Why OpenAI inked a deal with dating app giant Match Group | Equity Podcast

This episode is sponsored by Morgan Stanley atw work visit morganstanley.com Assessment to get your free transaction Readiness assessment Today hello and welcome back to equity a Podcast about the business of startups Where we unpack the numbers and the Nuance behind the headlines today is February 2 third my name is Alex and I'm Joined today by the usual power Trio in One corner we have the pride of Texas It's maranne aabo marann hey hi Alex I'm Can't help but chuckle at being called The pride of Texas as I always tell you You're my favorite Texan and therefore You're the best one we also have Kiren Corek Kiren how are you doing great um Great for me actually Alex but not so Good if you're trying to sell premium EVS as you might have noticed with some Of our coverage earlier this week about Rivan and Lucid yeah we'll talk about More EVS down the road but not the Four-wheel variety instead we'll talk About those that only have two on the Show today we do have deals of the week From permit flow cake and then what Match group is doing with open Ai and Then for our first major section of the Show today we're going to discuss what Happened with Clara and seoa and then We're going to close with notes on Venture-backed gaming and why gaming Companies could be in good Straits for

2024 but Maryanne you have put my most Hated words into a headline and so I Want to start with you because you put Turbo Tax into a startup headline and I Want to know why well I was I wrote an Article about a company called permit Flow and I guess you can tell from the Headline they are focused on permitting Specifically construction permitting and They claim to be building the Turbo Tax For construction permitting so this Company is basically saying look we can Be a One-Stop shop for General Contractors so that when you have to Apply for a permit well will help you so That the process can be smoother and Faster now this is one of those topics That may seem dull to the average person But again maybe because I'm a little bit Of a construction Tech prop tech nerd I Think it's very interesting this is a Huge problem it's a big problem for Everyone really even if you don't Realize it because if permits take a Long time to get approved that delays Projects that delays things like housing Being built and that makes prices go up So that is one of the things this Company says it it's hoping to do with Its software is help make housing more Affordable by getting things cleared Through the pipeline quicker okay I have A very important question though because Software that streamlines things great

But often times the bottleneck is at the City or the county which is an absolute In my personal experience total Nightmare to deal with so how is it Navigating that piece yeah very good Question Kirsten I'm going to say that I Think the the best way to describe this Is they have llms embedded into the Software and so they're able to tell Maybe what kind of obscure requirements The city might be asking for and help Contractors plan for that in advance Even because they've already for example Let's see they've helped 5,000 units of Housing get permitted so they have all This data already so that's that's part Of the goal is to say okay we can kind Of predict what the city is going to ask For so you can go ahead and address a Head on and I forgot to mention one Other quick thing this company just Raised $31 million in series sa funding And that was led by Kleiner Perkins and Interestingly this was just over a year After they raised 5 a half million in Seed funding which is a pretty short Time frame in this day and age when it Comes to raising Venture Capital uh Other investors include Y combinator is YC Alum felic Ventures initialized Capital Alto Ventures I know that Alex Is going to have all sorts of questions On the funding sides and commentary but I did note that so right now they're not

Working everywhere but mainly in California Florida and Texas and California is really interesting to me Because that just seems like a Permitting nightmare a lot of specific Requirements so are they working with Each city and county to get all that Data you because you said you're they're Using llm so what's the data set where Are they getting that information yeah So okay from how I understand it they do Operate in municipalities all across the Country but their largest Footprints are In California Florida and Texas um but They do plan to expand nationally and Good question about that one of the Things that they had told me is the Co-founder Sam Lim who used to work at Uber has experience in helping to scale Geographically localized software so I I Think that that's one of the things that Claim makes them different is they're Able to really like hone in on each Geography and figure out the different Requirements based on you know that Particular municipality or city so yeah One of the things that the Kleiner Perkins partner said in a written Statement was no longer do construction Professionals need to try and decipher Obscure Municipal websit requirements And suffer through back and forth Whack-a-mole in the form of municipal Office comments they're saying permit

Flow handles all that complexity through Its software which it I just want to say Nuances of how it actually works aside Super necessary we have seen entire Cities and regions handicapped in their Ability to build housing because of Permitting issues amongst other things Like higher costs labor and so forth but I mean oh my gosh if we can use this Sofware to build more housing hell yeah If you want to see a real world example Of housing policy and how it impacts Areas and societies look at Austin Actually oddly enough maranne Austin has Seen relatively high levels of uh Housing permits approved and has seen a Lot of apartment units come on which has Helped I believe if I recall the data Correctly dampen the increase in rent in The whole city and other regions where That's not happening San Francisco for Example my adopted home the other way Around so I really hope that this Company succeeds just because I think It's going to be good for the country I Agree uh one other quick point I'd like To make this is just one of a number of Startups in this space that has raised Capital over the past year and a half or So I wrote about another one called Pulley which raised money in June of 2022 also very recently Austin as you Mentioned Alex a company called greenl Raised or announced it had emerged from

Stealth with $8 million in seed funding Last fall there's another bootstrap Company also in Austin called Permits.com so there there are a lot of Companies in the space and partly that's Because after covid that opened the door For more digital applications so that Kind of helped pave the way for more Startups in the space I see well one Last note before we move on I do want to Talk about the numbers Kristen is Correct the company shared that it saw ARR growth of over 20x in 2023 now we All know what that means it means they Had $4 in Revenue in 2022 but you still Love to see rapid acceleration of that Sort and that to me explains Maran how It raised so quickly after its last Round because who doesn't want to invest In a growth story ironically a great Segway to our next story which is all About a company that's not growing it Has in fact kind of gone into the ditch But as it turns out we finally get to Say the words Florida man on the podcast Kirsten what's going on with cake yes we Do get to say Florida man and in a Positive context by the way not Wrestling an alligator or some other Florida Man story that we've come to Love uh so the story really centers Around cake which is a Swedish startup That makes e- motorcycles or e- Motorbikes these are not ebikes these

Are you know little little heftier and Go faster and the company went in into Bankruptcy protection is now winding its Way through that the founder is really And who has spoken to us a couple weeks Ago is really intent in trying to save The company but as it goes through this Process a Florida man his name is Michael Joyce he runs a retail shop in St Petersburg Florida called Emoto and He basically bought all of cak's Assets In terms of motorbikes not its IP or Anything like that and they're all Coming State side which is kind of like A fun story About a you know a startup kind of Falling to the Wayside and it's they are Popular one person stepping in and Buying all this inventory but there is Another layer to it and it's a startup This Florida man is working with a Detroit based startup called Bloom not To be confused with all the other Startups out there called Bloom but this One is going to Warehouse all the Inventory and sort of help ship the Motorbikes around the country blue Is this new company that's come from the Founders of ebike Brands Propel and Vela And the idea is that they see this shift Happening around ebikes e-motor bikes a Little bit of Economic headwinds and They see themselves as potentially this Third-party goet contract manufacturer

That will help them so there's this Interesting layer of a fun hero story But also this new and emerging startup Which by the way is based in this place Called Michigan Central kind of like a a Hub for startups that I just happened to Be at last week in Detroit wow these Cake ebikes are awesome they're also Like5 or $10,000 so these are really Serious bits of Hardware they're not Like the ebike that my family bought Which was like a grand from a friend Right the these are I think it's better To call them electric motorbikes um and Interestingly we had a scoop a couple Weeks ago that the the founder said you Know while he was trying to save the Company the founder of cake he actually Had a number of chats fairly serious Ones with Harley-Davidson and some other OEM so you could see in hopes that the Brand would stay alive and there would Be some larger OEM that would step in And save them that didn't pan out but You can see that this is more a Motorbike territory if Harley is Interested in them or was Swedish Company backed by International Capital Ends up going bust man buys the stuff With the help of Detroit startup so that Way American consumers can have access To What's Left of cakes ashes it's just It's it's cool it just makes me happy It's very interesting that just this one

Man this one individual is buying the Remaining us inventory of this whole Company that's kind of crazy good for Him I hope it works out for him to be Honest with you I think from the article Um that's all he sold right though out Of his shop in St Petersburg where where This particular brand of bikes yeah yeah I think he has aspirations to turn this Retail shop into you know a larger brand The interesting thing here is it raises The question just in general around Modernday ebikes especially these and Motorbikes with especially these bespoke Brands that have software in them is What happens when you buy a bike like Van moof for instance and then the Company folds what happens to you how do You repair it how do you um soft you Know software updates things like that And Alex is very excited to weigh in What happens is if you buy a van Mo and Then the company goes down you end up Watching your life savings go van Poof nice you couldn't wait to say that I could not wait to say that sorry we Actually have a at least one staff Member who has a van moof and there is a Startup that's kind of popped up to Support van moof owners at but again Just buying the inventory is helpful in Terms of fixing um repairing but then There's that question if there is any Kind of software Management in any of

These companies what happens and I think We're going to see that a lot more this Is just one instance of a startup that Was popular but it didn't really work Out but those products are floating Around there and so I think we're going To see more of this actually who Supports the folded company of the ebike Or scooter startup doesn't that also Apply though to EVS in general like Let's say I don't know you bought of Lucid and let's just say Lucid goes Bankrupt and they're not close to that To be clear let's just say it happens And so you have an EV from a Manufacturer that's dead and it's a Bigger investment than an ebike or a Motorized electronic bicycle do you end Up the same kind of quandry I mean yeah And if you if you think about it people Hold on to cars quite a long time the Average car ownership is 11 years so You're hoping that those Vehicles can be Supported for the the length of the time That you own that vehicle yeah so I Guess we'll find out if lucid's still Around in 10 or 11 years but I think That's going to be the case with some of These EV startups some are in a riskier Position than others yeah yeah well I'm Sorry to hear about cake I do hope that We keep investing in small electric Transit for urban environments because I Would like to buy something in that area

And the companies keep dying on me which Makes me sad but something that is not Dy is AI deal making and my deal of the Week is actually kind of a weird one Because it's actually a bit of a almost Like a transaction if you will between Two large companies so match Group which We all know as a parent company of manyi Dating services it's public and it's Wellknown so when it ined a relatively Large deal with open aai my first Thought was cool open AI is going to use Match.com data and so forth but actually It's more of a match group is buying Licenses from open Ai and that makes This slightly less compelling to me but The fact that match is so proud of Inking the deel to me goes to show that Everyone wants to have some of that AI Die glitter attached to them if you will Maryan and so it's kind of a weird deal To discuss but I think it shows where we Are today regarding AI hype I have to Say I thought it was amusing and even a Little clever that they had the press Release written by chat GPT and what an Funny and interesting release that was Our Sarah prz made fun of it throughout Her Piece the language not at all a grown Exclam point to a few of the can quotes That that were pretty funny buty you Know it caught our attention didn't it Not a bad marketing strategy in this

Case well I think anything open AI I Click on immediately because I'm always Worried it's going to be the launch of a New model or a new doohickey that I need To understand to know about so when they Do anything involving a large dollar Amount I kind of go what what now um and Then the context here is that match had Discussed putting 20 to $30 million this Year into AI based Innovation so expect I guess this stuff to show up in your Apps soon first of all I love and I will Now use it all the time the reference of A company wanting to be dusted with AI Glitter because I think this feels very Much like what I've seen uh among some Of the automakers as well who are trying To be part of the Conversation you know either putting Demoing uh Chachi BT in their vehicles Or talking about AI quote unquote Innovation But not really being super specific so Do you think that this squarely Falls In a little bit thirsty and wanting to Be included or is there actually some Real stuff happening here that people Who use Tinder match Okay Cupid we'll We'll see thirsty like a man lost in the Desert needy like a child left out at Snack time I mean come on this is Exactly what it is but I think that we Have to keep an eye on major Transactions involving open aai because

We forget I think occasionally that open AI is a company and it is partially Owned by Microsoft and other investors But not entirely and so it needs to do Business and you know we should keep Track of how it's doing as well so this Deal with match interesting on the match Side I think it matters a bit more on The open AI side if that makes sense and Also as we were kind of prepping for Today's show more news came out namely That Reddit has pinned a deal with Google to essentially license its data Into Google's AI systems if you didn't Know Reddit forms an important part of The Corpus that AI models especially Llms are trained on and I think that Deal is worth about 60 million a year so Here we have some companies paying open Ai and then also other AI model Companies paying other firms so there's A lot of money moving around and we're Storting out who's going to make I think The most profit here but the fact that Match group was this desperate to get Attention I just think really does a Good job of Shing kind of where we are Right now maryan last comment to you Before our break no I I agree and I mean I've never used match or or any of those Dating apps because thankfully they came After I got married but I I am curious To see how else they plan to incorporate AI into what they do I know that they're

Planning to use it to more of the Backend like with coding design analysis Building templates stuff like that but I'm curious if they're planning to Incorporate it in any other ways into Their apps or is it mostly going to be On the back end can I can I just do a Really short seg way based on something You just said Maran sure of course all Right so I was talking to my brother and We were talking about chat GPT because He and I are both big old nerds and he's In the Army I didn't know if he'd used It and he's like oh my gosh I use it all The time to write code and so it just Kind of hit me like my dad likes it my Mom thinks it's cool I use it match Wants it I don't know it's it's been Impressive to me how this stuff has Showed up in my regular life if that Makes sense and kind of leaving the Pages of tech runch and kind of walking Around in the world and that's to me is I think I just can't stop thinking about How many people are using this stuff now Day in day out and what it would cost to Kind of take it out of their hands I Think it's impressive I mean considering It wasn't launched that long ago that It's managed to become this widespread Already among just a general population Yeah 14 months or so right yeah someone Said something interesting to me the Other day and then we will definitely

Break but go back in time to when Google Search just came out and it was like Magic if you knew just the right words To put in to get that that response you Wanted and now that's happening with People who are familiar enough with chat GPT around prompts and how to write a Prompt and it's the new skill set that Today we of course take for granted Googling something but there was a time When it was kind of magical if you knew The correct way to do it so I feel like We're at that same moment in time again With uh Chad jbt yeah all right we have To take a break everyone hang tight when We come back we're talking about when You come for the king you best not Miss is your company planning to go Public or conduct a shareholder Liquidity program within the next 18 to 24 months did you know that proactively Planning for your next private company Liquidity event or IPO can help you Maintain greater control over timelines And outcomes Morgan Stanley at work Believes that when you have the right Technology and systems in place working In harmony leading up to a transaction You can prepare and execute with more Accuracy and ease visit Morganstanley.com Assessment to connect with their issuer Strategy and Excellence team for a free Assessment to find out if your company

Is transaction ready again that's Morganstanley.com Assessment to get your free assessment Today and what Alex was referring to When you come for the king and you best Not miss this has to do with Sequoia and The firm's effort to OU Michael Moritz From the Clara board so what happened Here was a bit dramatic and it took over What it took maybe a few days for it to Unfold but a sequa partner Matthew Miller who joined clar's board at the Start of the Year initiated this move to Get Michael meritz off the board of Clara now for the unacquainted Michael Moritz was not only on the board he was Chairman of the board he helped lead Sequoia's investment into the buy now Pay later company and this came as a bit Of a surprise then a couple of days Later we hear that Sequoia is walking This back saying oops we shouldn't have Done this and then they said that Initially the decision was trying to Help the company prep for its upcoming IPO then what happened is that Matthew Miller who's the one that initiated all This is now off the clarner board so This the whole plan seemed to have Backfired in his face it's reminiscent Of what happened at open a a few months Ago when there was this initiative to Try to get Sam Alman well it did work he Was removed from his post as CEO and

Then reinstated so anyway all this Happened what do you guys think I want To get to the root which by the way the Root question which I'm glad you write Up open the eye because that rote Question still hasn't been answered but Maybe you have the the answer to this One which was why was there this effort To remove him from the board to begin With what was the actual problem here or Complaint so I don't think anyone's Actually finished chasing that down so I Think that's that that is the point of Active reporting but I do have a Hypothesis okay so you're the new guy on The board right and you're looking Around the room and it's a bunch of People that run the company that have Invested the company and the chairman is This dude who just quit your firm and You want to be the voice of your SPM Seoa in this case to be as strong Strident and clear as possible hard to Have two Cooks from the same kitchen Even if one of them is Chef ameritus Right so you try to gently get Michael Off the board and then it turns out he Doesn't want that and he is a lot more Clout than you ha haa and then it blows Up in your face but I presume this was Something that kind of a low-key power Struggle if that makes sense yeah but I'm it's interesting that they it hasn't Been fully reported out yet because we

Still don't know what the root reason Was with the whole open AI debacle Either so well we kind of know but there Are some details that are still missing Right yeah but I mean it's it's everyone Thought that Sam was doing too much Under his own name and was not being as Clear with information as he should be The same stuff that kind of dinged him At why competitive there's a a Behavioral pattern here right sure in This case it is interesting that these Like little power plays came to a Conclusion so quickly yeah just goes to Show you know sometimes these things get Drawn out and it never really gets the Attention of media and in this case it Really kind of came to a abrupt end or Conclusion within a couple days yeah I I Was intrigued because in in the Financial Times article on the topic it According to a person with knowledge of Sea's thinking the firm had not fully Understood the situation when it Launched an effort to remove morit okay Now this is this is what I don't get why Would you allow something like this to Even get started take place if you had Not really taken the time to fully Understand what you were what you're Trying to do as a firm I mean did you Not understand the implications to begin With this is a big deal trying to get The chairman kicked off of the board

Essentially how can you not understand Like it reminds me of like not doing due Diligence when you're investing like What how how did this even happen to Begin with like did they not think this Through I have one word that will Explain and answer all of your Questions Huus oh that's not you know rampant in The VC World you know I don't think that we Should read Kirsten's comment as Indicative of hubris qua seoa but maybe Perhaps huis qua this particular partner Right I mean you show up you're the new Seoa person it's kind of like putting on Like a Ferrari jacket you know what I Mean like you're like you're Representing the Famous Brand the Everyone knows the cool everyone you Know wants to be associate Soo is like The Harvard of VC right like it's been Around for a bajillion years and it's Not it's controversies but still B Respected but he didn't he didn't do This alone right he did this with the Support of the firm I'm just trying to Clarify as I understood it the attempt To remove him was backed by Sequoia Managing partner rooli okay so I don't We don't know any of this for sure I we Don't know exactly what happened clearly Though the The Firm realized very Quickly after the initiative that maybe

They had made a mistake and walked it Back so once again maybe just another Lesson for startups boards companies Firms Founders really think these things Through before you try to get someone Kicked off or kicked out of their roles As CEOs or board chairs yeah and just One more thing like Michael morritz is Not just another investor he's one of The few whose brand has transcended I Think the venture capit realm and he's Backed companies like Google and Yahoo And PayPal you may have heard of them You may have used them today I may work For one of those companies now I mean This is a person who has a pedigree that Is basically going all the way back to 86 and I think it's going to be hard to Say that you're better than him at Leading a company through its end of Growth period towards its IPO or at Least I'd rather have Michael Morris on My board than Jesus so he's a former Journalist which I I have to love I I Have to admit that yeah actually people Forget that but that was his original Career trajectory and there's a lot of Interesting backstory there but we don't Have time for it because we have to talk About my favorite thing in the entire World and know it's not heavy metal or Hot sauce it's video games and Maran I Know that you are the other resident Gamer on the podcast today so I'm

Curious what was your take on Rebecca Sc's excellent piece outlining the Optimistic case for Venture investment In gaming this year first of all I'm not Necessarily the gamer I was when I was Younger I played um you know Miss Pac-Man Galaga and Don key Kong I'm Dating myself right uh and Super Mario Let's not forget but I do have a gamer In the house and my 16-year-old son so Seeing how how even from as a child to Teen years he's continued to be into Video games and different types of video Games I do think this industry has a lot To offer still and I am not surprised That VC see this as a potential bright Spot in 2024 but Kirsten the numbers Don't look to be particularly attractive When we look at what happened last year Right so 2023 is total is down from 2021 9.9 billion in 2022 6.7 billion um This is compared to 2023 is figure of Gaming startups raising 2 billion last Year so quite a fall actually and I'm Wondering where is it lack of interest Is that money going somewhere else is it All going into AI for instance are there Fewer VCS interested in in gaming what What's the underlying reason for that Drop part of what Becca pulled out from A couple of investors helps kind of Answer that question and the thing that Stood out to me the most in the story Was that a lot of the decline was a

Retraction in investment in web 3 gaming Uh because there was a moment when People were very optimistic that games Like axi Infinity were the future and That played to earn in its various you Know minations would become increasingly Popular and so a lot of capital went Into that but during the last kind of Web 3 winter that dried up so the Numbers we're discussing and crunch Base By the way kind of backs up the data From Convoy I think is like probably Half the decline of web 3 gaming and Probably half natural decline in other Type of gaming investment but the thing That that that hit me when I was kind of Preparing for the segment and rereading This post is just how big the gaming Industry is it's something like just About $200 billion a year Allin versus The American movie box office last year Was 9 billion And just the scale differential is so Large you would think that there would Be a lot more Capital chasing it just Given how much spend there is year in And year out maryan and I'm sure your Checkbook has taken a hit from your Son's gaming fandom yeah I was I was Really surprised at the difference Between the size of the video game Industry compared to the film industry But then again I shouldn't be because we Were just talking about it here at as a

Family that there just you know haven't Been that many movies to be honest with You that make you want to be like oh Yeah I want to go go see that in the Theater because you know movies are so Expensive these days it costs a fortune Just to to go to the movies to buy Popcorn to buy drinks and a lot of them Just don't have that much substance Anymore and when it's so easy to stream Things in the comfort of your own home I Guess it's not such a shock so anyway Video games appeal to a large like a Wide range of people from younger to Older and I think that's part of the Appeal and I think one of the reasons we Saw a decline is as as Becca mentioned There was a lot of web 3 and crypto Stuff that was trying to be incorporated Into gaming and then that kind of Evaporated last year and that Contributed to the decline of funding But that also goes to what we saw is What like these tourist investors coming In and and fueling these spikes and Maybe they've kind of gone away but that Doesn't mean that that the gaming Industry is not still worth investing in I think the people who who've seen his Potential all along have stuck around And they'll continue to stick around I Was going to say also with the you know Comparison to film video games have a Stickiness that not a lot of movies have

You know you continue to use it continue To go back to it and it takes a lot for Someone like a Barbie movie for instance For there to be folks who could go back Time and time again it has to reach that Cult classic whereas a video game if It's successful you know people will Play it for years so there's a long Tale On video game of course it has to be a Hit and there's certainly plenty of Examples of failures out there right oh Gosh yes but there's also so many Amazing Niche things like one thing we I Think discuss at a cultural level is a Lot of movies have been reboots sequels And superhero films lately and there Seems to be a bit less of the more Quirky independent experimental type Films hitting the theaters than perhaps We would all want in the Video Game World just in the factory management sub Niche of automation games and in the Sub Sub niche of space-based automation Factory games there are so many cool Titles I'm playing a game called Dyson Sphere program right now that is amazing And cost me 20 bucks on Steam it's just Fantastic so to me like the the the the Niches of video games is just one of Their best points but it's big it's Interesting and VCS do think that Cheaper Talent due to layoffs corporate Investors being active and AI especially Generative AI in games are going to be

Major drivers this year and as one last Little addendum on the gaming front There's a new community funding round Coming together that I'm kind of excited About do you guys recall when substack Raised money from its subscriber base When it raised that 5 million last year I think it was mhm yeah reg CF funding And frost Giant games who was building a Real-time strategy game called stormgate Is doing something similar rather soon And I wrote about it because I think They're going to be able to raise a good Amount of money and I wonder if that's Going to become more popular as a way to Fund gaming Studios than traditional Venture Capital given how much money We've seen leave that space but we'll Talk about that more when we have time In the meantime Maryann thank you so Much for your time Kirsten thank you for Repping Arizona keeping it proud if you Want more from the equity team of course We are over on X and threads and we are Tech runch pods over on Tik Tok my name Is Alex we are back on Monday morning We'll talk to you then goodbye Bye Equity is hosted by myself Alex Wilhelm and Tech runch senior reporter Mary an aeto we are produced by Teresa Loans solo with editing by Kell Bryce Durban is our illustrator and a big Thank you to the audience development Team and Henry pette who manages Tech

Wrench audio products thank you so much For listening and we'll talk to you next Time