Ilya Sutskever’s new AI venture, and time to BeReal about bankruptcy | 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 21st 24 I'm marann aavo and joining me is Senior TC reporter haa camps ha how's it Going you know what I'm doing great it's A sumers sols disc and I feel an Incantation or two coming on and you Know maybe I have to go dance naked on a Beach somewhere it seems like that kind Of Day well let us know if that happens hey We're also joined by Tech crunch senior Reporter and editor Kiren coret Kirsten How's it going in your world and welcome Back by the way we missed you yeah I've Been all over the place and I just want To make a note haa today is I think it's An unofficial I don't think it's Actually a true national holiday but it Is hike naked day so instead of going to The beach maybe hit the trail instead One way or the other I'm not going to be Wearing any clothes is what I'm Hearing have fun with that hopefully uh My kids aren't listening to this episode No no fair fair I been gone for a bit But I've been vacationing and also going To some cool press events including Rivan so I've been a bit all over but of

Course I've been listening to the equity Podcast during my travels oh we're happy To have you back and and as always we Live vicariously through you and your Travels so anyway we've got a packed Episode this week a lot of different Things going on our deals of the week Are looking at wobby Ginger and safe Super intelligence then we're going to Take a look at 2024 bankruptcy so far We've got a number of those to dissect And then we'll also look at voodoo's Plans for social media startup be real That to me was super interesting so Anyway first Kristen wobby wobby raised A $200 million series B round crazy this Is an autonomous Trucking startup tell Us more yeah wob is really interesting So it was founded by a woman named Rockel Eris she's actually been on her Stage in the past um at a previous Robotics events really kind of Considered one of the leading AI Scientists and had previously been The chief AI scientist out of Uber's Toronto office prior to launching this Company in about 2021 and the timing of That launch is the most probably Interesting piece because at that point AVS had sort of peaked and a lot of them Were actually starting to fail and and This consolidation was starting to Happen Acquisitions were happening and She went out and ended up getting

Backing by actually Uber at the time and Has since been making progress all Around this idea of an AI first approach So before gen AI had become this very Hypey Buzzy thing she was actually kind Of thinking about this and working on This and so really what this round Series B is is a culmination of the Success she's said over the last three Years or so raising that 200 million Series B she did not share the Valuations so it's hard to gauge how the Pre-post valuation is but it seems like She's still getting a lot of backing From returning investors and some new Folks as well so yeah a lot of money and Clearly even though there's been some Ups and downs in the space wob is not The only company that's raised a rather Large round this year right in the space Yeah and that's to me one of the more Interesting things that we could Probably spend a whole show on there was This hype cycle we went through this Peak and then this fall and a lot of Failures and consolidation and then late Let's say fall of last year we started To see some deals and really the last Month or so we've seen a number of Companies raising money in what has been A difficult funding environment so Emotional comes to mind getting support From their existing backer hyai GM Injecting another $850 million into Cruz

Which is much needed cash wave getting $1 billion this has all happened in the Past quarter or so and so wobby is also I guess taking advantage of of this Better funding environment but I think The other thing that's important to note Here is that wobby has some tech that Investors are particularly interested in With this AI first approach to Autonomous vehicles so I have a Curiosity you mentioned that this is Like driess trucks using generative AI How's that different from the other kind Of self-driving approaches we've been Seeing what is the generative piece of This how's it different so when Autonomous vehicles sort of the Bas Basic General premise is that it uses Hardware and software combined to create The self-driving system in the early Days it was a lot of rules-based Programming combined with machine Learning so kind of if pedestrian then Break hard kind of thing right so there Were some rules around it then there was This push and and Tesla certainly been Has used this terminology a lot which Was the endtoend neural networks and That has been sort of the course and Shift that a lot of us other companies Have been using now with I would say More success than Tesla which is still Only has an ads system to be clear so Companies like wh Cruz using a

Combination of endtoend neural networks And machine learning with some rules in Place there so it's not like the quote Unquote blackbox wobby what they're Trying to do is using generative Ai and Neural networks to go more towards that Approach so less rules-based And her premise is that when you can do That it uses less computation and Requires actually less data if you can Be successful in this approach as Opposed to having you know hundreds if Not thousands of vehicles on the streets Collecting data in order to support These models so it is something that People have been talking about for a Long time she's trying to prove it out I Think one of the things that had me I Don't want to say I'm skeptical but just A little bit dubious where she says that The wobby driver as they call it has This remarkable ability to generalize so Rather than trying to train the system On every single possible data point that Has ever or could ever exist the system Can learn from a few examples and handle The unknown in a safe manner well that Kind of put up some red flags for me I Mean from a few examples yeah I guess we Have to qualify we have to qualify what Does a few examples mean to roel is that A thousand or in in her world it could Be more than a few but I do think this Is the conversation that's been

Happening actually in the AV World which Is the whole Edge case situation a lot Of companies have been building out These simulations in order to run Through all the various edge cases and That's why there's been this movement Towards more I'm going to use this term The industry doesn't necessarily but Sort of learning through behavior and More generalized because what I think a Lot of companies have found is it's Impossible to think of every single Possible Edge case that could happen Happen so what is the better approach is It to have a system that can handle edge Cases even if they've never encountered That in simulation for instance or a System that has gone through every Single edge case and therefore can Handle it and a lot of folks will argue Well you can never possibly think of Every single possible scenario so you Should have a system that's more General That's super interesting and actually This is a good segue into our our next Deal of the week open I's co-founder Elia suser announced his new company This week safe super intelligence not Shocking I mean he actually only left Open AI about a month ago and I'm not Surprised he started a new company I am Surprised it happened so quickly ha tell Us more about it well I think this is Super fascinating right CS was the

Co-founder of open AI right and he was Also the chief scientist he left briefly A while ago and then came back and it Was a few back and forth and that kind Of thing but you know clearly he left a Month ago and already had this in the Works and he's building up this new Company called uh safe super Intelligence which some really High-profile co-founder I'll get back to That in just a moment but what they're Trying to do is to kind of build a super Intelligence as what they're calling it And reading between their lines it seems Like they're actively trying to build a General AI which is kind of the gold Standard for AIS that can be use for Anything but they're saying they're Prioritizing safety and some of the Critics in this space are like look per Definition a general AI cannot be safe Because you get very very close to Self-awareness and at that point Self-aware beings have a tendency to try And protect themselves right a lot of Science Fiction covers this in great Detail but it's fascinating because he Brought in some super interesting Co-founders and he's definitely one of The sharpest Minds in AI so if he says This is possible you know the world's Going to pay attention I have a couple Questions about safety but I will say This I was not surprised at all by the

Way Maryann that it happened within a Month My guess is that folks like him are Constantly thinking of various ideas and Maybe saw things happening in a Direction that he wasn't really excited About over at open Ai and had something Pretty ready to go and with his pedigree And experience I'm sure he had zero Trouble raising funds but my question For haa is what does he mean by safe has He talked about that because what I Found in covering AV companies is and Covering Tesla is that everyone has a Little bit of a different definition of What is safe and there's been some Questions with open AI about how will They protect and make things safe so What is he actually doing that is Different that is the undisclosed value Question they haven't said anything About the valuation or how much money They've raised and they've been really Vague about what this safety thing Actually means a quote in the articles Says that we approach safety and Capabilities in tandem as technical Problems to be solved through Revolutionary engineering and scientific Breakthroughs we plan to advance Capabilities as fast as possible while Making sure our safety always remains Ahead which is a whole lot of nothing Burger to be honest right there's no

Specifics doesn't say anything about What safe actually means and I think Honestly from what I'm hearing through The grape vine is that there was just a Bunch of people who got very unhappy With open AI in general you know there Was the lawsuit from Musk there was the Are we or aren't we open source are we Owned by Microsoft like there's a whole Bunch of messiness that came up and I Think open AI in many ways became the Victim of just growing so Extraordinarily fast and so I think They're just hanging on for their life And did a medium good job with that and It seems like CIS at some point was just Like look this has gotten too political I want to start something else where Where we can actually go back to basics This is all secondary information but That seems to kind of track with the Type of company he's trying to start Here yeah I guess we we'll have to see How this all plays out I mean it's it's Pretty fascinating to watch it's always Really interesting to me when you see a Company as large as open aai have senior People leave and then Branch out like One of the other former exec is now at Anthropic so you know it's kind of Interesting because it seems like if They could keep Harmony within where Would open AI be now like if these People didn't leave to go do other

Things it kind of makes me wonder but But anyway we're going to switch scares A little bit my deal of the week does Involve AI a little bit my goodness what What doesn't involve AI anymore but it's A fintech company called ginger and they Just raised $20 million led by PayPal Ventures and so I thought this company Was interesting because what they do is Essentially offer companies mostly Startups at this point the ability to Pay for uh technology purchases such as Software infrastructure cloud with a buy Now pay later method so you know it's Not a New Concept there are other Companies doing similar things but what Is interesting about what Ginger is Doing is that they work both with buyers And sellers so they actually work with Vendors to embed technology into their Platform so when when trying to sell to Companies they can say hey here's some Flexible payment terms for you you can Pick and pay in this amount of time or Over you know this period meanwhile the Companies get a way to kind of preserve Their cash right and not not burn as Much and extend their Runway is what you Know what the advantage is what Ginger Is saying so I hadn't really heard of Anyone doing that specifically working Both with buyers and sellers so caught My attention Kirsten what do you think Well the integration piece to me was the

One not saving grace here but you know We've we've heard of this sort of idea a Lot but that piece is interesting to me And I think it's worth mentioning that These aren't small vendors either right This is AWS OCTA Cisco Salesforce are some examples I believe Sake right yeah exactly really really Large companies yeah so that to me is Where it has a stickiness Factor where If you are a startup and you know you Have all these potential platforms that You may be dealing with and which is Oftentimes a huge suck of a Beyond Payroll a huge amount of where your cash Might be going or Capital might be going And it's integrated right there you're Likely going to then use use that option And so that stickiness factor of Ginger Already being in the loop and not having To do a lot of external sales in order To get people on board to me is the the Clutch part here right right and they Only launched about a year ago or in the Second quarter of last year so they're Saying growth is uh 700% year-over-year Of course it was a small base because They only launched last year but it's Still I I do see that potential PayPal Ventures did too new backer existing Investors also participated including Google's AI Focus fund gradient Ventures So they also had raised I think it was In December of 2022 which you know a

Year and a half between rounds now is Dare I say a little bit close together In this funding environment because that Used they you know they used to happen Sometimes within months of each other And and now it feels like companies are Going longer in between rounds but yeah They they raised more money they want to Grow and yeah it just stood out to me It's it's definitely a little bit more Of a unique model another statistic that Surprised me too that a recent Forester Research report estimated that Global Tech spend is expected to reach $4.7 Trillion in 2024 so okay think about the Massive market right that this is a Massive market so I think Ginger's Ability to grow is huge if they can do This right hi I'm curious do you have Any thoughts on this yeah I've just been Sitting here thinking about it in a way They're kind of picking a fight with Both the VC industry and kind of venture Debt and so it becomes another way for People to acquire these types of Technologies it's a really fascinating Play and honestly I can't really make Heads or Tales of it I was just Frantically Googling and reading up on The on their customers yeah I mean they Make their money you know like a lot of The buy now pay later business model Type companies by charging interest on Their loans they also make money from

The buyers on the loan origination fees As well as through interchange fees that They have through a card program so They've got a a diverse Revenue stream So it looks like they're not just Putting all their eggs in one basket Sorry I hate to use cliches like that Slapping my wrist here listeners you're Allow one cliche a show it's okay yeah But so I mean I think what they're doing Is similar like when they first came out They kind of likened themselves to Startups like pipe and cap chase you Know which offered like upfront cash for Like predictable recurring Revenue that Was to come later they said that the Model sort of evolved since then and That they said that there are other Companies that kind of do what they're Doing like Tropic zip and vendor and Then there's brex and ramp that offer The corporate expense cards but Interestingly when they talked about Their main competitor they mentioned Bill.com yeah that's that's fascinating To me too my curiosity here is credit Cards exist other credit lines exist Invoice Finance in which is I guess Where they're kind of getting close to Bill.com exists I wonder which customers They end up with and whether they Actually end up with the high risk kind Of lowest end of the business customers Which is a strange space to be in right

Yes I can totally see why those business Customers need this service but I'm also Imagining that's actually a pretty High-risk uh debt category to service so I'm really curious how that plays out For them yeah me too I thought about That too also I guess I hadn't thought About this until just now when I Mentioned it but then how do they claw Back if they are lending and mostly most Of their customer base are riskier Businesses which have greater Probability of failing what happens when Those companies fail and how do they Claw back that money so you wouldn't Want your business model to just go Towards that customer group you would Hope that it would be a diverse group Group yeah I mean those are all great Points they claim that as the company is Maturing it's seeing its customer base Grow from early stage startups to more Mature companies spanning from series a To preo but yeah I think especially with You know the way things are going for Companies these days and more and more Shutdowns that that is an interesting Point and we'll be interesting to follow Back up with them later see how things Are going but anyway now we are going to Take a break after this break we're Going to look at speaking of shutdowns a Number of bankruptcies feels like There's been more than usual but anyway

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 pr.org [Music] TechCrunch okay yes so we're going to Take a closer look at recent Bankruptcies Eevee startup Fisker filed For bankruptcy this week in an Unsurprising move Kristen again this is Definitely your wheelhouse no pun Intended we aren't shocked what do you Think about this uh bankruptcy filing Yeah I mean this filing should surprise No one and you know our senior reporter Here Shan oain has done a ton of deep Reporting about Fisker for the last Several months and actually prior to Even coming to Tech wrench he's been Following this company for years now and I thought his piece which I'll get to in A moment really encapsulated what Happened here but the nuts and bolts are This the company filed for bankruptcy And their estimated assets of around 500 To 1 billion liabilities of between 100 Million and 500 million and they have an

Hundreds of creditors including by the Way back to bills to technology Companies and services that you might Have to buy sap Adobe Salesforce are Among the largest so these are companies That they owe you know hundreds of Thousands of dollars to because they Were using their their software we've Seen this coming for a while and Beyond The filing um and there's going to be a Lot more reporting to come on this the Vehicles themselves on the outset looked Compelling and interesting but as Sean Wrote this week it really was that they Never got past that piece meaning they Were using a contract manufacturer Magna So they were like great we're going to Be an asset likee company we're handing Off the hard stuff the manufacturing Those expensive factories to an Established company but they sort of Forgot all the other stuff that is Necessary in order to run a car company Yeah like important stuff yeah having Proper customer service being able to Handle servicing the vehicles when they Inevitably will have problems even Collecting and keeping track of their Own customer payments we had a story Earlier this year about how they had Actually misplaced and later found about $16 Million worth of customer payments So oops this is yeah oops so this is a Company that it wasn't that the idea was

Bad it was that they did not operate it As a company and the sort of pitiful Part is that the co-founder Henrik Fisker has gone through this before with Another company many years ago and so The expectation was you'll learn your Lesson I mean failure is a part of Learning you'll learn from these past Failure and it seems like you got caught Up in sort of the same thing again oh Yeah and then some really and then some Yeah and then some it's a tough Environment for Ev startups as well even If they had executed everything Perfectly I think they still were facing A lot of headwinds we've seen a number Of EV startups fail over a couple dozen Actually over the last couple of years Many of these companies went public via Spack mergers and were part of that Summer of meme stock saturation and fun And and really they were pre-revenue Most of them and they've since collapsed And really in the last couple months Once we've seen some other bankruptcies Happen arrival being one of them a Battery startup called Embry another one So it's not that Fisker didn't do Everything right in this terrible Environment and here they are it was a Combination of bad environment bad Choices yeah I think that sounds a lot Like synapse although as this story Continues to unfold it starts to get a

Little more disturbing in terms of what Was going on behind the scenes syfs was A banking as a service startup basically That operated the service that allowed Others mainly fintex to embed banking Services into their offerings we started Seeing signs of trouble last year when They had some layoffs and then finally In in April they filed for chapter 11 Bankruptcy they were going to sell their Assets in this fire cell $9.7 million Only fire cell to another fintech that Fell through and then the company had to File for chapter 7 bankruptcy since then It's been kind of a a disaster really a Number of the fintechs they worked with Have found themselves stuck unable to Access funds that customers are wanting Or needing copper I wrote about Basically had to discontinue its Bank Operations and overall apparently There's about $85 million in customer Funds that are not accounted for which Is a lot of money and I tell you this is Is worrisome because there is this Question of why work with an Intermediary like synapse if you can Work directly with a bank and now after All this has happened I think a lot more Companies are going to be less likely to Want to work with an intermediary like Synapse because this is just all been Kind of horrific and in the past week The CEO of of synaps U reportedly raised

$10 million for a new robotics startup While all this was still unfolding at Synaps so yeah anyway this is just a Mess it's an epic mess and at the same Time I think if we zoom out and look at The the problem that synapse is solving Right it is the look setting up a Banking anything is excruciatingly Difficult and if you want to do anything In this space you have to kind of rely On other suppliers the the thing synapse Got so incredibly right was it was all API forward it was easy to use as a as a Kind of banking service right this is The same reason why twio became Successful because actually sticking Racks in service to send text messages Is such a massive pain in the butt and So I think yes people are going to be More curious about using services like Synaps and maybe there will be better Diligence happening and maybe these Types of problems will go away but at The same time there's definitely a space In the ecosystem for companies like Synapse and as we talked about a few Weeks ago I am so curious who's going to Be filling this void because it is a Void that needs filling for sure well I Have a question about that so was this a Case of it sounds like good product and Poor choices Or what is the cause of this like in the Fisker case yeah economic conditions are

Bad but as I noted they made a lot of Bad choices and it seems like this is Also a little bit of a dumpster fire but What exactly did they do wrong that led Them to this end this terrible end Because as high a mention they they had Like an easy to use Product yeah I think all of that's still Trying to be deter and there are Allegations that the CEO really just Didn't understand well enough you know The the banking world and actually just Last week the Federal Reserve ordered Evolve Bank Corp which was a partner to Synaps and and had partnered with other Fintechs to quote bolster its risk Management programs around fintech Partnerships so now there's a lot of Eyes looking at evolved too like was There enough compliance going here you Know there's just a lot of questions as To exactly what went wrong there's been A lot of finger pointing since day one Between you know synaps and evolve and Then the startups it worked with so I Think all of that is still coming out Kiren we don't really know for sure what Happened but I do think it's kind of Crazy that this guy is already raising Money for another company it just speaks Of hubris and yeah he he was responding To our requests for comments pretty Early on but once once the acquisition Fell through and and things really

Started to come out he got quiet which You know Sometimes silence speaks louder than Words yeah for sure I mean the the Biggest question for me is like how do You lose $85 million it's kind of the Same question as with Fisker how do you Like did you check between the sofa Cushions what the hell happened and that Just reeks of fiduciary Irresponsibility and so it's a little Surprising I mean you don't go and raise $10 million randomly right that would Have been in the works for a while and What that says to me is that it sounds Like the the CEO kind of checked out Already and Poss you know if it's if It's circling the drain of course you're Going to look at what you're going to do Next is it a little huy and is it a Little bit rude Absolutely but you know it's uh It's Curious it is curious well I know we Could probably spend a whole another Episode talking about this but we're Going to move on to a little bit more I Think fun conversation here so be real a Social media startup was acquired by Voodoo for about $537 million so this Was super interesting to me I'll be Honest never used be real but basically For those who don't know this is a Startup that gives users like two Minutes to quote be real by taking both

A front-facing photo and a selfie it was Struggling right I think they were they Were going to be running out of cash in A few months this is not a typical Acquisition where you know a company's Doing pretty well and and they get Acquired I mean for half a billion Dollars but obviously Voodoo this French Mobile gaming app unicorn saw a lot of Value and what B real can still do and Scoop them up so I don't know this was Intriguing I think B supposedly has Currently about 40 million active users People are apparently drawn to it like I Guess encouraging more authenticity Unlike some of the other social media Apps but still $537 million for this Just seemed like a lot what do you think Ken yeah I guess it was slightly lower Than their last valuation of 587 I've always been interested in this Company because it was super Buzzy for a While but and I'm luckily I'm not you Know in the predicting business too much And more in the reporting business but I Just it seemed like one of those things That was just going to fizzle out like People were going to get really excited About it and then it was just going to Fade away and maybe it would have had it Not been scooped up for me the value of A company like this is then how far you Can take it how far can you take the the Platform Beyond just being real for 2

Minutes how does it evolve and it wasn't Really clear to me how it was evolving I Don't know if you have any insight into That but to me the big question is what Technology do they have aside from the Users that Voodoo found so interesting That they were compelled to spend half a Billion dollars on it yeah I I don't Know but from what I gather the voodoo CEO plans to incorporate ads into be's User feed so I think that he sees this Potential to monetize through Advertising with number of other Obviously social media platforms have Done successfully for some not so much For others because it feels like a Little counter to what the the company Is touting Right authenticity be real But hey here's an ad so you can you know Maybe look a lot prettier if you do this Right so it feels a little contradictory In a way but it's a big BET right a half A half a billion dollar bet and that ad Strategy I think is what we're curious To see you know will it actually work Out for them yeah I think two little Things to that I want to kind of pick at One is you know we don't write about These kind of Acquisitions a lot but They happen a lot like a soft Landing or An aqua hire or that kind of thing this Is like the last ditch like it's this or Failure right so these kind of exits Happen a lot of the time it's hard to

Get numbers on it because it usually Doesn't get reported but if you're in The VC space often enough you see them a Lot the other thing worth keeping in Mind is like they spend 500 million so About $540 million On 40 million active users so that's a Customer acquisition cost of $13 now in A lot of these kind of Dynamics $13 per User even if they don't convert all of Them that is a reasonable acquisition Cost right so even if they hate all the Tech and discard everything else if they Can somehow convert a subset of those Users into Voodoo users that is Extraordinary customer growth for a Dollar figure that is roughly in range With what the going rate is for Acquiring customers of course going to Be a bunch of over app and that kind of Stuff but I I imagine that's a huge part Of it right this is this is an Acquisition strategy as far as I can see That's a really good point I can see That but also I'm still curious because You know the the whole ad stuff it's Still an issue I mean earlier this week Ad blocker sponsor block posted that It's it's Google and video Services Testing out the server side ad injection With a limited number of users Google's Reiterated is position that ad blockers Violate YouTube's terms of service and That viewers who want an adree

Experience should sign up for YouTube Premium so I think I mean I I see your Point that's actually a great one that's Kind of cheap to acquire you know 40 Million potential users but you know how How will that play out over time Remains The bigger question would they will they Be able still to because I was intrigued I mean be real is not making money so Can this is a huge bet and that that This can be turned into a way to Monetize for Voodoo totally and this is Not at all uncommon either right a bunch Of the startups I'm working with when I'm not wearing my TC hat are doing Acquisitions for users right they've Built a product they're struggling to Get to get to a certain user base and They're like wait a minute our Struggling competitor that has 10,000 Users is like on The Chopping Block we Can acquire the customer roll in user Base and the cost of acquisition is Actually cheap for user acquisition and We can go through and and cherry-pick The best employees and take them to so It's a it's a pretty well trodden ground It's it's pretty high risk right because Who knows if those users are going to be Angry about your acquisition or the Change or whatever but it makes business Sense if you're just doing dollars for Eyeballs it makes sense yeah well we'll See how it plays out yeah it's it's it's

One of the bigger bets I've seen in this Space for sure a big bet for sure but Anyway we're going to have to leave it There but Equity we'll be back on Monday Until then you can find me on X at Bay Area rer and Kristen where can you be Found on the internet so many places Maryann but in the social media world at Kirsten corc on threads Instagram and x And haa what about you I am most on X Under ATA which is spelled h a j e By The way that's the one you can also find Equity under the handle Equity pod on X And threads don't forget to check out Our sister show found which Dives deep Into the stories behind startups with The founders who built them have a great Weekend and thanks for listening Bye-bye 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