AI's tween years, who's taking over climate tech, and the latest for Fearless Fund

What could be more frightening than Friday the 13th? How about a realization that AI is in its awkward tween stage? At least, it was for the TC Equity pod crew, which this week included hosts Devin Coldewey and Kirsten Korosec along with TC reporters Tim de Chant and Dominic Madori Davis. AI is often a topic over here at Equity Pod; and this week was no different. It seems to be everywhere — and nowhere — all at once. Take Apple, for instance. As Coldewey noted on the show Apple has punted on AI. The tech giant is touting its AI capabilities, but for now, it’s all promise for the future and not quite a fully mature product. (get the tween reference yet?) As Kirsten and Devin discussed, it’s not all bad in AI land. Take the startup Someone Somewhere, a Mexico City-based startup that applies handcrafts on clothing and accessories and works with rural artisans in seven of Mexico’s poorest states to create “quality, on-trend products.” The startup used AI — specifically, Stable Diffusion’s text to images model — to show companies how some of their most iconic items might look if they were made with artisans from different regions. Let’s just say, the company got a lot of attention for the effort. See AI can be used for good? There were plenty of other non-AI deals and discussions to be had on Equity, including an eye-popping pivot from the venture-based autonomous vehicle delivery startup Nuro as well as Oura’s recent acquisition of metabolic health startup Veri. For the second half of the show, De Chant joined to provide his insight and expertise on an interesting trend around climate tech startups — hint it’s about hardware. Davis helped close out Equity with an important update on Fearless Fund and discussion of what the trickle down effect might be following a legal settlement and the shutdown of its contested Strivers Grant Program. Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:11Kirsten Korosec?

  Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. Today is Friday, September 13th. Woo, spooky. I'm Kirsten Korosec and joining me today is TechCrunch Senior Editor Devin Coldewey. What's going on in your role, Devin? Has AI taken over yet?

• 0:28Speaker 01

  No, still waiting on that, but you know, it's Friday the 13th. Anything can happen. Freaky Friday. Maybe I'll do a little brain swap with ChatGPT. See if that's an improvement.

• 0:37Kirsten Korosec?

  I think it would be. Well, on today's show, AI might come up. We'll talk about Aura Neuro, an autonomous vehicle company. Someone, somewhere, how hardware is taking over climate tech and an update on the fearless fund. I should also note that we will be joined by other special TC guests later in the show. But before we jump into the deals, Devin, I have to talk to you about this Apple story that you wrote. You know, all around, you know, we have a ton of Apple coverage. We have a quick rundown of what Apple announced earlier this week. So you can check that out on the Equity shot from Monday and thanks to Amanda Silverling for taking over on that. We'll put a link to that in the show notes, but you can also go back two episodes to listen.

• 1:20Kirsten Korosec?

  But Devin, your story, Apple punts on AI.

• 1:23Speaker 01

  Yeah.

• 1:23Kirsten Korosec?

  Is Apple punting on AI?

• 1:25Speaker 01

  Well, everybody's punting. I mean, it's just, you know, Apple talked this up along with everybody else. Every AI maker is like, it's going to revolutionize everything. It's going to change the way you communicate. It's going to change everything about how you work and what you do. And then like the actual capabilities are so basic. It's like, oh, you can rephrase snippets of text. You can summarize emails. You can generate clip art or like find people in your, in years of photos. It's like you can do all of these things already trivially with tools you already have. And it's not that Apple's useless. It's just that it's not exciting or interesting in any way. Like after, you know, Tim Cook gets up there and is like, Apple intelligence is groundbreaking, these new capabilities. And it's like, dude.

• 2:10Speaker 01

  We've been doing these things for years. Google Photos has done this like, oh, recognize your friends and significant others and categorize them so you can search for them. You know, like those pictures of my wife on Halloween. We've been doing that for years. So I don't know why they feel like they need to hype it up so hard, but then like the actual things are so prosaic.

• 2:33Kirsten Korosec?

  Well, it's interesting and don't want to spend too much time on it, but it's interesting because as you noted, it's like really computationally arduous to achieve the same things that we already were achieving. So to me, I guess I'm like, if I'm seeking an analogy of some kind, it's like, maybe these are like the weird tween years where like you're at the age of making big claims, but you don't really have any independence and you can't really, nothing really big has happened yet. That's where we feel like we are right now with AI, like kind of doing the same thing. There's a promise of the future.

• 3:03Speaker 01

  Well, look, yeah, yeah. Interesting things are coming and there are improvements like Apple's approach to privacy and security and doing it on device is definitely a better way to do some of these things, but the things themselves are just not particularly exciting. It's like, oh, you can ask Siri, oh, who's the architect of this building? It's like, yeah, I was asking Siri that 10 years ago, or I would have if I had not turned off Siri first thing as soon as it was installed. But yeah, I mean, it's, we're moving forward. It's just, I wish they would talk a little less bombastically.

• 3:32Kirsten Korosec?

  Yeah. Well, one thing that Apple does talk a lot about or did was around health and that's a perfect segue to this acquisition story because health hardware or the combination of hardware and software and health seems to be pretty hot right now. And one of the deals was a story by Brian Heater, which is Aura acquiring this Helsinki based health startup called Very. And they're known for these continuous glucose monitors. I mean, basically their focus is on metabolic health products. This one was interesting to me because it just continuous glucose monitors are so hot right now, like seriously.

• 4:10Speaker 01

  Everything's so hot right now.

• 4:11Kirsten Korosec?

  There are so hot right now. I mean, they are everywhere. And admittedly, I actually used one last year and it was pretty amazing. Like I did achieve the goals I wanted to achieve. But this deal is interesting and I'm wondering if it's a hint at what's to come.

• 4:26Speaker 01

  Well, I think so. Some of the stuff at the Apple event, some of the most exciting stuff was health-based and wearables-based, like being able to use the AirPods Pro as a hearing aid and stuff like that. We're just getting more capabilities in smaller devices. And that's really helpful for a lot of people. And we're getting there, like the Oura ring, you know, a few years ago was pretty useless. It was like, oh, it's like a step tracker. Like, forget it. But now, like, we're getting to the point where these little devices are actually going to be really helpful for people that have health goals or chronic illnesses or something like that. It's getting really pretty useful. And the FDA is clearing this stuff for everyday use by ordinary people. It's not like, you know, a thousand dollar device. It's like a $50 device like the Lingo. So I think that there is a move towards,

• 5:12Speaker 01

  this is a reality. This is a new, ordinary, everyday health reality. And it could help a lot of people. But you can't let Apple and Google and whoever take the whole pie. And I think that Oura is probably making a play to make a bit more of a platform. It's not just, hey, here's your step tracking, here's your blood oximeter, whatever. It's more of a like, hey, if I'm going to track my health, am I going to do it on Apple? Am I going to do it on Google? Am I going to do it on Oura? They want to present themselves as a more full stack solution. And part of that is developing or buying a platform for that that is broader and very has that. They've been doing, you know, blood sugar stuff and diet stuff. They have a take a picture of your meal. And I think it's a smart play,

• 5:58Speaker 01

  or at least it's the smart play right now.

• 5:59Kirsten Korosec?

  Yeah. So the one thing before we move on is that you mentioned basically all pretty big companies. And obviously, the deal, this deal in which financial terms were not disclosed, unfortunately, Very is a startup. But like, I kind of wonder what happens with the startups, right? Because it doesn't seem like the room or the market size isn't infinite. Like, how many companies can really... Really have the mix of hardware and software that people will want and desire that seamlessly goes into their lives and that allows them to do all this health tracking. I don't know if they would buy into a startup necessarily to do that. Maybe they will. So do you have any sense of like what this means for the startup community? Like, how much room is there?

• 6:41Kirsten Korosec?

  Or is this just going to be like Apple, Google, and like maybe Aura and maybe one other player? And then that's kind of it.

• 6:48Speaker 01

  It's hard to say because the technology is very advanced stuff. But like, I think that Aura is not going to face pressure from other startups. Its competition is Apple. Like, the thing that will kill Aura, if anything kills it, will be when the next generation of AirPods has heartbeat and step tracking it, or I don't know, step tracking, but like blood oximeter and all these other like health tracking tools, because it's a little pod that sits inside your ear. Instead of having it around your finger, you have it in your ear and it does all the same things. I don't think Apple's going to put out a ring. And I don't think a startup is going to put out something even smaller or svelter than Aura's ring. It's gonna be svelter. I think that the danger comes from above if you're already a startup.

• 7:32Speaker 01

  And I don't know that there is much room in the hardware side for startups to step into this, the wearable space, because Apple, Garmin, and Aura have eaten up a lot of the cake already.

• 7:46Kirsten Korosec?

  Yeah, for sure. Well, speaking of hard to break into, heavy on the hardware. The next deal is a deal written by one of the folks on the transportation desk, Rebecca Bellan, and it's about Neuro. And Neuro is a company I've been following for years. This is an autonomous vehicle technology company, but specifically they were focused on delivery. And they weren't focused on sidewalk bots. The whole premise was these lower speed, although eventually higher speed vehicles that were not designed for humans to ever be in. This was only to carry goods on the road, so not on the sidewalk. They're kind of fairly large and would do autonomous delivery. And this was the whole premise. And they raised like more than two

• 8:31Kirsten Korosec?

  Billion dollars over the course of them existing. They had all this tech talent. They actually made it through some regulatory hurdles. They seem to really be kind of a darling of the AV space. They've struggled the last couple of years. They definitely seem to have over hired and now they're pivoting. So my deal of the week is really about hope for a deal.

• 8:58Speaker 01

  Is the aspirational deal of the week?

• 9:00Kirsten Korosec?

  Aspirational deal.

• 9:01Speaker 01

  Maybe?

• 9:02Kirsten Korosec?

  Yeah, it's pivot. They don't want to be an operator anymore. Instead, they're going to be licensing their AV tech to OEMs. So automakers and also this idea of ride hailing and delivery companies. They face competition, Mobileye, which is absolute monster of a company that already has tons of deals on the advanced driver assistance, computer vision like space and is moving in towards that more automated driving higher levels. And then like a buzzy startup called Wave, which just captured a billion dollars. And they're doing the same thing. So they don't even have a deal as far as we know. It's a really interesting pivot, but it shows how difficult it is

• 9:45Kirsten Korosec?

  for these companies that like seem to have everything going for them in terms of money and talent. And then to commercialize is just they're not getting over the hump. They're like, the business model is the problem.

• 9:58Speaker 01

  Oh, yeah. I mean, and that's, I wouldn't say that I had any intuition about this a few years ago. I would have said, you know, the technology will be there and they'll find a market, but they still haven't found a market. Neuro hasn't, you know, Waymo is like, you know, they're on the streets in San Francisco. But I mean, those cars must cost like 300 grand to make, right? It's not a business model. It's a, it's a tech demonstration. And, uh, you know, I, I want these companies to see success because I think autonomy is the future of transportation and logistics and stuff like that. But. You know, who out there is actually going to pay, you know, when they actually see the contract sheet and the like, hey, yeah, so you're going to be licensing this technology

• 10:37Speaker 01

  or our leasing 18 of these vehicles for your corporate campus, that will cost $7 million. And they're like, oh, I'm sorry, let me just tear up this contract and throw it in a hole because I will never, ever pay $7 million for your stupid little automated go karts. I feel like that's how most of the meetings have gone for the last few years and that may change. And hopefully pivoting like this gives them a better business position to be a little more flexible and actually make this business proposition happen for the first time.

• 11:07Kirsten Korosec?

  Yeah, well, I'll push back a little bit on the hope there.

• 11:10Speaker 01

  There's no need to.

• 11:12Kirsten Korosec?

  There, there is like, oh, okay, this seems to make sense. Maybe they're like landing on this business model, but with one really important caveat here, which is automakers are the most fickle entities that exist. And I feel like we have gone back now to 2015, 2016, when all these AV startups were getting, basically what was happening is they were getting interesting tech, showing demonstrations, VCs were like, oh, wow, this, this could happen. There wasn't really a business model. The business model was land that proof of concept deal or that MOU with an automaker. They put all their chips into

• 11:53Kirsten Korosec?

  that, they develop it and then automaker and they raise money off of it. And then automakers are like, yeah, no, we're good. And so many of these startups went through that. And I'm a little bit fearful that that will happen to Neuro. The one exception is Neuro's been around the block. They know what they're doing. They've been at it for a long time. They've got good connections. They've got good, you know, tech and talent. And hopefully they can land a deal with an automaker that doesn't just decide to change its mind because this happens a lot. We've seen this multiple times. Ford, you know, pulled its funding from Argo, dead company. This could be repeated. So I'm a little worried about that, but we'll see. I mean, hopefully this gives them more.

• 12:37Kirsten Korosec?

  Runway to make a go of it.

• 12:40Speaker 01

  Well, let's hope so.

• 12:41Kirsten Korosec?

  Well, before we move on, before the break, I should say, I do want to mention one other story. And this was from Mary Ann, who everyone here at Equity knows. And it was this kind of cool feel good story about someone, somewhere, a Mexico City based startup that applies handicrafts on clothing and accessories. Devin, tell me what the heck this has to do with AI.

• 13:05Speaker 01

  No, this is, this is great. And it's just a very light, such a great little story. This is a company that was looking to source products from artisans who are unable to take part in the global marketplace, like throughout Mexico. And they're like, hey, we make this woven thing, or we make these patterns the way we have for years and years. But you know, you can't pitch whoever, you can't make a woven shirt and then say like, oh, would you like to make a million of these Nike? But what they did was they used an AI model, stable diffusion. And they fine tuned it on their patterns and stuff. And then they made basically like concept products that were like, oh, here's what Air Jordan would look like if it used our patterns. Here's what a jersey would look like if it used our patterns.

• 13:47Speaker 01

  And they pitched a bunch of companies with these AI generated products and said, hey, if you were to do this, it would be really awesome. And it would give work to a lot of people who are deserving of it. And Adidas and a couple of other companies actually went for it. And they made a bunch of limited edition jerseys for the American Cup. And it's really cool. It's like, this is, this was an opportunity for AI that actually was empowering for people who don't really use AI.

• 14:13Kirsten Korosec?

  You sound so shocked, Devin, that like, this is, this is the one instance of AI actually doing good in the world.

• 14:21Speaker 01

  I mean, 99% of the time with, with the AI stuff, the rich get richer, just like everything else. And here's just one, one case where a bunch of people who needed like basically a marketing win, used AI to make something cool happen for them and to make them some money that they deserved. So I think that's awesome. You should read the whole story. There's a lot more detail and interesting stuff and Mary Ann did a great job with this. So yeah, go, go check it out.

• 14:46Kirsten Korosec?

  Yeah, go check it out and hopefully we'll see more of these stories in the future. Well, that's it for Deals of the Week. When we come back from the break, we're going to talk about hardware taking over climate tech with Tim Deschand and what's happening with Fearless Fund.

• 15:05Kirsten Korosec?

  You know, I'm ready to talk about one of my favorite topics, and no, it's not transportation, it's climate tech. And we have Tim Deschamps here, who's the Senior Climate Reporter, to provide his expertise, his know-how on all things climate. Tim, thanks for coming on the show.

• 15:20Speaker 02

  Thanks for having me.

• 15:22Kirsten Korosec?

  Yeah. So you had a story that was really interesting to me because it focused on this report published by Congruent Ventures and Silicon Valley Bank that found of 50 North American companies, the most promising candidates in the climate space are hardware startups with a focus on energy or raw materials. That was a little bit surprising to me, but maybe, maybe you have a different view. Is it, is that like some huge takeaway, some big change?

• 15:47Speaker 02

  I don't think so. I mean, I think there is more than just 5% software within climate tech generally. What they were looking at was really the companies that have the potential to make the biggest impact, both in terms of climate and then of course, returns too. So they're looking at out and out carbon reduction. And there, I guess it's not entirely surprising that you would get companies that are hardware focused, because climate change is a physical, real world problem. And it's really hard to do that with software, right? You can get some impact, but not everything.

• 16:18Speaker 01

  Newman seems to think otherwise. Low carbon, that's, that's not going so well, though.

• 16:23Speaker 02

  Yeah. I mean, the ones that they were really focused on were across a number of different categories, materials and manufacturing, energy, like kind of how we live and move was one of them, agriculture and food were others. That I thought was really interesting. Ag and food, I thought were pretty underrepresented. And I think there it speaks to the challenges that startups have faced in the space, right? You've seen a lot of the alternative protein companies, fake meat, whatever you want to call it. They've kind of stumbled in the last few years. And so I think that's kind of put a bit of a damper on things. And also too, agriculture is just a huge system dominated by living things, plants, animals, people. It's really hard to change, and it's hard to eliminate some of those emissions. So.

• 17:09Speaker 02

  Maybe someday we'll get there, but for now, a lot of them were focused on things that humans have a lot more control over, like manufacturing and the materials that we use, the energy we produce.

• 17:19Kirsten Korosec?

  Yeah, well, the theme here that I'm hearing a lot is climate tech is hard, in part because it is so hardware focused. That isn't exactly like a favorite of the VC community to fund deep tech or hardware that's difficult and expensive to scale, right? So how is this actually affecting startups? Are they having trouble raising funds? Or are they still managing to, even though there is this emphasis on hardware, getting funds from firms?

• 17:51Speaker 02

  Yeah, I mean, you're right. Software is definitely the preferred vehicle these days. Hardware is less so. But of course, when you go back to the early, early days of venture capital, hardware was the thing, right? We were making chips and semiconductors and stuff. So maybe someday we'll kind of swing back a little more toward hardware, but that's, that's not what's happening right now. It is a little bit harder to raise money than it was during the pandemic when money was flying around and valuations were up. Early-stage funding is down this year relative for climate tech. So it is a little bit tricky if you're trying to get out the gate. And then even for those early-stage companies that have established themselves, once they get to that middle stage, the dollar requirements

• 18:36Speaker 02

  go up, right? You're trying to make a first-of-a-kind power plant or a first-of-a-kind manufacturing line. That's really expensive, and that's not something that venture capital is currently set up to do.

• 18:47Speaker 01

  I'm really curious about this, this number that is mentioned in the report, that the average startup in the report is seven years old and has raised $374 million. Obviously, as an average, that's thrown off by some of the really

• 18:58Speaker 02

  Yes.

• 18:58Speaker 01

  long numbers there. But like you said, I can't imagine a venture capitalist going to a new green or climate tech startup and saying like, well, listen, are you one of those startups that's going to need like five years and $200 million to, you know, before you even start showing profit? Or are you something that we can throw like $10, $15 million and we'll get our money back in three to four years? Knowing the numbers, looking at the numbers so starkly, it seems like, like I wouldn't invest in it as a venture capitalist. But of course, if I have a random mining company, I'd be like, oh, yeah, sure, that sounds great.

• 19:31Speaker 02

  Right, right. And I think the difference is that something like mining, a lot of the risks are known. Mining is still a really high-risk industry, but we've done it for a long time, right? And for a lot of these companies, this is new. We haven't done it for a long time. One thing I will note that's interesting is that even though the average is $374 million raised, the median is only $114 million. So it really is skewed by some of these outliers like Commonwealth Fusion Systems, which has raised $2 billion, Impossible Foods, Redwood Materials, Seela and Terra Power have all raised over $1 billion. So those definitely kind of push the numbers up in terms of the average. I think the one thing that's driving the investors that are in this space is that some of these markets are enormous, right?

• 20:15Speaker 02

  If you are Commonwealth Fusion Systems and you're trying to transform the electricity market, that's trillions of dollars in value right there. You're not necessarily going to capture all of it, but it certainly makes a $2 billion investment feel small.

• 20:29Kirsten Korosec?

  Right, but it also still has to be like, successful, right? Like, you gotta do the work before you can actually make the money off of it.

• 20:36Speaker 02

  Somebody's gotta do the work.

• 20:38Kirsten Korosec?

  Yeah, totally. What does this mean for the acquisition side of things? And this might be outside of the scope of the report, but I think of strategics getting kind of involved and seeing, oh, this interesting climate tech company, like, maybe a mining company is looking at some tech that would help them meet some regulatory need or whatever, and there's a hardware base, and they actually have the pocketbook or the wallet big enough to sort of acquire. So are you seeing, just sort of anecdotally and outside of this report, acquisitions happening with these hardware companies? Or are those like, nope, we don't touch those?

• 21:13Speaker 02

  I'm not seeing any acquisitions at this point. I think the markets may be a little bit frozen. Valuations did get a little high, and that can make things tricky, either from an IPO perspective or from an acquisition perspective. You do see corporate venture capital coming in and supporting some of these companies. So strategics in that sense, trying, I think, to get them to the point where they feel like either the science technology, if it's an early-stage company, has been de-risked, or if it's later, is starting to get some of the business risk sorted out and move towards commercialization. So there is some thinking that strategic VCs or corporate VCs are going to move in in those middle stages and help that commercial valley of death, the first-of-a-kind problem, whatever you want to call it.

• 21:59Speaker 02

  Help get those companies through that. But you know, corporate VCs are still VCs and they're not going to go out and write a $200 million check or something like that.

• 22:07Kirsten Korosec?

  Yeah, totally. What about the influence that like mega companies like Apple and their sort of climate commitments and their emphasis on hardware? And is that any sort of trickle down effect or driver effect in greater interest in these kind of hardware heavy climate tech startups?

• 22:27Speaker 02

  I think you might start to see some of that eventually. Like what we've seen with data centers and these net zero goals that Apple, Google, Amazon, Microsoft, et cetera, have are that they're looking for increasing amounts of renewable power. And you know, that's helping. You don't call them startups anymore because a lot of these companies are mature or companies have been bought by, again, you know, these major corporations that are producing solar panels, wind turbines, et cetera. And I think that that's kind of like helping to push demand for some of that. So Commonwealth Fusion Systems doesn't have like an offtake agreement right now or you know, power offtake agreement with any companies, but you could see a world in which that might happen.

• 23:09Speaker 02

  We've already seen it with Helion where they've committed, or sorry, they're a fusion startup as well. And Microsoft, I believe, has committed to buying some power from them once it's ready. They have a very aggressive timeline. So in that sense, you can start to see some of that trickle down. Other hardware companies that can do maybe say direct air capture can sell to companies like Stripe, Microsoft, et cetera, who are willing to pay a premium for one ton of carbon to get that stuff out of the atmosphere. And so in some sense, they're very directly and intentionally seeding the market and kind of trying to pull some of these companies forward in terms of their development. Other cases, you know, maybe some software companies might benefit in terms of virtual power plants and power sharing agreements and stuff like that.

• 23:54Speaker 02

  But it really takes, I think, kind of a clear view of the market and then also dedication on the parts of the companies to the large companies, I should say, to drive that forward. And speaking of Apple, we didn't hear much about climate, did we?

• 24:08Kirsten Korosec?

  Yeah.

• 24:10Kirsten Korosec?

  We did not. But yeah, actually, I think to your point just a moment ago, it takes a lot for a mega company or like a utility, for instance, or a mining company, oil company, even if it does have this need to meet some regulatory emissions, regulations and things like that, to take a risk on an unproven startup. So the other factor, and maybe we can leave it there, is sort of the connections. And like the buzzy startups sometimes get the best inroads or those connections that they have, but it's still high risk.

• 24:43Speaker 02

  Yeah.

• 24:44Kirsten Korosec?

  So you see all these pilot programs that don't necessarily go anywhere.

• 24:47Speaker 02

  Yeah, exactly. It's tough. And I think that's the challenge. A lot of investors have been favoring companies that have really good unit economics because they know that regulations might change and companies ultimately care about the bottom line. So the goal is to get something that's good for the climate and good for the bottom line.

• 25:05Kirsten Korosec?

  Great. Well, thanks for that update. We'll definitely have to have you back on again soon. It's been too long. And thanks again.

• 25:13Speaker 02

  Yeah, thanks, Chris. And thanks, Devin.

• 25:16Kirsten Korosec?

  All right. Well, next up, we have Dom. No last name needed because she is that dominating of a force here at TechCrunch. And she has an update on Fearless Fund, which is a story that she's been tracking for a really long time. Dom, welcome to the show.

• 25:33Speaker 03

  Hey, thanks for having me.

• 25:35Kirsten Korosec?

  Yeah. Well, first for the listeners, like catch us up on exactly what is going on with the venture capital firm Fearless Fund. And what is the latest update?

• 25:44Speaker 03

  Yeah. So basically, last year, a conservative activist group called the American Alliance for Equal Rights sued Fearless Fund, which is a black woman owned VC firm in Atlanta that's known for supporting women of color businesses. So basically, the AAR sued them over one of their grant programs called the Strivers Grant. That grant was, I believe it gives $20,000 to, or it gave $20,000 to businesses founded by black women. And AAR sued them, saying that it discriminated against non-black founders.

• 26:21Speaker 03

  And it's been this saga for about a year, back and forth, which basically it ended up with a preliminary injunction was placed on the grant. So Fearless Fund hasn't been able to give it out for a while. And I guess it's almost a year, a year since the lawsuit was filed yesterday. Fearless Fund and AAR announced a settlement, which depending on how you look at it, could be good or bad. Good news is, I guess, the lawsuit is finished and that it's not going to impact anybody else or impacts the other work that Fearless Fund does. And when I say anyone else, I mean, like, it's they didn't take the case to the Supreme Court and create a new law around allocating, you know, grant money. So that's good. They were able to settle it out of court. But it's also just overall, when you look at

• 27:06Speaker 03

  the anti-DEI wave that's been sweeping the country, it's another success, another victory with conservative groups really finding much success in suing away a lot of DEI initiatives.

• 27:20Kirsten Korosec?

  Right. Well, I'm wondering what if what you see now moving forward, like as you mentioned, this is now settled, Fearless Fund can move on and continue to do some other work. But what does this mean now moving forward? And kind of, I guess I'm asking you to put on your prediction hat. You're really close to a lot of VCs and also a lot of startup founders. So how do you see this sort of affecting things in the short term? Do you think that VC firms like Fearless Fund that who had set up these sort of programs will find other workarounds? Or are they just gonna all like take a beat and just wait out this anti-DEI wave right now?

• 28:01Speaker 03

  Well, I know that some founders have told me that they've already started noticing that a lot of the initiatives that were once targeted toward minorities have started to loosen up the language a bit to make it a bit more vague. And a lot of businesses, not a lot, but like Fearless Fund is not the only one getting sued. And AAR is not the only conservative group. And it's definitely not something I don't think that companies want to deal with being sued like this. And so What in the short term I can see initiatives kind of not being so obvious in who they're targeting and making it a little bit more vague. And I think that some programs, not in venture, but also like in legal, and I think there was a Comcast lawsuit as well. I know

• 28:46Speaker 03

  that AER is, has another lawsuit. I believe they're suing the Smithsonian Institute's Latino Museum Studies Program for having a focus on hiring Latino interns. And so there's definitely, this is going to keep going. And I think the response is going to be these programs are just going to stop being so obvious about who they're backing.

• 29:07Speaker 01

  That's so like, it's hard for me to, to comprehend this because it's like, on one hand, we, we have to acknowledge like systemic racism and like the relevance of race and background in, you know, everyday life, but also, you know, race is a protected class constitutionally. And so there's sort of a fundamental like, well, if you are assigning money or government grant money or whatever, there is a risk of saying this is only for this protected class. Like it's, it's kind of obvious that there would be objections, but we don't, but we don't want these objections because it's like, it's, it's harming the people who are being systematically oppressed by or excluded from capital and other resources. I feel like there's, it feels like there's no way out.

• 29:50Speaker 03

  No, there definitely isn't. I was talking to someone yesterday about it because it's kind of like, what do you do? I think there was like a tweet, someone was like, America's always telling like black people to pull themselves up by their bootstraps. And then they do this, like something like this happens. It's kind of like, how do you get around this? Because technically Edward Blum and the AER, I think the problem is like that they're technically not wrong in the way that the constitution has been set up. It's just that the way the constitution was set up was at a particular time that did not, I, I feel like a lot of these lawsuits now are not taking into context, the situation that certain minority groups are starting from. Like, I can't even like phrase it properly because it's like,

• 30:30Speaker 01

  It's frustrating, right?

• 30:32Kirsten Korosec?

  It's like, the rub is, how do you find equity and parity, but then also like completely ignore history? And that's, that's

• 30:40Speaker 03

  Okay, yeah.

• 30:40Kirsten Korosec?

  The diff- that's

• 30:41Speaker 01

  And not just history.

• 30:42Kirsten Korosec?

  The difficult piece.

• 30:43Speaker 01

  Cause there's, I mean, the statistics today, like, Adama, I see you right about this. Yeah, cause it's like, oh, you know, like, the representation of women of color in, in cap tables and stuff like that is way low. And you're like, okay, so maybe we should be, you know, there is something here. So let's try to negate that trend. But then people are like, oh no, it's illegal to negate that trend. And I'm like, okay, so it's illegal to discriminate. Obviously there is some form of discrimination happening, but we can't do anything about it. It just feels like, I don't know, I just like, like you, I don't even know how to sort of articulate or solve this problem.

• 31:14Speaker 03

  Well, yeah, no one knows.

• 31:16Kirsten Korosec?

  Let's, let's focus on the companies or the VC funds that, that were involved in this and what they're actually gonna do, right? Like, cause it is one of those things where it's like, I don't even know where to start. Like, just throw up your hands. But it sounds like one of the workarounds they're doing to comply with the law is using looser language. And then the question is, do they then continue though with active recruitment into the communities, in the minority communities that really still matter while also keeping that loose language? Like, it seems like that's the way forward, which isn't ideal, but hopefully still gets to the end result, right? And hopefully without any other lawsuits? Like, is that kind of what you think is going to happen here?

• 31:58Speaker 03

  That's what I think is gonna start happening. I know that one problem with that is, people are saying, well, how are, how are like these black founders and, you know, the Latino founders, how are they going to find us if we're not being so obvious in our call out? But I don't know how you get around that. You, you kind of, in some sense, have to start using more vague language because you will definitely get sued, as we have seen, and you will definitely lose, as we have seen.

• 32:26Kirsten Korosec?

  Yeah. Well, I guess if anything is true is that there's, first of all, there's a lot of fickleness out there. So I suppose we could all cross our fingers and hope that the attention shifts elsewhere, right? Some other great cause that they need to go after. But in the meantime, which is not ideal, by the way, I'm being incredibly sarcastic. But in the meantime, I think we kind of count on your coverage to keep us aware of what's going on within this community and not just with Fearless Fund, but others and how, what the long-term effects are going to be. It's not just, hey, settlement, we're done. We don't need to report on this anymore. Right? Like, what happens now? So I can't wait to

• 33:07Kirsten Korosec?

  sort of read your coverage three months, six months, a year from now, as to how this is playing out and what the effects are.

• 33:14Speaker 03

  Yeah, it's gonna be something.

• 33:16Kirsten Korosec?

  All right. Okay. Quote of the day. It's gonna be something. Well, Dom, thanks so much for joining the show. We will have to leave it there, but Equity will be back next week. How can listeners find you, Dom? On social media, somewhere?

• 33:32Speaker 03

  Yes, follow me on Instagram, please. @dominikmadori. Yes, follow me. Go to my Instagram.

• 33:38Kirsten Korosec?

  Insta is for Dom. Until then, you can find Equity under the handle @equitypod on X and Threads. See you next week.

• 33:49Speaker 04

  Equity is produced by Teresa Loconsolo with editing by Kell. Bryce Durbin is our illustrator, and we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening, and we'll talk to you next time.