SBF's sentencing, Databricks' GPT rival, and who's investing in the "underdog" founders

As the week comes to a close, we're also shutting the book on the trial of former FTX CEO Sam Bankman-Fried, the erstwhile crypto baron who is heading to prison for 25 years. But while the SBF news was a big deal, there was so very much more to cover on today's news roundup episode of Equity. With Kirsten Korosec, Mary Ann Azevedo, and Alex Wilhelm aboard this week, the crew dug into Robinhood's new credit card and what it can tell us about the strategy of major tech companies, Fisker's latest woes, and even Databricks' new AI model that it spent $10 million to spin up. But that wasn't enough. We also dug into two companies building startups focused around kids. One wants to help tots learn how to produce music, while the other is working to reduce waste and help parents care for their kids on a budget. Then, to wrap up, a look at just who unicorn founders really are, and a new $100 million fund that to back climate tech. Equity is TechCrunch’s flagship podcast and posts every Monday, Wednesday and Friday, and you can subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. 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.

• 0:10Speaker 00

  Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. My name is Alex and I'm joined today, as I am each and every Friday, by my dear friend, Senior TechCrunch Reporter on all things fintech, it's Maryann Azaveto. Maryann, hi, how's life?

• 0:28Speaker 01

  Life is good. It's a beautiful day here in Austin. How are you?

• 0:31Speaker 00

  Well, I got an eye infection. My eye did horrible, terrible things. I got to spend a day on the couch and now I am back at work and blinking a lot, but I can see out of both sides of my face, which does allow me to spy in the other corner, it's Kirsten Korsak. Hey, Kirsten, how are you?

• 0:44Kirsten Korosec?

  Hey, it's been a minute since I've been on. I've traveled, I don't know, like, seven different places since the last time I was on the podcast, so it's good to be back.

• 0:54Speaker 00

  So I wasn't going to bring up the fact that you were just going on full jet set mode there for a bit, but give us your chief highlight from the last business trip quickly, and what did you learn that was the most interesting?

• 1:04Kirsten Korosec?

  So Detroit was really fascinating to see actually what's kind of going on downtown with this incubator, Michigan Central, that new lab is actually involved in. Saw how it's all laid out, it's very neat, and we actually have a feature coming up in a couple of weeks about one of those startups. South by was South by in Austin. Missed you, Maryann. I know you escaped the city at that time. And, you know, there was still transportation stuff, but wow, was there a lot of Gen AI stuff going on?

• 1:33Speaker 00

  Never heard of it.

• 1:35Kirsten Korosec?

  Orange County was Rivian, so that was a big show, lots of fans, very interesting to see the R3, that was the big surprise. And prior to that was LA again for the Strictly VC event, in which I interviewed Tekeidra Mawakana, Waymos co-CEO onstage. And since then, they've basically launched publicly in Los Angeles, driverless, so a lot's happened.

• 1:59Speaker 00

  Yeah, Maryann, I went from my couch to my desk to my couch and back to my desk again. I take it you had a similar schedule?

• 2:06Speaker 01

  Yes, very, very similar. I'm living vicariously through Kirsten.

• 2:10Speaker 00

  Yes. And you know who else is going to be living vicariously through people who have the right to travel? Well, it's Sam Bankman-Fried because he's about to be nailed down both feet inside of prison for quite a long time. Mary Ann, can you run us through just the high level numbers here about why fraud is not a good business model?

• 2:26Kirsten Korosec?

  Well, Sam Bankman-Fried was sentenced to 25 years in prison today for fraud and money laundering at FTX. Okay. So we've all been wondering, we were all curious how long he was going to get. I think his attorneys argued for far less.

• 2:43Speaker 01

  Seven years.

• 2:44Kirsten Korosec?

  Seven years. Right. And he could have gotten what? Up to 110?

• 2:49Speaker 00

  Yeah.

• 2:49Speaker 01

  Which that's, that's a lot.

• 2:51Kirsten Korosec?

  So 25 is the number.

• 2:53Speaker 00

  I think we should have a rule for every billion dollars you squander, it's 100 years in prison. You know, I think there's to be some really stiff penalties for certain behaviors out there. I think it would help quite a lot. I'm glad he didn't get seven years. I think 25.

• 3:07Speaker 01

  It's a lot.

• 3:08Speaker 00

  It's a lot. I don't think he's 25 years to get over being a bad kiddo, but I do think that it's good to have the precedent set that if you do this, you get.

• 3:16Kirsten Korosec?

  Yeah. I mean, he's 32 now, so he'll be in his 50s when he gets out. And if he were to serve the full sentence, and that's, that'll be interesting to see that play out. Not sure I'll be paying attention to it 18 years from now, potentially, but I'll recall the name when that comes up and be like, ah, yes, I recall those times when we talked about it on the Equity Podcast. What happened to that guy?

• 3:36Speaker 00

  Well, it turns out not much.

• 3:38Kirsten Korosec?

  It is substantially less than, let's say Bernie Madoff.

• 3:40Speaker 00

  I think that's reasonable ish.

• 3:42Kirsten Korosec?

  Yeah.

• 3:43Speaker 00

  There's nuance there. Anyways, I'm sorry. I got so caught up in the kind of breaking news of SBF's sentencing that I forgot to do the show rundown. So if you're curious what's going to be on the pod today, well, we are going to talk about three deals of the week. The first one, all about Robin Hood's new offering, what's going on with Fisker and Databricks just launched what? And then we are going to dive into kid focused startups, which are growing very, very quickly. And then a new fund that does appear to be contra trend in one interesting way. But first, Mary Ann, Robin Hood back on the show post IPO. What's going on?

• 4:14Speaker 01

  Yeah, so Robinhood this week unveiled a new credit card, which they call the Robinhood Gold Card. This was not a shock to those of us who've been paying attention to Robinhood's activities. Last summer, it did scoop up a startup called X1 for $95 million. I had covered that company a couple of times. And one of the features that that card had that is being parlayed into this one, or has been parlayed into this one, is that cardholders can get cash back. They get 3% cash back and that cash back can be rolled into their brokerage accounts at Robinhood, and they can use it to invest. That's just one of many features that this card offers.

• 4:52Speaker 00

  What was that company that was doing like the, it rounds up your purchases and then puts that the extra into savings for you? Was it Acorns?

• 5:00Kirsten Korosec?

  Oh, well, I mean, a legacy company is Fidelity. I have that retirement savings card, actually.

• 5:04Speaker 00

  Oh, that's cool.

• 5:05Speaker 01

  Oh, okay.

• 5:06Kirsten Korosec?

  But it doesn't go to a brokerage, right? I mean, it's put into a retirement, a dedicated retirement. So that isn't a new concept. What I like is that there's no annual or foreign transaction fees, which I think is going to be compelling for people because there's, there's a lot of hidden annual fees in some of the more established, let's say, financial institution-backed credit cards.

• 5:27Speaker 00

  Yeah, absolutely. But Mary Ann, not everyone can get this card. There's actually a requirement upfront that does, well, Kirsten makes a very good point. Put it into greater context.

• 5:35Speaker 01

  Right, right. There is no annual fee or foreign transaction fee. However, you can only get the card if you're a Robinhood Gold member. That costs either $5 a month or $50 a year, which, you know, they say, oh, depending on how much you spend, you could earn back fairly quickly. That's how they're selling it. The 3% cash back is interesting because it's not on just any one or two categories, like food, travel, or groceries. It's on everything. And that, as I was writing about this, made me think a lot about parallels to the Apple Card, which has a lot of interesting features as well. But the cash back it offers is 2% on all purchases. I think it offers higher percentage back on Apple purchases. But across all categories, Robinhood's is 3, Apple's was 2, or is 2.

• 6:21Speaker 00

  I'm glad you brought up Apple because I bet some people are like, why is the equity team discussing a new credit card offering? And it's because frankly, what we are seeing is technology and tech adjacent companies like Robinhood get more deep into consumer credit. And we're seeing companies that can essentially become fintech players that we didn't expect to become them. I mean, if you think about when Apple rolled out the iPod and I told you down the road, they're going to have high yield savings accounts and a consumer credit card, you would have been like, why did they become Goldman Sachs? But now it's kind of normal-ish to do this. So Robinhood to me is kind of following in a wave of companies that are moving in the same direction to become more financially relevant.

• 7:00Kirsten Korosec?

  We're also finally starting to see sort of the fruition of some of these acquisitions that we were talking about, not just Robinhood, but a number of other companies. Like, what are they going to do with this acquisition? And now we're seeing that play out. And so, as you mentioned earlier, we could have predicted this, but now we see what it looks like. And I think that there's a number of other. We have, I've got to go back in our archives because there's been a number of these types of acquisitions from some of these companies that kind of put them closer into the fintech world.

• 7:28Speaker 01

  Yeah, I kind of nerded out a little bit on that aspect of it, having covered the startup from its early days, right? So I always find it interesting watching a startup grow and then to see one get acquired by a larger public company like Robinhood and its technology rolled into its offering like that, I think is pretty fascinating. Robinhood opted to do this instead of trying to build out the technology itself, which we often see larger players do these days.

• 7:52Speaker 00

  Yeah. Also, I just think we're seeing essentially every platform become like every other platform, period. Like, we used to joke about this in the world of social media, like something becomes big, Facebook clones it, and then, you know, that's kind of how things went forever. But it now seems to be a little bit broader than that. It like, for example, LinkedIn is trying to do games like the New York Times and videos up top like TikTok. Why? Because they want to grow more, apparently. And so I wonder if this kind of falls, Mary, and underneath the same aegis of, once you have some users, you eventually just want to juice them for everything you can. And so I expect Robinhood to launch an ad network in the next six months.

• 8:28Speaker 01

  You never know.

• 8:29Speaker 00

  When it, when it does happen, we can all groan together. Anyways, over to the world of automotive and EVs, Kirsten, one of my favorite companies, and by that I mean sarcastically, Fisker is having one hell of a week, and I want the high level breakdown because so much has been going on over at the troubled company.

• 8:45Kirsten Korosec?

  Yeah, well, I, I think dumpster fire is a more accurate descriptor right now. So there have been problems at Fisker for a while now, but you know how when a company, you just see it all of a sudden accelerate from like, ooh, that's a problem. Hmm, that's a problem. A federal investigation, eh, you know, this is what's happened to Fisker. So you might recall about four weeks ago or so, we did have a investigation on how multiple customer complaints and federal investigations into the Fisker vehicle, the software being buggy, the hoods flying off, roll away problems. So that sort of was a huge red flag that was happening. But behind the scenes, there was apparently a lot

• 9:29Kirsten Korosec?

  of money, internal money problems. So the scoop that we had from Sean O'Kane was that based on sources that we spoke to, Fisker lost track of millions of dollars in customer payments for months. They did manage to find, locate and recapture those dollars back. But this is basically failing at a fundamental level of what a company needs to do to survive, which is first you have to make a product and make a product that is of good enough quality, and then you sell that product, and then you got to collect that money because otherwise you're basically giving it away for free. So that's what was happening over at Fisker, and it's unclear to us whether they have resolved all these issues, but it did trigger an internal audit. And then the last thing is,

• 10:12Kirsten Korosec?

  while that was happening, many other things have been happening. Fisker basically is running out of money. It's deal with an automaker unnamed, but reportedly Nissan fell through, and that was a closing condition on its $150 million convertible note. So now, stock dropped 28%, ouch, trade was halted, and the same day, New York Stock Exchange then suspended them. So this all happened in the span of two or three days.

• 10:38Speaker 00

  Suddenly, and then Quickly.

• 10:40Kirsten Korosec?

  Yes.

• 10:40Speaker 00

  On the Fisker losing track of payment story that I was reading as be prepped for today's show, the thing that made me laugh the hardest was the fact that they weren't sure who had sent them money. And I believe they sent cars to people who hadn't actually paid for them.

• 10:53Kirsten Korosec?

  Yes, I read the same thing. I read that and was like, oh, my goodness. How on, how on earth do you do that? You deliver a car to someone who hasn't paid for it at all? I mean, what a mess.

• 11:06Speaker 00

  Look, we all clown on Williams, the F1 team for using Excel to track like 20,000 different parts for their F1 cars. But at least Williams rolls up, you know, with a car. I feel like here they must have just had like different systems that weren't talking to each other. But I'll just say this, I didn't get a free Fisker Ocean. And that's a bummer. I could have used one.

• 11:24Kirsten Korosec?

  I don't think you want a free Fisker Ocean. Clearly, they're running out of money. But I don't think figuring out how to collect money is going to solve their problems. They're sitting on about just under 5,000 vehicles in their inventory. And they just slashed the price of their vehicle by about up to 39% in the last couple of days. Wow. So imagine the desperation. I don't actually understand why that's even happening. Quite honestly, because it immediately crushes any existing Ocean owner. The resale value just now has plummeted. I don't think that even if they sold every single one of these, that they would even be in a better financial position because they certainly

• 12:09Kirsten Korosec?

  must be losing money on those cars by selling them so cheaply. At the end of the day, I think they just want to get rid of the inventory and maybe it makes it cleaner for them to enter into bankruptcy.

• 12:18Speaker 00

  Oh, man. You said the B word. Now, if it happens, we're gonna get, we're gonna get blamed. You've jinxed them.

• 12:24Kirsten Korosec?

  I think the only people who to be blamed are the folks maybe running Fisker. But I would be shocked if Fisker doesn't file for bankruptcy protection within this quarter. Well, the quarter is about to end, but within the next quarter. I, that is my big prediction of 2024. How about that?

• 12:42Speaker 00

  Well, I think you're dead on. And I'll just say that I've always thought the Fisker Alaska, which is their, I think, yet to be released EV truck was super hot.

• 12:49Kirsten Korosec?

  Here's my little chef's kiss. I mean, here's the thing. Henrik Fisker is the CEO of the company and is a well-known famed designer. And his wife is actually CFO. You liking the Alaska pickup, or people actually liking the design of the Fisker Ocean is the problem here, which is having a well-designed vehicle does not in any way mean that you will have a successful company. In fact, because you have to execute on things like that it works mechanically, the software works, the service works. And that's, that's the big question. The software and service for the existing owners of Fisker, if Fisker dies, who maintains that? It can't just be pretty.

• 13:33Kirsten Korosec?

  Right. We live in an era right now where we are starting to get more and more modern vehicles from newer companies. And if those companies go out of business, because they are so software centric, it isn't clear that you could even hold on to these vehicles for the length of time that the average American holds on to vehicles today, which is about 11 years or longer. What will this car look like in 15, 20 years?

• 13:57Speaker 00

  It's gonna look like an Android smartphone still running like Android 4. By the way, the problems that Kirsten's outlining here involving price cuts, impacts on resale values, young companies that may die, and software updates is also impacting a lot of EV makers over in China. So while this is a Fisker story, it's also a global story. And I could go on and on and on. For example, like the fact that Fisker was gross margin negative back in Q3, but we have to move on.

• 14:19Kirsten Korosec?

  We do.

• 14:20Speaker 00

  We got to talk about Databricks yet again, but this time not because Databricks has dropped us an entire sheet of new numbers showing off how fast they're growing while still not going public. But instead, they have spent $10 million, give or take, on a new generative AI model called DBRX. Now, putting these models to the test is a little tricky. It's hard to say which one's precisely better for different tasks, but it seems to be roughly on par with some leading models and slightly not quite as good as GPT-4. But Mary Ann, to build something almost as good as what OpenAI has in the market today for 10 milli, seems to be like a pretty good deal.

• 14:54Speaker 01

  Yeah, I mean, honestly, I have to give Kyle props. Obviously, he's the author on this and he knows the space very well. So I was trying to understand the nuance here. What's the difference between Databricks' new model compared to OpenAI's? I don't know, Alex, did you get it?

• 15:11Speaker 00

  More or less. So the way to think about this is Databricks wants you to bring your data over to Databricks and then use their services for all of your data processing, data intelligence, AI needs and so forth. And so what they want to do is make sure that there's lots of cool models you can use for your data over on Databricks. So it makes sense that they have their own model and you can use it. It's quasi-open source in the same way that a lot of other things like, I think, Llama 2 is. The thing that really stood out to me, though, Mary Anne, is the hardware costs are quite high. I have downloaded LLM software and tried to run models on my own local environment. I failed, but you know, I could, I could download them and run them in theory. This requires, I think, a CPU or GPU cluster of at least four H100s,

• 15:53Speaker 00

  which are very expensive, hard to get your hands on, and not exactly a prosumer item. So this is aimed at the enterprise, and so it's, you know, not really for us. But who does Databricks sell to? Well, it's not us. So I guess that kind of sits well with me.

• 16:07Speaker 01

  Yeah, I mean, that's, I guess, my question. So at least four Nvidia H100 GPUs. A single one of those costs thousands of dollars. So who is the customer of Databricks is my question. If it's not us, who is it?

• 16:21Speaker 00

  Well, if you want to use their recently purchased company, Mosaic ML, it might help with just that. Bringing back your point about acquisitions that are being announced earlier and we're seeing kind of later tucked into these mega corps. I think what matters here more than anything is the competition for foundation models is not going to be restricted to just OpenAI versus Anthropic versus Alphabet. There are other players that have the sufficient capital, resources, and customer base to make this a viable economic option. Now, I think the thing that we'll want to know in six months is, is anyone using DBRX? Or was this essentially them building something that was then ignored by the market? But I do think it's an important moment for the trajectory of these technologies. And that's kind of what I, what I took away and wanted to bring up because eventually, at some point, before we die, maybe,

• 17:06Speaker 00

  maybe, maybe before SBF gets out of prison, they will go public and then maybe we'll get to learn more. But this will be a point in that eventual S1 filing, I think, right?

• 17:14Kirsten Korosec?

  Yeah, I mean, I do think it's positive that there are more companies entering into this market, that it's not just dominated by OpenAI, even though they are dominating a lot, including headlines, that there's another company that's doing something somewhat similar, although there are some slight differences here. And competition's always good, specifically around, I think, generative AI, because it can be used in so many dangerous ways that I think when there's multiple companies working on it, that is a positive.

• 17:43Speaker 00

  Yeah.

• 17:44Kirsten Korosec?

  But I'm still waiting to understand who Databricks' customer will end up being for this very specific product.

• 17:52Speaker 00

  The way that I think about it is, I mean, I wouldn't be shocked if Yahoo was a Databricks customer, but I think TechCrunch is probably too small. And so I presume this model is tuned for very specifically the enterprise use case, you know, bring your own data, retrain it with your own stuff, and then you have your own in-house model. But we got to move on, and that means we have to take a very short break. But when we are back, kid-focused startups, two of them in fact, and how building for tots can be quite the way to make a buck.

• 18:21Speaker 01

  This week, we had a couple of stories on kid-focused startups raising capital, which I, as a parent, of course, thoroughly enjoyed, because I feel like people don't realize, if you don't have kids, just how much money is spent on children. So anytime we have startups that have new products, or new software, or new whatever, that helps make our lives easier, or help us save money, our ears perk up. One such startup is called Playtime Engineering, and they have come up with something that, if you're musically inclined, seems very, very cool. It's a keyboard synthesizer, or a kid-friendly synthesizer, designed for kids ages three and up. How cool is that?

• 19:03Kirsten Korosec?

  Yeah, this is really cool. So this is actually started as a Kickstarter campaign, which is kind of fun and interesting. But when I walk through a toy store or whatever, there is a lot of like kid keyboards, and how is this different?

• 19:17Speaker 01

  Well. This is pretty, this is pretty sophisticated for a child's toy. I think they're looking to sell it for about $350, which is, is a lot and the company acknowledges that, but apparently it's, it's really more like, uh, the company describes it as essentially a groove box or electronic music production device, fully decked out with a drum machine, synthesizer, built-in microphone for audio sampling and sequencer all in one device.

• 19:43Speaker 00

  This rips.

• 19:44Kirsten Korosec?

  So making music, yes. You can actually put together tracks and things like that. This sounds like, yeah, okay.

• 19:50Speaker 00

  And it has these really chunky buttons and knobs because one thing that I have learned by hanging around with children is that their, their hand dexterity is garbage. They really can't like, have a baby try to pick up one Cheerio. It's hilarious. They're like, ah, they can't do it. So you need to have really big knobs that don't come off when the baby tries to rip them off. And it, there's a lot of things that go into children's toy design, but looking at this thing and being somebody who owns a consumer grade synthesizer device that I bounced off of because I was too dumb to figure out how to make it talk to my software. I love this idea. Let the kids have something cool. Help them be creative. Get them into the idea that art isn't something you just consume, but can also participate in and create. Hell yeah. Where was this when I was a kid? We had to have like tape decks. Like this is, this is wildly awesome.

• 20:36Speaker 01

  Yeah. I, I mean, I'm sadly not very musically inclined, but I do think if you have children who want to explore making music and you could afford it, that this is pretty darn cool. It's called a MyTrax.

• 20:49Speaker 00

  And as soon as my first daughter can use it, I'm buying her one because I want to see what she comes up with.

• 20:55Kirsten Korosec?

  Ah, so does that mean that she's going to come up with like the Equity Podcast like soundtrack potentially?

• 21:01Speaker 00

  You know, I don't think the production team here would allow me to bring that into the show. Probably not.

• 21:08Kirsten Korosec?

  So here's a little known fact. Actually, we were, I was kind of teasing you about having your daughter do the synthesizer, but actually the technology that we use, the synthesizer we use for Equity is the same as this. It just doesn't have the big buttons. Our podcast producer master doesn't need the big buttons. But it's the same exact technology.

• 21:30Speaker 00

  Exactly. So essentially what we're saying is as soon as my daughter is a couple of years older, Teresa is out and Ada is in. And that's how we're going to run the show from there on out. We joke, I just think it's really cool to see more technology put to use in this manner because it brings delight to kids and also gets them off of TikTok on their parents' phone. Marianna, there's another story and this one is incredibly cool. I think this is fantastic and this is right up my alley. Tell us all about Kidsy.

• 21:54Speaker 01

  Yeah, I thought so too. I thought it was really interesting. Kidsy is a new Chicago-based e-commerce startup. And what they do is sell kids' clothing, toys and gear at discounted rates. And they do it in an interesting and kind of different way. They partner with retailers like Macy's, Target, Kohl's, Walmart, you name it. And we know that these retailers have a ton of like returns and open box items that they don't resell. And I've never really thought about what happens to them, but apparently they either get sold for like really cheap overseas or end up in the landfill, which is just such a disgusting waste. So Kidsy buys these items from them directly

• 22:36Speaker 01

  and then resells them on its website. And it's recently raised a million dollars in pre-seed funding. And in just a matter of months, it emerged from beta in September. They said that by January, they had hit $1 million in annualized revenue.

• 22:50Kirsten Korosec?

  Oh.

• 22:51Speaker 00

  So they sold three dresses and a bib.

• 22:55Kirsten Korosec?

  So this kind of, I mean, it sounds like a kind of like an overstock model.

• 23:00Speaker 01

  Yeah.

• 23:00Kirsten Korosec?

  Is that fair?

• 23:01Speaker 01

  I would, I would say so.

• 23:03Kirsten Korosec?

  Okay. Which is a pretty big company. So what I'm curious, of course, and, and I'm guessing that they didn't provide this information, but they hit a really nice revenue month number. What is their costs and overhead? I mean, are they already on the road to profitability?

• 23:20Speaker 01

  Well, she told me they expect to be profitable in about two years. It's early yet, so obviously we don't know. But they get a take rate on every item they sell and the percentage varies across brands and categories. On average, it's about 35%.

• 23:34Speaker 00

  Which is a lot. That's a lot.

• 23:37Speaker 01

  Yeah.

• 23:37Speaker 00

  And it also makes a lot of sense because if you're a company that was going to sell it off for 10 cents on the dollar or throw it away, getting 65% of a reduced amount is probably much better. And it means that kidsy gets a big fat cut of this stuff. I, I think this is just great, Mary Ann. There is so much waste in little kiddos because they grow fast and they are disgusting foul little creatures. And so everything's always torn, ripped and covered in snot. So it's just great to have this system. And one thing that I have been really lucky about is we have a couple of friends here where I live. And they have kids that are about two years older than, than our first. And so people just gave us stuff.

• 24:13Speaker 01

  Yeah, that's ideal.

• 24:15Speaker 00

  We have so many like children's toys and books that people outgrew and they're done having kids and just gave to us. But not everyone has that community and paying full ticket for these prices, these items is often prohibitive. So having a way to get them more cheap into people's hands and reduce waste and support kids. What I mean, it's cool to see a business where everyone wins. I love it.

• 24:33Speaker 01

  I think, yeah, I think it's a very cool model. I mean, the majority of the products they sell are brand new and unused. About 10% only are gently used. So coming to the website, there's a lot of popular brands on there. I do think there's a lot of potential, if this is done right, to be a pretty successful company. And interestingly, the co-founder shared her backstory. She's a former journalist, Bloomberg TV and ABC News journalist that went on to direct a documentary. And that documentary was on child labor and global supply chains. And that's when she learned about this inventory glut that exists in the U.S. and all the supply chain issues by faced by retailers. And that kind of led her down this path.

• 25:13Speaker 00

  I think it's absolutely fantastic. And if you want to hear more about how entrepreneurs are tackling the question of kids. Well, we had an interview with the CEOs of Wonder School on early day on the podcast earlier this week. So go back one episode and you'll see that in your feed. It's a good time. There's an acquisition there and who doesn't love seeing some venture backed startup combinations? Now, moving on, we're going to talk about sustainability and diversity for a second because there's quite a lot going on here. Now, Mary Ann, I want to start with this new summit fund. It's about climate. So I know Kirsten will have a lot to say, but can you give us the, the TLDR on new summit's new capital vehicle?

• 25:47Speaker 01

  Yeah. So new summit investments is apparently raising a new $100 million impact fund. And it's mainly focused on investing in managers, backing startups and other companies focused on environmental and social problems. So of course, all of us welcome more money flowing into that because who doesn't want these problems solved?

• 26:06Kirsten Korosec?

  Yeah. To me, what's really interesting here is the sizable jump from its previous fund. So this is its fifth fund and the last one was, I think, around 40 million. So that's quite a leap. And what I'm curious to see what happens here, they're calling it like an impact fund, social and environmental problems. That is huge, hugely broad. So is this going to be, when we think about environmental, like climate tech, so hard tech, or is it more on the social consumer end of things? And so I'll be curious to see where these funds end up.

• 26:44Speaker 00

  Absolutely. You know, it's interesting. There has been a, and I'm going to try to be delicate here, call it under the DEI backlash umbrella of views about investing and how some norms have changed in the last couple of years. So to me, this fundraise does seem to be slightly counter narrative, which makes it all the more exciting. And I will say, it's not the only time we've seen an impact or climety or socially fund out there. There's been a number that I've covered for TechCrunch AM lately. Folks who are trying to have an impact on certain social and climate issues are still raising capital and still going out there and doing it.

• 27:14Kirsten Korosec?

  Yeah, I believe that there's been some recent data coming out, right? That has talked about that there is still interest in investing in these underdog founders and also in diversity and a number of female founders also rising. We had a story recently by Mike Butcher, actually, and it's a new study that zeroes in on founders of so-called unicorns. So these are companies worth over a billion dollars. And they've found that most have quote unquote, underdog founders who are often drawn from the top 10 universities. And there's also a rising female founder makeup as well. So while that that sort of seems to support just your anecdotal recall just now about how you are seeing quite a bit around DEI and investments.

• 27:57Speaker 00

  Yeah, you know, one thing that hit me from that study that Mike covered was that 70% of unicorns, and this is mostly focused on the US and the UK, so not, not the full global picture, but those are two critical markets for billion dollar tech startups. 70% of unicorns were founded, at least in part, by an underdog founder, which they thought of as an immigrant, a woman, or a person of color. And that was just more than I expected, frankly. It challenges kind of my, my perceptions of who's building all these companies and is a bit more diverse than I, than I thought. So not to say, congrats VC, you've done it. But I thought that was relatively encouraging data point.

• 28:28Speaker 01

  It was, it was definitely encouraging. I was very pleasantly surprised to see that. I'm always kind of supporting underdogs, whether it be like watching basketball or startups grow. So this, this actually made me very happy. I do think also it was interesting, Mike had a bunch of great data points in here that when they looked at like larger funds, actually the top fund that invested in unicorns was Sequoia and they backed only 2.8% of unicorns, which basically what they're trying to say is a lot of these big funds are not necessarily the ones that are spotting these companies that go on to become unicorns one day. And I thought that was really interesting.

• 29:09Speaker 01

  It's typically other types of firms or funds that are really getting in at the very early stages of these unicorns. It's fascinating.

• 29:18Speaker 00

  I have my skeptical face on, because I read that slightly differently. The data point, if you include accelerators, is a little bit different because YC and SV Angel invest in so many companies, they get a higher percentage of them. But to me, you know, 2.8% of the 84 trillion unicorns out there is quite a lot. I guess the question that I would have is what percentage of Sequoia's portfolio becomes unicorns versus what fraction of the total unicorn pool they have? Because I don't, I mean, Mary Ann, I totally see your point. 2.8% does not sound like a lot, but given that every firm only backs a small fraction of the backed companies, could that not actually be a more impressive number than it?

• 29:53Speaker 01

  Well, it could be. I'm not so much concerned with Sequoia, but I'm just thinking in general, the fact that that was the top, that means that a lot of these so-called top-tier venture firms are not necessarily the ones. That are backing these companies that go on to become unicorns, if that makes sense.

• 30:11Kirsten Korosec?

  I think the point of what both of you are saying, though, is fragmentation, is that this is quite a fragmented market and there isn't any like clear dominant winning VC while we oftentimes point to them that it's a far more fragmented market, which is a good thing and a bad thing because then it's hard to track success, right?

• 30:27Speaker 00

  Absolutely. Although this does allow me to cap off the show with my favorite version of an anecdote, which is, you know, people say that the press are haters and that we are just bitter peons who are trying to tear down other people's success. Well, there's no bigger hater in the world than an active venture capital fund because they love to tell you how they turned down 99.9% of businesses that come their way, some of which go on to become unicorns. So if you want to figure out who the biggest hater in the world is, go find your local friendly VC and tape a sign on them that says, "It's me!" And with that, we're done for the day, everybody. Equity comes out Mondays, Wednesdays, and Fridays, except for when we do have an interview episode and then we drop those when we can. We have two sister shows, Found and Chain Reaction. Today on the pod, we had Kirsten

• 31:08Speaker 00

  Korosec, the head of all things transit, automotive, and awesomeness at TC, and Mary Anne, who covers fintech down in Austin for us, so that way we can combine tacos and interest rates. My name is Alex. Equity's back on Monday. We'll see you then. Bye.

• 31:20Speaker 01

  Bye.

• 31:20Kirsten Korosec?

  Bye.

• 31:23Speaker 00

  Equity is hosted by myself, Alex Wilhelm, and TechCrunch Senior Reporter, Mary Anne Azvedo. We are produced by Teresa Locan Solo with editing by Kell. Bryce Durbin is our illustrator, and a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening and we'll talk to you next time.