a broad software Development deal Kiren was this a Surprise yes yes it was a surprise I was Just out with rivan in Seattle testing Their nextg basically their improved NextGen R1 Line This is their SUV and Their truck and was definitely not Anything on my radar that they would be Partnering with VW that was I put it in The bucket of did not expect this in 2024 however looking at this deal it's Quite interesting and it does make sense Even though I did not forecast it rivan Is at an interesting point in its Lifespan it is now putting out its new And improved r1s and R1t and it has a couple of years until Its next generation of vehicles comes Out so really they have to do two things Reduce the cost of making these vehicles Right now they lose about $38,000 for Every vehicle that they make really this Next Generation yeah it's it's not a Good business model um the this next Generation is meant to greatly reduce That so they need to lower cost and at The same time they need to keep selling These new and improved r1s while they

Wait for this whole next future Generation to come to pass so that means They're plowing through a lot of money Even as they go towards that Profitability moment Here Comes VW VW Needs help with software there is no Question about it and their electric Architecture this is not the battery for People who aren't into Vehicles this is The zonal architecture which is what Rivian has created which is where all of The let's say mini computers or ecus are Laid out in the vehicle and a correct And let's say efficient architecture can Really be important as you then Integrate it with software vw's really Struggled with this as it pursues this Thing called the software defined Vehicle and they say in rivan the Promised land if you will rivan Meanwhile really needs money so here These two come together this deal is Potentially worth up to5 Billion so Initially it's pretty complex and we Won't get into all the details here but Initially it's a billion dollar Investment but then there's a joint Venture that's going to be created in Which IP from rivan will be part of this And so there there will be a payment Structure there that joint venture is Going to be about $2 billion and then This can scale up to five billion over Time there's an interesting piece here I

Mean we keep saying Volkswagen but we're Actually talking about Volkswagen group Right that includes a whole lot of Brands what else is in that group right So we're talking Porsche we're talking Audi we're even talking this upstart Called Scout which is supposed to be This very American Focus sort of Nostalgia all electric brand that has Yet to produce a vehicle but it is you Know in the works right now multiple Brands globally so this is really could Be quite large if it goes well and I Will put that as a massive caveat we are Talking about a company VW group with Almost 700,000 employees wow r certainly Has quite a you know many thousands of Employees but nothing close to this its Software arm VW group software arm Called carad has struggled for years Really since its Creation in about 2020 To execute on this next generation of Software if the two can come together And have a symbiotic relationship then This could be really successful but we Have to see but in the short term Rivan's really winning on the money side Yeah yeah for sure I mean the first time I bought a Tesla I kind of joked that I Bought a $70,000 iPad with a free car But conceptually that is super important Right the fact that it's so softwar Driven why are the car manufacturers Struggling so much making this work is

It because it's fundamentally a Different way of approaching how to Build a car correct yeah I mean in short And we could have a whole a show for for Everyone out there on this topic but Generally speaking people have been Legacy automakers have been going after This quote unquote software defined Vehicle very jargony silly term for a Long time now really trying to replicate What Tesla has done and I would say Arguably what rivan has done very much a Clean sheet approach the Legacy Automator you have to understand have For Generations created this massive Network of suppliers pulling in Different pieces not building a lot of Things inous one could say automakers Are really designing and then assembling The vehicles but they Many of these components are being Created produced by other suppliers and While Tesla and rivan certainly use Suppliers much of the software and the Underlying electrical architecture has All been developed inhouse and there in Lies the difference the capability is What matters so everyone talks about Software updates being wirelessly done Just like your iPhone a lot of companies Can't do that or in a meaningful way That goes beyond the infotainment system They can't push a software update that Would change the performance of the

Vehicle or if they do they have the Owner bring it to the dealership so it Doesn't brick the car if you have a Next Generation electric vehicle architecture Coupled with best-in-class software You're able to do that and so this is The goal ultimately for pretty much Every one of the big Legacy automakers Yeah it seems like a really potentially Transformative deal for both companies Speaking of really interesting deals I Was surprised but intrigued by new bank Which is a digital Bank out of Brazil Acquiring a startup called hyperplane no Big shock that hyperplane is described As an AI for Bank startup and this Caught my attention too because actually When our reporter frederique first Covered hyperplane in December I thought Wow okay this is an interesting company There's little San Francisco based Startup and they've built these Foundation models to help Banks predict Customer Behavior they came out of steth In December they raised $6 million in a Funding round LED by former stripe exec Lackey groom and the idea behind the Company is to help Banks use their first Party data to build personalized Experiences by predicting user Behavior So new bank is is really like it's doing Very very well I think it had a Profitable first quarter reached a Market cap of over $50 billion over the

Past year it overtook another company to Be I think the largest bank I'd have to Look up exact words but anyway in America it's just growing like crazy so Uh it's not a surprise that we don't Know how much it paid for hyperplane Probably not a huge amount but it Probably could see the value in this This budding startup so very intrigued By this deal also coincidentally this Week chime a very large bank here in the US digital Bank acquired a company Called salt lab so two m&a deals in this Space this week question I'm not sure if You have the answer here but this is Interesting this sort of predictive tech And as far as you know is it only going To be used for making the experience Better for customers or is there a I'm Not going to say a nefarious purpose That it could be used for but could it Be used also to predict for instance Like the riskiness of the customer Buying habits or whether they'll go into Debt or could could it be used for any Of these other pieces or is it really About improving the you know customer Facing experience as they do their Banking yes I honestly don't know all The details because I didn't cover the Startup but I know according to Frederick's story that the company did Launch this llm that specifically can Help Banks predict when a customer may

Turn or things like that so I think it It can go to your point Beyond just Providing like these personalized more Customized experiences for users but you Know I think with new bank and its very Large pocketbook there may be more Applications than originally thought Here I have to wonder if this is going To be the beginning of a whole new group Of m&a happening on AI so AI applied Just on predictive you know on Forecasting I could see the application With banks but I could also see an Application with other companies and I'm Wondering how let's say saturated the Marketplace is with startups that are Going after this very specific area Which is sort of predictive consumer Behavior piece using AI yeah probably a Lot I think the question is like which Ones are actually doing something very Meaningful or those just saying they're Doing something meaningful right that That remains to be seen I don't know but I just I I really love it when we as a Team at TechCrunch write about startups In their very early days and then they Go on like this to be acquired by a very Large company just a few months later or You know go on to raise a lot more money And become profitable sooner or later I Just feel like part of what we do as Reporters and editors is sort of like What investors do identify which

Startups have a lot of potential so in My view you know just to nerd out a Little bit I feel like this is a case Where you know one of our our staffers Was like okay this is a cool company Early days but cool and then look here You know six months later they get Acquired by new bank so I think that's Very interesting yeah I think for me the Cool thing was you know at the tail end Of last year they raised $6 million and I just took a quick look at who the Investors are and there's no Blue Chips In there right so this is likely a Pretty decent acquisition and this could Be life-changing to a bunch of these Funds so I'm really curious if we keep Digging to see where this goes because I Think it's really interesting it's a Really fun acquisition and it shows that There's still a lot of m&a activity Happening in especially in fintech but Also across the ecosystem yeah yeah Agreed well we've got to take a break Now but after the great haa I can't wait To talk to you about this absolutely Fantastic feature you did on the Fediverse we'll be Back 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 where the most competitive Tax incentives in the US FastTrack

Success and hard work is rewarded with Sunsets and turquoise Waters if you Believe your business can go anywhere Puerto Rico is the place invest Pet Crunch all right ha so you wrote this Fun feature called Welcome to the Fediverse and this was so informative I Learned so much tell us how the story Came about it was actually really funny So Henry who's also the head of audio Product so he's our boss uh came to me With a slack question he was like dude Can you explain what the fediverse is it It makes my head spin it's confusing and We got a message back and forth a bit And he was like wait this is a post and I got to do my favorite thing which is Nerd out hard on a topic right go deep Do all the research look into everything And then write a post about it and the Thing is the Fediverse in a nutshell is kind of a Decentralized version of Twitter Essentially a way of feeding information Between different platforms and networks And that kind of stuff and you know you You've obviously heard of Twitter but There's also threads and madon and Ironically truth social which is Trump Social network also runs on the Fediverse platform called Mastadon and So yeah it's been really interesting to See that evolve and you know it's always

Kind of been this in the background Something that nerds use if they want to Spin up their own Twitter and then a Really major thing happened which was Elon Musk bought Twitter turned it into X and it's hilarious uh you see the Graph of adoption for for example Mastadon it exploded as soon as musk Twitter everybody was like okay this is Not a good idea let's figure out Something else and a lot of little Subgroups there is a instance focused on Photographers there's one focused on Queer folks there's an instant focus on People who are really into clouds you Know it just kind of exploded in every Possible Direction and the cool thing is All of these different platforms kind of Interact with each other so you have a User account on one it means that you Can actually post on other platforms as Well so you have your main subgroup Maybe it's for journalists maybe it's For researchers maybe it's for whatever But you can also kind of go outside of Your little bubble and have Conversations elsewhere and in a Nutshell that's really what the Fediverse is for so first of all I love A story or assignment that occurs by a Conversation happening through messaging And it happens all the time I'm like oh You just assigned yourself a story good Job but and and it does happen actually

For our listeners quite a bit you'd be Surprised with the Brain Trust over here At TechCrunch here's my question though Stepping way back you talk about how Really Elon buying X sort of catapulted This but the fediverse was in existence Before how small was it before like Where was it because I just was pretty Unaware of it at all up until more Rec Recently same like I was surprised that Mastadon had been around since 2016 I mean I thought it was much newer Yeah well this is the this is the way it Goes with a lot of these kind of nerd Projects right people have like this Idealistic like okay why do we trust Twitter to be like a centralized source Of all this stuff and originally Twitter Was meant to be a decentralized I mean Twitter was essentially a joke when it First started like hey this is fun we Can send text messages to each other but Online and then it kind of evolved like Jack's vision for it was for it to be Decentralized and then of course it Massively exploded and he kind of lost Control and kind of went in a different Direction that's what blue sky was right Supposed to be it was that decentralized Piece within Twitter that ended up Breaking out correct exactly yeah so Blue sky kind of was a response to uh Like hey this is the way I wish Twitter Had been from day one if we had known

Where it would have gone right nobody Had any idea how big Twitter would get But to answer your question Maran when Elon Musk bought Twitter there was Around three and a half million Macedon Accounts in the entire world that has Three doubled since that day and pretty Quickly too but it's always been like a Niche like okay we don't really like Twitter but what else are we going to Use it kind of was like it kind of Replaced forums and Reddit and Twitter And it was kind of this in between stuff That people couldn't really make sense Of and then you know the acquisition Happened and people suddenly there was a Lot of news like okay what do we do now That Twitter is going to get ruined we Could talk about more whether or not it Did get ruined but there was certainly a Lot of changes yeah for sure and we've Been tracking these Twitter Alternatives Since musk took over more separately Though in a bunch of different stories Kind of more focused on each individual Ones so I'm sure our listeners are Familiar with all of these platforms but Haa thank you for putting it all Together in one piece so we can have the Context and have a breakdown of it all In a bigger picture very very helpful Also very interesting so if you haven't Read it definitely look up that story We're going to move on to another topic

So Dominic madori Davis and Kyle wiggers Wrote a feature taking a look at a Recent post on X that scale AI founder Alexander Wing wrote about moving away From Dei to instead Embrace another Acronym called Mei which stands for Merit excellence and intelligence so That post drew a lot of divided Responses Dom and Kyle took a deep dive Looking at the implications of this and If I sound hesitant it's just because This is a very sensitive topic and I Want to be careful in how we approach it Since I didn't actually write the piece We didn't write the piece and Dom and Kyle aren't here but there's a lot of I Guess controversy around this topic There's a lot of emotions but it's an Important one and one of the things that Wayang wrote was that scale his company Is a merro can't say this word Meritocracy and must always remain one I Don't know hia Kiren your thoughts so First of all what I liked about the Article was that as you mentioned it's Super sensitive topic a lot of people Are divided on it and it's also what I Found in in speaking to people about it Is when just using specific words Immediately triggers a response but then When you end up having a larger Conversation about it often times people Are a lot closer than they realize what I liked about this article was that it

Didn't just lean on a take it wasn't a Hot take it actually They spoke to a number of people about Not just what this means but how it Could potentially play out and be Interpreted and what this might mean for The industry so that is where I just Give them kudos for that because it it's Just very easy to just weigh in and have A take this wasn't that and and I know That I'm sure that they've gotten a lot Of responses to me what's really Interesting is going to be Beyond this Article and Beyond quite frankly Alexander Wings tweet on X is is there An undercurrent of actually pushing Towards this ideology in practice or not In the industry because right now people Are talking about it but is it actually Happening well they did provide some Statistics to your point Kirsten in 2023 The US data industry saw new women Recruit levels drop by 2/3 from 36% in 2022 to just 12% according to one Staffing firm Dei related job listings Have also declined 44% in 2023 according To data from the job site indeed not Great we also saw another story this Week about Fearless funds founder Resigning and this is after being sued For providing grants to black women Business owners I think you know we Don't know the details about exactly why She resigned but I think it's just a

Reflection of of all of this that's Going on I think the real challenge with A lot of this is that Merit excellent in Intelligence is always such a myopic View of how this is meant to work if Everything was equal then absolutely you Should hire on Merit on intelligence and On who is the best at the job the Problem is the people who are doing the Hiring are not unbiased right and a Dei Movement was meant to kind of put its Thumb on the scale and say hey let's see If we can make this a little bit more Equal like in a world where men and Women have the same level of Intelligence why aren't there 50/50 VCS for example mhm and then if you kind Of Follow that all the way down it's Like well there are a bunch of hurdles In the way that make it pretty hard for Certain people to get to the Forefront Of things like if you always invest in Who's been making you money over the Past 30 years you're only going to be Investing in white dudes from Stanford And on a very simple level that just Doesn't make any sense and so I think That was the response to Dei it's just Gotten really really political and Really nasty the article kind of Highlights where the conversation is Currently at which I think is really Fascinating yeah I think to your point Merit excellence and intelligence yes of

Course those are all important things But it's a fact that underrepresented Founders may have all those things but Don't get the same access or have the Same visibility that their counterparts Might you just cannot deny that I don't Know I'll be honest I mean these these Sort of conversations just make me Really sad that we're still having them To this extent just kind of bums me out You know Alexander Wings post got Support from the likes of Elon Musk Palmer lucky Brian Armstrong and we'll Have to see how things play out I think In 2020 there was this big focus on Dei That's just tapered off I think that we Just we cannot forget the fact that There are super talented smart Founders All over that just aren't getting the Same access the same opport unities a Couple of things I wanted to go back to That Fearless fund story for a moment This was really interesting so an Appeals court had actually ruled against Fearless upholding this preliminary Injunction that had been in place it Started with them being sued by the American Alliance for equal rights which Argued that the grant discriminated Against non-black women Founders since Only black women could apply and we've Seen this type of legal action get Played out in a lot of way outside the VC world about equal opportunity but

Then it's sort of flipped so you know Usually going after are you Discriminating against non-black people As a result of creating These funds for Black people what I'm interested in Seeing is how this plays out now that Fearless fund's co-founder has stepped Down and and how Fearless fund actually Moves forward and goes about its mission Is it hamstrung now as a result of that And will as an extension of that other Funds or other efforts to do this also Hesitate over fear of legal action that Could prevent them from doing what they Set out to do their initial Charter if That happens that could really be Devastating for the few funds that exist Out there that are trying to give sort Of funding or grants towards black women And other minority founders or people we Aren't really sure how that's going to Play out but to me that could be the Much broader and unfortunate end to What's been happening over at Fearless Fund very good point could set a Dangerous precedent well I'm sure our Excellent reporters will continue to Keep an eye on all this so we'll just Keep looking out for stories on this Topic all right we're going to have to Leave it there for now but Equity will Be back next week due to the holiday Week we'll have one episode for you on Wednesday but no Monday or Friday news

Roundups kirst has a really interesting Interview coming up with VC and serial Entrepreneur John mcneel so stay tuned For that until then you can find Equity Under the handle at Equity pod on X and Threads until next time bye-bye have a Good one Bye Equity is produced by Teresa Lo Conso 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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