OpenAI's DevDay, reinventing the REIT and good actors in crypto

This is our Friday show, and we’re talking about the week’s biggest startup and tech news. This time ’round we had Kirsten Korosec, Mary Ann Azevedo, and Alex Wilhelm on the job to chat through a massive pile of news: For everyone who listened to our fintech deep-dive, here are Affirm’s results. Deals of the Week: $105 million for May Mobility, $3.6 million for Mogul Club, and Microsoft’s latest startup wooing trend. WeWork is bankrupt, and we are Not Shocked. All things from OpenAI’s developer day, and how its latest news is a good example of platform risk. It’s raining IPOs! Here, there, everywhere! And with that, we’re going to go rest for the weekend and come back Monday at full steam! For episode transcripts and more, head to Equity’s Simplecast website. Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more! 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.

• 0:11Speaker 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 am joined today by Senior Tech Reporter on the FinTech Beat. It's Mary Anne Zaveto. Mary Anne, hello. I haven't talked to you in like 48 minutes.

• 0:26Speaker 01

  Yeah, I know. I am doing well today, Alex. How are you?

• 0:30Speaker 00

  My baby was sick last night and so sleep was in short supply. So today on the show, advice is something very, very dumb. It's my child's fault and yes, I am passing that buck all the way to the 10 month old. But you know, we're hanging in there, but it's not just the two of us. We have dragged along our friend Kirsten Korosec. It's lovely to have you back. I'm very glad that you're here. With the dynamic trio, we are going to talk about deals of the week, including May Mobility, Mogul Club, and then Microsoft and VCs teaming up. After that, we have to talk about the end of WeWork as we know it and what's going on with Zeus Living. And then finally, how OpenAI's tech can actually burn startups. And then we're going to talk at the very end about the 2024 IPO market. It is a packed show. And even before we get to all of that, Mary Anne, we have to talk a little bit about Affirm

• 1:14Speaker 00

  because we touched on this company just a few days ago.

• 1:17Speaker 01

  Yeah, so Affirm announced its earnings report for the first quarter, fiscal first quarter. I think, was it yesterday or yesterday? Yes. And wow, the stock is up like 18% today. We're the day that we're recording this and I was impressed.

• 1:33Speaker 00

  Yeah, I was too. I went ahead and poked through the numbers. My impression of everything is that the company just is doing well along the marks that it expected to hit. The only thing that I'll throw in there is that if you look at the company on a GAAP basis, which is inclusive of all costs, it's still way more unprofitable than I expected it to be. But if you believe in the B and P model and you believe in how Affirm is running the company, lots to like there as evidenced by the stock market price. And just as a last note there, Mary Anne, I'm not shocked. We just said that Khan is doing well, not a huge shock that Affirm, another player in this space is also doing well. So it seems that that subset of fintech is healthy.

• 2:09Speaker 01

  Good news for BNPL.

• 2:11Speaker 00

  Good news for BNPL. Scooty along. Kirsten, May Mobility is a company that apparently I should have known about, did not know about, learned about for this show, but I'm perplexed that a company can raise nine figures before I've even heard of it.

• 2:23Kirsten Korosec?

  Yeah, so May Mobility is really interesting. They've been around for a while. We've been watching them for a while, but they didn't have, let's say, the, maybe the cachet or popularity that some of the, the big players have had. But in the very beginning of what I would call the beginning of the hype cycle with autonomous vehicle technology, let's say, 2015, 2016, around that era, there were a number of companies that were all like May Mobility's size and a little bit their strategy. And in the process of consolidation and going through that hype cycle down to the trough of disillusionment, which we've talked about

• 3:03Kirsten Korosec?

  before, a lot of these companies were either acquired or died altogether. And May Mobility kind of kept at it. They have some really interesting backers. Trucks VC is one of them, San Francisco based, more traditional VC, but then also Toyota and BMW. So they, they had the strategic investors and then they have the traditional VCs. They are taking a slightly different approach, though, from Waymo and Cruise, B2B. And that's probably why you haven't heard too much about them because, you know, while a consumer may be in their, using their system at some point, they are not necessarily as consumer facing as a Waymo and Cruise robotaxi.

• 3:48Speaker 00

  And that's because they want to replace bus routes in certain cities where public transit might be weak versus instead of putting out a whole fleet of cars that you can hail a bit like an Uber or a Lyft.

• 3:57Kirsten Korosec?

  Yeah, and I like to think of this as, and this is an approach that has gotten criticism in the past, not moving fast enough, how could they make money? You know, why would you do this other than just a bus or a train? And they've done a lot of experimentation. Actually, back in the day, TechCrunch Crew, Video Crew and myself, we went on one of their shuttles in, in Detroit, and they had a fixed route. And at the time, it was like a smaller bus that could fit a few fewer people, but it had more regular timing than, let's say, a bus that would go across town or something like that. And it just stuck with a very specific route.

• 4:32Speaker 01

  I don't know. It just seems like, how can it? Toyota Sienna minivan replaced bus or a shuttle even they don't hold that many people.

• 4:41Kirsten Korosec?

  Yeah, the one we rode in was not a minivan. It was actually like a more of a purpose-built shuttle. I think they're doing some experimentation on the actual vehicle itself, but remember they're developing the autonomous vehicle system. So that's the software and how it fuses together with the hardware. So theoretically you could put it in any vehicle, right? I say that with a lot of conditions and quote marks around it, but you could then apply that to a custom-built vehicle that Toyota might be working on. And they've shown concepts, Toyota's shown concepts like the e-pallet that are like, look like little floating toasters and you could theoretically apply that AV system to that vehicle.

• 5:25Speaker 00

  On the floating toaster point, because I still hunger after a BMW i3, even though I remain roughly 50% too cheap to purchase one, it is like a miniature toaster and I absolutely love that that form factor because I don't go very fast. So aerodynamics don't matter to me. So I love to see that anyways, but the company has raised $300 million to date. So maybe mobility has enough cash to really get out there in the market. The thing that I'm not really clear about is how many vehicles do they have out there? And is this like a company that's in its commercial phase or still in the kind of R and D building phase?

• 5:59Kirsten Korosec?

  I would put it in the latter and I wouldn't quite put them in that commercial phase either. This is a, this is a a stepping stone towards, you know, ultimate commercialization. I don't have insight into what kind of revenue they're getting, but I would suspect that beyond proof of concept, but more in a development stage, they'd be getting some sort of revenue through these partners that, who they're working with. But fun fact, $300 million to date, sounds like a lot. Cruise.

• 6:29Kirsten Korosec?

  Burns through about $244 million a month.

• 6:32Speaker 00

  Well, burned because they're they I hear they're taking the old scalpel to the HR Rolodex.

• 6:39Kirsten Korosec?

  Correct. So a very quick update before we move along to other exciting deals is that Cruise continues to have issues. Just this morning had a little mini scoop about layoffs. First with contingent workers focused on their driverless operations because there are no driverless operations right now. So that is an interesting story, especially in comparison to May Mobility, very under the radar, now sort of continuing to, you know, plug away while the companies that raised a ton of money, huge cash burn, lots of attention, struggling.

• 7:17Speaker 00

  And just as May Mobility has reinvented Lyft Shuttle, which reinvented the bus line, we have Mogul Club up next from Mary Ann, which as far as I can tell is trying to reinvent the REIT. Mary Ann, what's going on?

• 7:29Speaker 01

  Yeah, so Mogul Club is one of several startups that I have written about over the past couple of years that has built what they call a fractional real estate investment platform. Specifically, they are investing in single family homes and giving the masses the ability to invest in them as well, have partial ownership of these homes. So they've just raised $3.6 million in seed funding and they only have a few houses on their platform. So it's very, very early, but the founders who are former Goldman Sachs real estate investors are are super gung ho. They claim that their platform is different because they're really focused on quality and looking for properties that will deliver higher returns

• 8:14Speaker 01

  and are more likely to appreciate. And they feel like they have the background to help identify those. And also, this platform is built on the blockchain.

• 8:24Kirsten Korosec?

  You got me a blockchain question, maybe a silly one. So based on that basic description, it's sort of, in a weird way, sounds like timeshare. How is it different in terms and what markets you said is very limited right now? So very curious is like, what is their little launch market or test market? And how is it different from that timeshare sort of idea?

• 8:47Speaker 01

  The first markets are in Texas, Dallas, to be exact. And I think they're have another house or property in Houston. Timeshare, yeah, you know, honestly, I can't compare. But with this, they basically handle all of it for you. Cause like there's, there's an everyday, like if you're an everyday person, you're like, I'd love to be able to have rental properties, but it's intimidating. I don't have enough money. I don't have, I don't understand now the whole process. So that basically they're like, okay, here, we handle all of that for you for a fee. You just give us the money and the fee, and then we'll take care of everything else for you. We'll manage it. We'll, you just get the income, the rental income and that's it.

• 9:24Kirsten Korosec?

  Got it. So it's more focused on the rental instead of going and using it yourself. So yeah, there is a little bit of tiny overlap, but I see the difference. Yeah.

• 9:34Speaker 00

  Okay. So I'm really torn about this because on one hand, the possibility of being able to invest a smaller dollar fraction of your personal net worth into real estate properties that will appreciate and generate income, and you don't have to manage them is very attractive. But what we all know is that being a landlord is tough and expensive at times and difficult to do. So I'm curious about how much operational risk local club is taking on itself. And then also, you know, if they're being so selective properties, can they actually find enough to build up enough inventory to make the model work? And I don't understand at all why this has to include the blockchain. That feels.

• 10:13Speaker 01

  Yeah. And I don't either, to be honest with you. They just, they claim that it will, it will create a more efficient backend, efficient process. That's what they said. And that's what Tim Draper, who's an investor said.

• 10:25Speaker 00

  Ah.

• 10:26Speaker 01

  Yeah. So, but you know, those are all good questions. And honestly, I mean, any, any real estate startup that's getting off the ground right now in this current environment where interest rates are so high, I have to say that's kind of bold because you know, it couldn't be a worse time to be buying a house with the interest rates so high. But these guys seem pretty confident.

• 10:46Speaker 00

  Well, maybe, but I presume they're not taking out, I presume they're buying these properties outright, not taking out mortgages because that would consume nearly all of the income from the properties, right? That's, that's my, my guess at least. So they wouldn't be privy to the interest rate issue. There's still a supply problem for sure.

• 11:01Speaker 01

  For sure. I think that that is a key thing because so many people are not putting their houses on the market right now because they don't want to have to shell out the money for another mortgage. So regardless, they are, they are moving forward. They're, they're pretty enthusiastic and they're one of many startups in this space who we have covered.

• 11:20Speaker 00

  Yeah, one of which is fractional and then elsewhere there's kind of Arrived, Happy Nest, Thunderrise, lofty.ai and Honey bricks and various amounts of overlap with this company. Last note on this, the startup plans to offer $10 million worth of single family rental properties by year's end, AKA one garden shed in Palo Alto.

• 11:39Speaker 00

  So we'll have to see how that all works out. My deal of the week is about Microsoft and their efforts to get startups to build on them. As we all know, Amazon's AWS cloud platform has an enormous amount of market share in the public cloud space. But when it comes to AI, the race seems to be a little bit more Azure versus Google Cloud with Amazon, in my view, being kind of a third place player there. So an inversion of bit of, of where we are. But Microsoft is taking the fight for future startup business up a notch by handing out credits to its Azure AI compute systems via a new thing called Microsoft for startups hub that's going to give access to the Azure cloud for developing AI models.

• 12:19Speaker 00

  And I think this is really, really cool, but it's constrained, Mary Ann, to just the Y Combinator set to begin with, and then M12, its own portfolio companies and its own venture capital fund, which seems relatively modest and also kind of mean to tech stars.

• 12:35Speaker 01

  Yeah, I'm not, I'm not so sure why it's, they're being so restrictive in the early days, but maybe it's kind of part of that. Let's make this hard to have access to, to make it more attractive mindset.

• 12:47Speaker 00

  Yeah, I mean, back in the day, Microsoft teamed up with YC to give out, I think it was a half million dollars in Azure credits back in the YC winter 2015 batch. That's of course way before we were talking about, you know, LLMs and generative AI and so forth, but it shows that companies are really willing to pony up and absorb cost to get startups to use their cloud tech early so that way as they scale, they can effectively lock them in as their kind of chief or key cloud provider. And you know, just and frankly, for Microsoft, this is just a little bit of capacity, not too expensive, but could yield quite a lot of returns down the road. And I think it's also good for startups. So I kind of think it's nice and win win-ish, even though it is a big tech company doing big tech things.

• 13:26Kirsten Korosec?

  Sure, I mean, there is the fact that they're going after early-stage AI-focused companies, very hot right now. It is sort of a future bet on one of those early-stage startups becoming gigantic and then sticking with its product, right? So it is a tiny way, I suppose, of diversifying your revenue stream or like creating that longer tail. Of course, a lot of these early-stage companies don't go on to do that, but they do benefit from it potentially in the short term in terms of getting access to that hub. So yeah, I think it's interesting. It's interesting to me, too, that they are focused on, you said Y Combinator and not some of these others. I wonder if that's just the first step and then they're going to continue to expand from there.

• 14:07Speaker 00

  Maybe it's a, YC has a big batch of startups every, you know, every half mark of the year, so we know what we're getting into. It's kind of a constraint and you can tweak it later on. Just to add a little bit of details to this, though, the access to the AI compute power is not forever and it's not designed for these startups to be able to use this once they reach scale. I think it's more like, look, we understand that this cost can be very high for startups that have a very limited capital base and no revenue. So come build over here, we'll help you when you don't have that. But later on, we will expect you to break out the checkbook and fund Azure's long-term growth.

• 14:42Kirsten Korosec?

  Or another way of describing this as giving them a little taste and getting them a little bit slightly addicted to the product. And then when they reach scale and then they have the money, they will be motivated to continue with the product that they love.

• 14:57Speaker 00

  As the comedian said, you know, drugs sell themselves and currently, you know, advanced AI cloud compute sells itself. So the analogy actually holds centralized distribution, high profit margins, sometimes ambiguous legal status, you know, hey, it's all, it's all right there. All right. Now, before we get into what happened at the very end of WeWork's first life and why Zeus Living is apparently living no more, a short break.

• 15:24Speaker 00

  The day has gone, actually, the day has passed. WeWork has filed for bankruptcy. And now that we're here, it feels almost inevitable, but still almost a shock that it finally happened.

• 15:34Speaker 01

  Yeah, I mean, we all knew it was coming. I'm not shocked. I feel like it was, they tried to restructure, they tried to do all these things, they tried different marketing, it just didn't work. So yeah, officially, they finally filed for Chapter 11 bankruptcy protection this week. They've, wow, listed over $18.6 billion of debt and assets of over $15 billion. That's a lot.

• 15:58Speaker 00

  Yeah, it's a lot of money. Kirsten, the numbers here, obviously quite large. Shocked by them or about what you expected?

• 16:04Kirsten Korosec?

  Here's the thing, anyone who isn't shocked by a company that goes from, you know, multi-billion dollar valuation down to, you know, worth pennies in your pocket, I think should be shocking, right? Like, that's a, that's a big fall. And their shares, I think, have fallen 99.8% to under a dollar. Yeah, that's shocking. What I'm really interested in is, and I don't know if we've gotten into the first day motions or anything like that, but sort of who is the big loser here in terms of shareholders? Who lost the most here?

• 16:41Speaker 00

  Given that this bankruptcy is limited to the US and Canadian operations, I presume it's going to be the commercial real estate owners who had long-term WeWork leases that they were hoping would convert into regular and steady cash flows. Although if one of your major lessees is in this kind of financial straits, Kirsten, I just presume that you're not exactly banking on that for the future. But one thing we also know is that commercial real estate in general is distressed right now, not just in the US, but actually in a lot of places. But this is kind of like insult to injury. You know, this is a second shot to the same foot for a really troubled part of the economy as people, much like I'm doing right now and you're doing right now and Mary Anne's doing right now and Theresa, our producer's doing right now, work from home versus in the office.

• 17:22Kirsten Korosec?

  Exactly. Well, commercial real estate has been in a troubled spot for a really long time, particularly accelerated by COVID. So that's why WeWork's bankruptcy in many ways isn't surprising. Packed on top of that, all the drama that has occurred in its past, sort of weighing on it. Interestingly, though, there are some other startups that have been popping up that take a slightly different view on the commercial real estate vacancy problem. And it's a little bit of a different workaround than the WeWork model, right? And those companies, I'd love to dig into them at some point, because those companies, Cody

• 18:02Kirsten Korosec?

  is one of them, I think Industrious is the other, that are potentially going to be helpful to those commercial property owners in the future. But their market share isn't quite the same as WeWork.

• 18:13Speaker 00

  Yeah. So I wanted to understand what went wrong with WeWork, which I know sounds funny, because we understand that during the Adam Newman era, you know, a lack of focus, enormous expenses, it just, the company didn't look good when it reached its kind of IPO filing. But what I did was I went back and I looked at its SPAC combination filing, and then I went through its results as a public company. And it never got better. There was never a lot of margin in between the amount it could collect in rents and memberships and what it had in expenses to operate those places. And so fundamentally, the business talked a lot about how, you know, buildings mature and then after a certain time they generate cash and ex-markets are doing well and all that. But at its scale,

• 18:58Speaker 00

  it could not charge enough for its spaces to make the model work. And so essentially, it didn't have enough revenue for its cost base. And I know that sounds incredibly Basic, but sometimes with complex companies, you can get lost in the sauce a bit. The charts get kind of crazy and you end up looking at community adjusted EBITDA, blah, blah, blah, blah. It couldn't charge enough. It couldn't make enough margin to actually cover its costs and it effectively died. Low margin businesses are hard.

• 19:27Kirsten Korosec?

  Yeah, I was gonna say margins matter, but yeah, and I'm wondering if, if it could work for anyone. Is any other company with a similar model, is this a WeWork problem? Or is this the business model problem in general? And so I know that Cody and others are going after a slightly different, they're like doing a turnkey office space, not just the desk. It's slightly different than you're getting, you know, small numbers of employees in their little office space. And maybe that's less transitory in a way, but I don't really know. Like, is there another example out there that is a WeWork clone that is doing well?

• 20:09Speaker 00

  I mean, Mary Ann, there was Canadell, right?

• 20:13Speaker 01

  Oh, yeah, they, they also went bankrupt in 2021.

• 20:17Speaker 00

  I think COVID really just crushed them. I think you could do, WeWork on a really small scale in a community where you knew people. But I think to scale renting a large building and then cut it up into little offices and then having them filled, you're going to run into the same problem you do with selling to SMBs in the software world, which is in the software sense, smaller ACVs and high churn, right? So that's tough. Cody and other people that want to do full turnkey offices are almost like the enterprise software equivalent. Probably a more stable customer base, probably a bit more margin. And so I can see that working out, but still fundamentally you're either renting or buying real estate and then trying to lease it out for more money and the ability to charge more is your margin. And that's tough. Do I hope Cody is great? Absolutely.

• 21:00Speaker 01

  Yeah, and a lot of people I noticed in comments about WeWork complained about just how high the prices were. And, you know, I think WeWork felt had to charge more because it obviously had spent so much money, but that that was a deterrent.

• 21:13Speaker 00

  And not the only company we've seen, Mary Ann, in the prop tech space that is hitting pause at best. Zeus Living is apparently also joining the ranks of the dead.

• 21:21Speaker 01

  Yeah, so Zeus Living too this week. It was reported that it is winding down operations. And we I last covered the company back in 2021. They'd raised $55 million. They've got pretty high profile investors, including Airbnb, Initialized Capital, NFX, Open Doors, Eric Wu, and Y Combinator. This was founded about eight years ago. And they started the company started its life by redecorating landlords' homes and then renting furnished properties to relocated workers for 30 days stays or longer. It's kind of a new type of corporate housing. And then it decided it would be kind of more also like property management and directly manage these homes that it offers and design and all of this. Anyway, whatever it ended up doing, it didn't work out. They didn't confirm it, but the

• 22:06Speaker 01

  information reported according to their sources that they basically just didn't have the money to keep going.

• 22:11Speaker 00

  Running out of cash is the theme I've heard more and more and more. And I don't think we're done hearing that story, although it is always a shock to me to see a company that raised so much from such high profile people just struggle to stay alive, because it means that their existing backers weren't willing to cut them a check as a lifeline. And that means the business probably, I mean, and I say this with, you know, respect to people who try to build things. I'm not trying to be a, you know, a dick, but the math just didn't work out to keep the money coming in. So that's the end of that. But if prop tech is struggling, the opposite of that is the AI world, which is booming. Call it dynamite. It's always going off. Hey. And this week, we're talking a lot about OpenAI's first developer event, which I'm sure you saw all over Twitter. Kirsten, can you give us a couple of high

• 22:56Speaker 00

  notes from what they announced at their first developer day?

• 22:59Kirsten Korosec?

  Well, I thought this was interesting. We obviously had a lot of reporters who were super on the ball there. And I was, of course, expecting it to be like, super hyped, right? But there were some interesting numbers, I think. More than 100 million people are using ChatGPT weekly, and more than 2 million developers are building solutions through its API, which wasn't necessarily announced, but it is an interesting point to me to show the growth, because just as a tiny reminder, remember, we just started writing about ChatGPT less than a year ago. I mean, I think it was, what, first brought out for more public use? What was that, December or something, January-ish?

• 23:37Speaker 00

  Late November, somewhere.

• 23:38Kirsten Korosec?

  Maybe, just about a year.

• 23:40Speaker 00

  Yeah.

• 23:40Kirsten Korosec?

  So, that's quite the growth. But some other highlights there was that OpenAI said it plans to let users publish these GPTs to a store, which is kind of an interesting approach. I guess it's a revenue stream, potentially. I don't know exactly how that works. Do you have any insight into that?

• 23:57Speaker 00

  Yeah. So the thing that I was very curious about is, we all know ChatGPT, which is, they're kind of like, public-facing, use it. My mom was in town this last weekend, and we sat her on the couch and made her ask for like, poems about X written in the style of Y, just to show her how this stuff works. And she thought it was magic, by the way. If you've ever seen someone not use an LLM and then use them for the first time, it's, you feel like a magician. It's a lot of fun. But what they want to do is let companies use their own data to train their own in-house kind of ChatGPTs, if you will, so that way they can ask them that's more tailored to their actual use case. And if you use a dataset that you don't mind other people interacting with, Kirsten's point, you can put it in this upcoming GPT store, and then people can buy it and use it. The definition

• 24:39Speaker 00

  of a platform is one in which more value is generated for partners than the core platforms through extensions. And so I really think that, you know, the OpenAI team is making a bet that they are capable of building a real platform. And I think the proof there will be in the usage and revenue putting.

• 24:53Kirsten Korosec?

  To really simplify it, would you compare this to, let's say, the App Store model, the App Store platform, which is you have developer, that whole ecosystem? Would you equate it to that? Or am I simplifying it too much?

• 25:06Speaker 00

  I think that's right. I mean, sometimes platforms can build really big companies. For example, Encino, when they went public the other year, they were a Salesforce platform company. They were not part of Salesforce, but they built on top of the Salesforce, you know, store essentially, and they go to sufficient scale to go public on their own. That's, I think, evidence of the impact Salesforce has had, you know, on the world. And normally, I would say a company that's this young and that has products that are this nascent is certainly not ready to go to platform status. But I think when you said the developer number and the ETS number, it probably is. And to quote, you know, Saint Balmer, developers, developers, developers, and they have them. So, you know, I'm really excited to see. As a last note, we also saw GPT for Turbo, which is coming into flavors

• 25:51Speaker 00

  and is more up to date in terms of the data out there in the world. OpenAI said they're not going to let it get as out of date as it had before. So if you wanted to use something that's a bit more up to date, well, there you go. I think what matters here, crew, is that we are seeing the pace of innovation in the generative AI world not slow down. I care about that much more than the individual discreet announcements that we saw. But it just feels, Mary Ann, that, you know, no one's taking their foot off the gas. And, you know, I presume next year is going to be absolutely bonkers.

• 26:19Speaker 01

  Yeah, I agree. But for some startups, this is not necessarily the best news because there are a number of them out there that have built their, their models around OpenAI's tech. And as a result, that's left them very vulnerable. And they're called wrapper products. They're provided service by wrapping around an API like ChatGPT. And then, say, OpenAI releases a new feature that is exactly what they were offering. Well, poof, there's no longer a need for this company. And then, just like that.

• 26:48Speaker 00

  It's over.

• 26:49Speaker 01

  Yeah.

• 26:49Speaker 00

  The canonical tweet about this came from Afonso Matos. He said, OpenAI just killed our startup. It all went down the drain. We got nothing left. And he was building a thing called Journalist AI. And essentially the picture of his team laying down, looking sad. But yeah, when you do build on someone else's technology or platform, you open yourself up to being essentially undercut or rebuilt by that company. And to Kirsten's earlier point about, does this track to the App Store? If you go back to the first days of the App Store, we had things like flashlight apps. Well, guess what got baked into iOS eventually?

• 27:22Kirsten Korosec?

  That.

• 27:23Speaker 00

  No one's paying $0.99 for a flashlight app anymore. So I think we're still in the early App Store days of the generative AI startup world, which means that, you know, you might want to make a bet on a model company if you are a venture capital player, because that might be the simplest way to equate value during this time versus startups that are trying to take commercially available tech and do something fun with it. It's been a busy week, actually, now that I think about it. Is that why we're so tired?

• 27:49Kirsten Korosec?

  Yes, among other things.

• 27:51Speaker 00

  Yeah, I was just like, I was like, okay, and we're done with the show. Oh, we have a whole nother section of important fricking news. Mary Ann, I don't know if you've ever shopped there, but there's a company called Shein, and it does fast casual clothing all the way from China. And I hear it's quite the big deal.

• 28:05Speaker 01

  I actually haven't shopped there, but of course I've heard of it. And the big, big news this week is that this fast fashion platform is looking to raise $90 billion in a potential US IPO.

• 28:16Speaker 00

  Raise.

• 28:17Speaker 01

  Which is up from the $64 billion valuation it was given earlier this year.

• 28:21Speaker 00

  It's a lot of money for, for clothing. That's a valuation that we associate with software companies like Stripe and OpenAI. Kirsten, I'm a little bit shocked to see a clothing provider that sells discounted, I don't know, garments, manage to get to such a high valuation.

• 28:34Kirsten Korosec?

  Well, okay, so in certain circles, everyone uses Shein. It's everywhere. It's not great for the environment. Fast fashion is bad for the environment, but it is everywhere. And

• 28:49Kirsten Korosec?

  It is fast fashion's been around there's you've got your like H and M's and your forever 21s and this is feel somehow larger and everywhere.

• 28:59Speaker 00

  Larger and everywhere is a great way to put it.

• 29:01Kirsten Korosec?

  Yeah, so it's not surprising that they got a high, high evaluation. What I'm most interested in is it's huge now staying power. What is the staying power of this because we've seen companies in the fast fashion world get really big and they're not as big anymore. So I'm really curious what happens in the future. Of course, the focus right now is the IPO and we'll learn a lot more about them as they go through that process.

• 29:26Speaker 00

  Yes, and Shein competes with Timo, which is another company based in China that's run up the American app stores, providing fast casual clothing and also other items for the house as well. But Shein is not the only company that we now have in our IPO sites. We also have Circle, the company behind the stablecoin USDC that is might be going public in 2024. I think Bloomberg broke that and I think it's kind of brill. I went back through their old SPAC filings and ran some math on their current essentially stablecoin volume and therefore implied reserves and therefore implied income off of that at current interest rates. Very interesting business. Can't wait. A bit like Coinbase is kind of like the, the good actor in the crypto space.

• 30:06Speaker 01

  Wow, feels like they're so rare.

• 30:09Speaker 00

  Well, I don't want to be mean, but yeah.

• 30:13Kirsten Korosec?

  There was one, a little interesting detail that I was curious about if you had any insight in it. So apparently they were going to do a SPAC and they called it off. So what I want to know is what prompted them to make that actually probably really good move in 2022 and now suddenly they're ready to do it now. So what, what was the timing insight that you can give me?

• 30:33Speaker 00

  Well, I mean, I have two thoughts here, both of which are a little bit speculative. So everyone put on your worldly hats because we're going up into space here. First of all, I think at that point in time, companies that were of high quality simply realized that going public via SPAC was a way to incinerate their reputation and all their value. Right, so they raised the price of their SPAC from four and a half to nine billion dollars in valuation before it got called off. So clearly things were looking pretty good. The other thing, actually two more things. One is I think. Think their stablecoin market cap was coming down at that point versus going up. So a bit of a harder growth story as interest rates changed, even though that did help them. And then the real thing here is I bet you there is some back channel regulatory clarity coming their way as they interact with American securities regulators, market regulators,

• 31:18Speaker 00

  to give them confidence that if they go public, they're not going to get sent to jail. So I think it's those things combined. I'm hyped about this. I find it ironic that stablecoins are essentially the first killer product in crypto. It's ironic that tokenizing dollars is a hot commodity on the blockchain, but hey, here we are.

• 31:36Speaker 01

  I would have thought.

• 31:37Speaker 00

  Who would have thought? And then finally, if you listen to Equity on Wednesday, you heard us talking all about Klarna and fintech and BNPL and all the state of things going on over there. Since then, news has come out, Mary Ann, that Klarna is rebuilding its corporate structure to prepare itself for the public markets.

• 31:54Speaker 01

  Yeah. So the company did confirm this week that they're in the process of creating this legal entity. It's, it's a holding company really in the UK as an early step in its plans for an IPO. And they said that creating this new legal entity at the top of its corporate structure would, would make it easier for it to list on a stock exchange. So it has confirmed it does have plans to go public. They are not offering a timeline. They haven't said which country they will IPO in, but it's definitely in the works.

• 32:25Speaker 00

  Who wants to bet that they don't list in the US? Is anyone willing to take that side of the wager? I don't see any hands going up. I mean, you can list in Europe, you can list in London. Find exchanges everywhere, but there tends to be a bit of a premium for growth oriented tech companies on the American exchanges. So I would presume, Mary Ann, they're gonna go public here. But again, I just want to say shout out to Klarna for not just declining to comment on future plans, but instead saying, we are doing this. That is where we're going. Not yet, but we're on the way. I just, I can't tell you, it's like the biggest breath of fresh air to talk to a company that actually is willing to say what it is doing, which shouldn't be as hard as it is.

• 33:06Speaker 01

  Really, it is so refreshing to just. For a company to, when you ask them a question to actually answer and then they they do share their financials, even though they're a private company. So it's, it is very, very refreshing.

• 33:18Speaker 00

  It's, it's, it's really fun. As a reminder, just to everyone out there, the TechCrunch team is mostly off tomorrow due to an American holiday. So the site will be a little bit light, but we have lots and lots coming for you in the next couple of weeks. And I just heard from a little bird in my ear that we have a fast versus sustainable fashion episode in the works. So if you were curious more about Shein and that entire model, we have more coming your way across the TechCrunch Podcast Network. So stay tuned to both Equity and our sister shows, Found and Chain Reaction, one focused on all things founders, one focused on all things blockchain. And we're pumping out episodes to keep you abreast of the world, the market and the realm of startups. Kirsten, Mary Ann, thank you very much. Equity is back on Monday. Goodbye.

• 33:57Speaker 01

  Bye.

• 34:00Speaker 00

  Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azevedo. 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. Mary Ann, I don't know if you've ever shopped there, but there's a company called Shein from China that likes to do fast casual fashion. Shein, Sheen, Shein.

• 34:30Speaker 01

  Sheen.

• 34:31Speaker 00

  Shein, god damn it.