Telegram founder's arrest, and who's using acqui-hires to tip-toe around antitrust

Today on Equity, Devin Coldeway kicked off our Deals of the Week rundown with Piramidal, a startup which offers a foundational model for analyzing brain scan data that just raised $6 million, as his deal of the week. The premise behind the company is a fascinating one in that its technology aims to help complement the work of nurses and doctors in neural ICUs by helping identify signs of things like an epileptic episode, or a stroke. Mary Ann Azevedo wanted to talk about Comun, a neobank serving Latino immigrants in the U. S. with financial services and banking products. The fintech just raised $21.5 million a round led by Redpoint Ventures, not that long after closing its seed round. It’s seeing fast growth — as well as a higher valuation. Rebecca Bellan dug into a scoop she had about Fluid Truck and recent drama there. The startup, which was founded to disrupt the commercial vehicle rental industry, has apparently ousted its sibling co-founders — CEO James Eberhard and chief legal counsel Jenifer Snyder — in what is being described as a hostile takeover. We then moved into the arrest of Telegram founder Pavel Durov, and whether or not tech executives can, and should, be held responsible for what happens on their platforms. And lastly, we dug into what’s going at Inflection after Microsoft poached its co-founders. That move has drawn attention from antitrust regulators in the U. S. and U. K., who are now investigating whether Microsoft was anticompetitive. The Equity crew discussed whether or not companies are using acqui-hires to get around antitrust regulation. Honestly, we had so much fun we could’ve gone on for a whole other episode. Give it a listen! Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every 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.

• 0:11Speaker 00

  Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. Today is August 30th, 2024. I'm Mary Ann Azevedo and joining me is Senior TC Reporter on the Transportation Desk, Rebecca Bellan. Rebecca, have you had a good week so far?

• 0:27Rebecca Bellan?

  Yeah, I've had a really busy week, actually. Just got one scoop out the door, working on another one. So it's been, yeah, it's been busy.

• 0:34Speaker 00

  Nice. Lots of scoops. Always, always good to hear and very interesting ones as well. We've also got Devin Coldeway, Senior Editor at TechCrunch, here with us today. Devin, always lovely to have you. How are you?

• 0:47Speaker 02

  I'm good. I'm down in San Francisco right now. It's been really lovely, actually. Everybody warned me it was going to be all foggy, but then the fog, it turns out, just during my stay is off in the distance, looking picturesque. So it's been very nice.

• 0:59Speaker 00

  Oh, how beautiful.

• 1:00Speaker 02

  Too hot, if anything.

• 1:01Speaker 00

  Oh, okay. I'm in Texas, so your definition of hot is probably very different from mine. What do you mean by too hot?

• 1:08Speaker 02

  Like, you can not wear a coat. If you wear a coat, you'll be too hot.

• 1:14Speaker 00

  Okay, yeah. Yeah, that's exactly what I thought, very different from 108 we had here recently. Anyway, well, we've got a really packed, fun episode for everybody today. Deals of the week include a couple of startup raises, including Perimeter and CoMoon, and what's going on at Fluid Truck. We're also going to take a look at what went down with Telegram's founder this past week and what that arrest could mean for other tech executives. And lastly, we'll be looking at startups that are getting eaten alive. More about that later. For now, Devin, tell us about Perimeter. It's a very interesting startup that's using AI for what seems like a really important application. And I have to admit, I had to read your article a couple of times to get it,

• 1:58Speaker 00

  because it was a little bit technical, but it was fascinating. So tell us more about it.

• 2:02Speaker 02

  No, it's it's interesting. I have a background in neuroscience. So this, when they pitched me and they're like, hey, we're doing a foundation model for brainwaves. I was like, uh, no, that is obviously a scam. But then I read into their work a little bit, and it turns out it's actually by some academics who've been doing this work for a long time. And they're working with EEGs. Those are electroencephalography readings. And this is the kind of thing, you know, you can put on a little helmet or little pads on your head and and it reads the activity in your brain. But this has been something you could do for a really long time, but it's kind of an approximate science because you don't get really specific readings. It's not like, oh, one neuron says this and that causes this thought. It's a very general thing.

• 2:41Speaker 02

  And it takes a specialist to understand those signals and readings. So the company is saying, well, if there's not enough of these specialists, then people who have serious neurological conditions can be undiagnosed or things can happen in the ICU. And the nurse on duty or even the doctor on duty may not even recognize the, you know, the EEG signals that are saying, hey, there's going to be a seizure in the next few minutes or whatever. But there's a ton of this data out there. Why don't we feed it to a machine learning model and it can learn those patterns because machine learning models are great at taking the signal out of a huge body of noise. And so they've basically created a foundational model for EEG readings, which is actually really cool.

• 3:26Speaker 00

  Oh, my gosh, I agree 100%. My mother's been in the hospital in and out this entire year. And one of the things that I've found most frustrating is obviously that, you know, most hospitals are short staffed, even in ICU. There's only so much that nurses and doctors can do. So having something like this there in an ICU to help monitor a patient to me, I just, it blows my mind. I mean, this could be. Truly life-saving. So I was just really fascinated by this. And Rebecca, please.

• 3:59Rebecca Bellan?

  Devin just answered one of my questions, which was that this is not a large language model. But then maybe a silly question to ask, but is it harder to spot hallucinations with this kind of AI? Do you think or?

• 4:11Speaker 02

  It's not meant to generate stuff. So hallucinations are where you generate. I mean, everything that a LLM does is a hallucination in a way. And it's whether it's a good hallucination or a bad hallucination. In this case, it's not generating anything. It's identifying patterns. And as they put it, you know, then some of these models are already out there in academic literature. They're like, hey, look, we've been testing these out, very specific little ones for very specific types of EEG readings or whatever. The problem is that you have to create a new model for every single condition, every single EEG setup. Because there's tons of different pieces, hardware and computers that do it. So they're like, we want something that can run on all the hardware and software

• 4:52Speaker 02

  that provides a base level of recognition for certain patterns that are troublesome or potentially threatening. And then they call the doctor, you know, it's not a diagnosis thing like saying, hey, put on this helmet and we'll tell you whether you have epilepsy. It's like, hey, normally this pattern would take a specialist who you'd have to call and they'd look at screenshots of the waves. This is a thing where it can say, hey, somebody should be in the room with this person because there might be danger. Their whole point is that it's only an improvement on what's already out there. Because what's out there is very elementary or relies on specialists who, like you said, every hospital is shorthanded and they'll take any tool they can get that makes things easier.

• 5:36Rebecca Bellan?

  And so this company has just raised a $6 million seed round, right? So what are they planning to do with the money? They're just putting it into pilots or?

• 5:43Speaker 02

  Yeah, they've already built an internal version of the foundation model, but this money will go to funding the pilot projects that they're doing with a few hospitals. I think they're all in the UK. They're going to be actually in the ICU, like deploying and getting a bunch more data because they need more data to support the creation of a larger foundation model. With these models, it's always bigger is better. And they're like, hey, we have a good model. But if we want a model that can have basically doctor or super doctor level precision where it can spot patterns that are something that a nurse or doctor might not be able to spot at all, let alone consistently, then we need more data. And hospitals produce tons of this data. They don't do anything with it.

• 6:27Speaker 02

  So the parameter is like, uh, we'll take it. You know, thousands and thousands of hours of EEGs. It's turns out it could be life-saving information.

• 6:35Speaker 00

  Before we move on, I'm just curious, Devin, would you say that in general, there's been a lot more investor interest in like medical applications of AI?

• 6:45Speaker 02

  It depends on how you define medical because when you're producing something that happens at the edge like this, which is actually going to be deployed in an ICU on premises, that's a pretty long-term and fairly risky deployment of technology because you're like, well, what if it goes wrong? You've got a lot of liability. So I think that investors have been pretty wary of investing in that kind of thing. The big money has been in systematic stuff like protein design and stuff where you have a generative side that can be trained to produce and sort through millions of candidate molecules. So there's a huge upside as far as like, you know, you can find the next trillion-dollar drug, right? Or you could assume a whole lot of liability and maybe help some people in need

• 7:29Speaker 02

  who possibly have no money at all. It's like, if you're an investor, it's a no-brainer. But if you're a researcher and you think that you can save lives, it's a pretty good startup and they do have some interest from investors. We'll see how much more money they need though, because running these models is not cheap.

• 7:44Speaker 00

  Yeah, super expensive. Well, great story. We're going to switch gears a bit and talk about a fintech that I wrote about this week called CoMoon. The neo big space has been a mixed bag, right? There's been some that are doing really, really well, and then others that have just bombed, no other way to put it. So CoMoon is only about three years old, and it's a digital bank focused on serving immigrants in the US. Now, this is a very crowded space. There are probably almost 10 that I know of doing a similar thing, catering to immigrants in the US with financial services. This one does seem a little bit different, though, than some of the others. They just raised, first of all, $21.5 million, and this was only like less than nine months after they raised

• 8:26Speaker 00

  a $4.5 million round. So, you know, the back to back sort of, even though it's not literally back to back, but the raising less than a year after raising another round, that happened all the time in 2021, right? I mean, all the time. But it's happening far less in 2024. So it did catch my attention. Redpoint Ventures led the raise. They've also backed companies like Stripe and New Bank. They seem really bullish on this one. So one of the interesting things about CoMoon is unlike a lot of other neo-banks, they do not rely on a banking as a service provider, which if you've been following the whole Synapse saga this year, really didn't end well for a lot of companies who found themselves with customer deposits just completely

• 9:07Speaker 00

  missing. So this company was like, you know what, pretty early on, you know, we want to build our own infrastructure. They wanted to own it. So I think that is one thing that really makes it unique. Also, they are just in general growing super rapidly. They don't charge fees for opening accounts. They don't just rely on interchange fees, though, either. They launched a remittance product earlier this year, so they make money off of that as well. And, you know, just fast growing. So I've been talking a lot. Let me be quiet. Do you guys have any questions or comments?

• 9:36Speaker 02

  I like this. Yeah, I'm not. I don't really focus on fintech stuff at all because it's usually, to me, it's not that interesting because a lot of times it's just, I don't know, boring. But this is, this is the kind of thing which is more like a very directed service. It has, it has identified a population that needs something like this. It's not just saying, oh, are you at, you know, Bank of America here? Sign up with us. Well, you know, we'll give you a better interest rate. It's, it's saying this is like immigrants in the United States are a fast growing and really important and increasingly have a lot of income. If you can capture that market and provide a service that is specific to them that other banks are failing at, I think that's awesome. And the less you rely on the existing banking infrastructure,

• 10:20Speaker 02

  the better services you can provide, the more specific services you can provide, and the cheaper it is for you because you're not paying, you know, a half a penny on every transaction to, you know, Capital One or whoever.

• 10:32Speaker 00

  Yeah, absolutely. The two co-founders actually started the company after they faced what they described as financial exclusion in the US when they migrated from Mexico. So they said, you know, we want to really help offer digital banking services. And they're especially focused on Latino immigrants. They provide native Spanish speaking reps seven days a week. They allow customers to apply for an account using 100 ID types from Latin America, including passports. And most traditional banks, of course, require a US social security card or offer some kind of proof of address like a utility bill. So yeah, lots of differentiators here.

• 11:05Rebecca Bellan?

  One thing I thought was interesting about this is that, you know, as you say, it's serving immigrants. And if it doesn't need a social security number, then that probably helps serve a lot of undocumented immigrants, which it's possible that that could be a risk factor for the company. But at the same time, I think that serves a public good. Like a lot of the time, people who are unbanked, whether they're undocumented or not, they're far more likely to rely on predatory financial services like payday loans and check cashing services. And those services, you know, they charge exorbitant fees. It's also risky for remittances as well. And for those who don't know, I think remittances, you know, when you send, if you're an immigrant, you send money back home to your family, I think, right? Is that right, Marianne?

• 11:44Speaker 00

  Yeah, yes, exactly.

• 11:46Rebecca Bellan?

  Yeah, so, yeah, I think it's an interesting space, but there's, I could recognize that there's a lot of risk. I mean, you mentioned also that they, they wanted to set their own thing up. Does that have cybersecurity risks, right? Like how much money of this investment is going towards ensuring safety in that way?

• 12:01Speaker 00

  They do say they have, they focus a lot on compliance with KYC, you know, your customer to help kind of address any potential risk with, with serving this sort of population that may not have the same documents or credit history that a US citizen might have. Another thing though, before we move on and before I forget that I also wanted to bring up is valuation. I know that's just a number, but this is also impressive because this year we've seen a lot of down rounds or flat rounds. And this company actually has increased its valuation by more than 50%, which is a lot. And according to PitchBook, it was 62 million at the time of its last raise. The CEO would kind of danced around

• 12:45Speaker 00

  that a bit and just said, that's inaccurate, but our current valuation has increased by more than 50% since the last one. So anyway, didn't mean to change topics altogether, but I know we have to move on and I wanted to bring that up. This is equity, baby. We gotta talk about the money.

• 13:00Speaker 02

  Oh yeah, just let it roll. No, I just, I want to say I love that because I think that, you know, bet on immigrants 100%. America is a country powered by immigration and that is something that I would bet on 100%. And you're seeing it in black and white right there with the valuation and with the rise in the investor confidence in them when investors do not have confidence in competitors or other neo-banks that are serving, you know, strictly American citizens or what have you. It's, I think it's fantastic.

• 13:27Speaker 00

  Well, I'm, I'm really glad you guys share my enthusiasm. Now, Braca, let's move on to your scoop or one of your scoops this week, Fluid Truck. Wow. So I read this. It was almost like some kind of TV movie and a lot of back and forth, a lot of finger pointing. Tell us about it.

• 13:42Rebecca Bellan?

  Yeah. So I guess not exactly a deal of the week, more like a no deal. So, sorry, sorry for that. So yeah, this was a complicated story. So I'm hoping I. I'm hoping I don't ramble too much. There's really two parts to this story. So Fluid Truck, for those who don't know, is a startup that started like around, I think, 2016, 2017. The goal was to disrupt the traditional truck rental or van rental, commercial rental space, right? By being kind of something like a Zipcar of commercial vehicles. So last month, the board voted to oust its sibling co-founders. So the CEO, James Eberhard, and his sister,

• 14:25Rebecca Bellan?

  chief legal counsel at Fluid Truck, Jennifer Snyder. It has been described to me as something of a hostile takeover from two of the minority shareholders that are on the board. This is Inca Investments, that's part of IKEA, it's the venture arm of IKEA, and Bison Capital. And now the other part of it is that, you know, part of the reason they axed the founders and the CEO in particular, is because of allegations of mismanaged funds. So Fluid got itself into this hole that I'll explain shortly, that just kept, that just kept widening. So, any questions so far?

• 14:56Speaker 02

  Well, I just always like, reading that like, you know, there's outstanding insurance claims of $9 million. Like, you know, if somebody told me that, I'd be like, so we're, if we're basing it on insurance claims, I mean, if you have a flooded basement, sometimes the insurance comes to you and is like, oh yeah, it's about $9 million worth of damage from the plumbers. They're like, oh, it'll be about a $10 million fix a job. Like, I don't, these, these numbers can be inflated or reduced to, you know, depending on what you need them to be. You know, maybe there's more to it. Obviously, there's more to it than that.

• 15:25Rebecca Bellan?

  Well, maybe this is a good point for me to explain the hole that they got into, because that has to do with the insurance, right? So, basically, Fluid Truck started this, what I thought was kind of a clever scheme in like 2018, 2019. And so rather than own all of the trucks and vans in their fleet that are being rented out to people, they decided to introduce something called a Fluid Vehicle Investor Program. So they were, you know, basically, I could say to you, hey Devon, do you want to buy, I don't know, 300 trucks and put them on the platform, my platform, Fluid Truck, and I, Fluid, will manage the entire fleet, we'll put them in the right markets, we'll make sure they get rented, we handle the software on the backend, and then when you're ready, you know, so if anything happens to it, we'll fix it, we'll deal with insurance for you. And then at the end of it, we will

• 16:10Rebecca Bellan?

  sell the vehicle. On your behalf, we'll take a little cut, we'll give you the money, right? So it's like a win-win for everybody, right? The problem is that when there was damage to vehicles, fluid truck started paying out of its own pocket to have that fixed. They'd file the insurance claims, but those don't come back for like a year, two years. So this hole just kept getting bigger to the point where they're just like, we have like a liquidity issue, we are missing vendor payments. And then at that point, when they started selling other asset owners' trucks, they started pocketing the money is what my sources tell me. So they started taking that money and not giving it back to the, you know, F V I Ps, fluid vehicle investor program people, and instead using that to help try to pay off their debt.

• 16:52Rebecca Bellan?

  So just, it just created this like absolute cycle. But from what I'm hearing, there was some bad blood between the investors who are on the board and the CEO, and they tried multiple times to, to kind of oust him, including a really aggressive term sheet.

• 17:07Speaker 02

  You know, this, this sounds to me, it's kind of like, you know, those puzzles where there's like, there's a bunch of little squares that you move around and there's like, you're just moving them like into the gap. It sounds like they're doing that with money. It's like, that's the business model is like, well, how are you going to pay for this? It's like, well, we'll take money from this account. They're like, well, that, then that account will be empty. You're like, oh, don't worry, we, that's why we have this. And like, it seems like that caught up with them because the pieces weren't, you know, uniform in size.

• 17:30Rebecca Bellan?

  Right.

• 17:30Speaker 02

  And they're like, oh, it turns out you were trying to pay a nine million dollar bill with a five million dollar account. And they ended up with, and their investors are like, you said you had this taken care of, but maybe that was not the case.

• 17:41Rebecca Bellan?

  Yeah, that was exactly it. So then last year, the investors were like, all right, well, well, you, you need more money clearly to get yourself out of this hole. We'll give you a save you, but this was a really aggressive save you, right? So normally a save you's equity or something, according to some VCs I spoke to about it. And this was a loan, a $10 million loan in three trenches. And to qualify for this loan, they would have had to, the, the CEO and the chief legal counsel would have had to step down, you know, they would have had to resign willingly. They would have had to completely give up their voting rights, the shareholders. One of the investors would have had to join the board, which would have really stacked the board towards investors. These are minority investors, by the way, and. There was a cost reduction plan. There's all these stipulations. Oh, and the worst

• 18:26Rebecca Bellan?

  part was a 5X redemption value. So, within 36 months, they would have had to pay back over 50 million. So, it was really like sink or swim, buddies. And, you know, I can understand, maybe the investors were like, "Look, you messed up and we don't have a ton of faith in leadership right now, but we're trying to help you turn this around hard and fast. And if that doesn't happen, well, at least we'll get out all right." I should say, I should add that the investors have told me that they refute the premise of my questions in relation to all of this.

• 18:58Speaker 00

  Yeah.

• 18:58Speaker 02

  Your question is not a real question.

• 19:00Rebecca Bellan?

  Yeah. They didn't provide any backup to explain what about my questions was wrong, or how I might be taking things out of context or anything. So, I wish they would tell me, but...

• 19:12Speaker 00

  Yeah. Well, maybe they'll change their mind. I mean, this is really great reporting. I'm curious to see how it all plays out. I assume you're gonna keep on top of it and let us know?

• 19:21Rebecca Bellan?

  Yeah. Definitely gonna keep on top of it.

• 19:23Speaker 02

  Sounds personal.

• 19:24Rebecca Bellan?

  It does sound personal. That's what sources have told me. They're concerned that it's like a personal thing. And that's pretty common, right? I think I wrote "Power Struggles Between Investors and Startup Founders Are a Tale as Old as Venture Capital." And it's funny, one of the VCs I spoke to that I described what I knew about the term sheet to, told me that they actually kind of respected it. And they were like, "You know what? We know VCs want to be seen as hostile to founders, but sometimes you have to protect your investment. And often, a lot of founders aren't really ready to step up to the CEO plate."

• 19:56Speaker 00

  Yeah. Sometimes founders don't always make the best CEOs. Well, speaking of that, we're gonna get into one founder getting arrested after the break, so stay tuned. Telegram founder Pavel Durov was arrested this past week. And wow, lots to unpack here. There's a lot of people who are on both sides of the fence here on whether the reasons why he was arrested are valid or not. Rebecca, tell us what happened.

• 20:29Rebecca Bellan?

  Yeah, so he was arrested on 12 charges that have, you know, he's been formally charged as of Thursday. That can be broken down into a few categories, but the main things are that they allege he was complicit in storing and distributing child pornography, facilitating drug trafficking, facilitating fraud and other illegal transactions. And not only that, but the court says that Telegram refused to cooperate with law enforcement when they filed requests for more information or docs. And he was also accused of taking part in a, quote, "criminal association with a view to committing crime or offense punishable by five years or more imprisonment," as well as money laundering. So, anyway, the point is, for those who don't know, Telegram is end-to-end encrypted. It has 950 million monthly active users, but it's got few moderation tools and processes.

• 21:14Rebecca Bellan?

  We previously reported that it also only has 30 engineers, which presents security flaws. So, yeah, it's, as you say, it's presented quite the argument about, you know, whether tech executives should be held, you know, liable or responsible personally for what happens on their platforms.

• 21:30Speaker 00

  Yeah, I mean, I think that's the big discussion here is how responsible is a founder or an executive of a company like Telegram or what happens on its platform? Now, I know that we've seen cases with Meta and Meta apparently has, or Facebook has a reporting system. And in particular, I think the issue with Telegram is, this is where, you know, as a mother, I, my heart hurt and my stomach turned. Any decent human being, not just a mother, but this June report from the Stanford Internet Observatory found that Telegram was the only major platform not to prohibit illegal material in private channels and chats, but not just that, but specifically related to children.

• 22:13Speaker 00

  Now, apparently Facebook or Meta has this reporting system for child porn to authorities and has actually used it. And supposedly it also works on prevention, identification and reporting. So.

• 22:26Speaker 00

  I mean, this is tough. Like, here's, here's a person who's profiting from this platform. So if this horrible stuff is going on, on it, should they not be responsible for it? I mean, this is, what do you guys think?

• 22:41Speaker 02

  Well, we've encountered this as part of the encryption debate for a long time because the, it's the perennial objection of government, especially that they say, we need a backdoor into encryption methods so that people who are distributing like sexual abuse material can be found and prosecuted. But we know that governments use those backdoors for other stuff. So people, basically encryption has remained strong against government interference. But that produces a situation where if you have a strong encrypted channel, all kinds of illegal stuff can happen in it. And we've addressed this over the years. I've talked with the, you know, leaders and TechCrunch has talked with the leaders of every major

• 23:25Speaker 02

  messaging app and encrypted file storage thing. They know that this is a possibility, but the technology is there and it's, it's less about should they be, should a, you know, a CEO be responsible for what is done on using their technology and more are they taking reasonable steps? And that's where you have the difference in this case, based on what we know, which is very little, but Roman did a great breakdown of the, the French system where they're like, look, we didn't do this because we don't like Telegram and because we want them to change. This is a criminal investigation with multiple charges. This has gone through the judiciary. It's not, you know, some political grandstanding,

• 24:08Speaker 02

  you know, person saying, hey, let's punish Telegram for, you know, for not acceding to our demands. This is, you know, it's a criminal investigation with like a lot going on. So we, I think that we can defer until we know a little more because it may be that he is more or less responsible for this than the facts that we have in hand tell us.

• 24:28Speaker 00

  Yeah. I mean, the court claims that Telegram has refused to cooperate with law enforcement when they filed formal requests for information or documents. So that's, that's one thing. We don't know if that's true. Like you said, so it's not just that, that things are happening, but that they're not really doing enough about it or cooperating to help make it not happen as much.

• 24:48Rebecca Bellan?

  Yeah, like Britain, for example, you know, passed an online safety law recently that holds tech leaders responsible personally if the company is made aware of the content that, you know, risks child safety specifically and systematically fails to remove it or do anything about it. So I think it's the lack of action. It's the lack of content moderation. It's, you know, these things are going to happen on, on these platforms, but I think that tech leaders to protect themselves need to show that they're trying actively to stop it and will report it slash work with authorities to prevent it.

• 25:17Speaker 00

  Right.

• 25:17Speaker 02

  Yeah. And that's the, the thing is if they are able to do some things, there are some things they can do. There's some they can't. You know, I've talked with Meredith Whitaker at Signal about this a lot that because they, you know, they have this very similar like totally encrypted. And I talked with Moxie Marlin Spike, who was one of the original engineers on Signal about this exact issue. And he was like, we have chosen to make it impossible to know what is happening between our users. And we can report certain data and we do when the government asks. We can say this user exists with this phone number and they created an account and that's considered complying with a government request because they can show that's all the information we have. So it is possible that perhaps Telegram

• 26:00Speaker 02

  or, you know, Durov specifically knew more than they were sharing or were able to comply to a greater extent than they said they were, which could be criminal.

• 26:11Speaker 00

  Right, right. So I guess we're going to have to see what, when an investigation finds out. So the last thing we're going to discuss is, this is a topic that I'm actually have a lot of opinions on, and I'm sure you, you both do too. But five months after Microsoft hired Inflection's founders, that company Inflection has now had to add usage caps to its AI powered assistant called Pi. So the reason why now it's not the usage caps that's necessarily the, the big news, because yeah, that is big news. But the reason why this is interesting to me or to us is it really just makes you wonder would Microsoft

• 26:48Speaker 00

  Kind of poached Inflection's co-founders in a so-called aqua hire. You know, did they cripple the company? I mean, was this an antitrust violation that was done in a backdoor way? And is this happening more often as a way to get around antitrust regulations? So lots of thoughts here. Devin, what do you think?

• 27:09Speaker 02

  Well, I think certainly I think that they will be considered a form of antitrust violation in time. Right now they're not, but the FTC and Justice are looking into this. Congress is interested in it. It's this this issue where, you know, if Microsoft bought a competitor, then they face antitrust scrutiny and they may or may not be able to go through with that acquisition. Right? But let's say they didn't buy the competitor. They only bought the top 10 people or 40 or whatever, and get an exclusive license to all the, you know, their technology, and then leave the other 500 people in that company adrift with a, you know, skeleton crew and no finances and no plans. Then they're like, oh, but we didn't buy that company.

• 27:50Speaker 02

  So they and it's like every, every, all the antitrust authorities are all looking at this and being like, I mean, this is clearly not cool. But, you know, Microsoft is, you know, saying like, can you explain in legal terms? Why specifically it is not cool? Because we just hired a promising young AI team.

• 28:09Rebecca Bellan?

  Oh, my God. It's so funny, this reverse aqua hire thing. I mean, obviously, Amazon said it with adept as well. But it seems like it has the energy of, you know, a child. You know, you tell a child, no, you can't have chocolate before bed and go to bed. And then you come downstairs and they're eating ice cream. And you were like, they're like, well, you said I couldn't have chocolate, not ice cream. Right? Like, it's just, it's a silly. Yeah, it's kind of an obvious one in terms of this, you know, poaching, reverse aqua hire, whatever you want to call it. But certainly, yeah, as you said, US regulators are looking into it. But also, UK's antitrust regulator is also looking into this Microsoft inflection situation.

• 28:46Speaker 02

  Yeah. And I honestly, I think we need a new term because it poaching is closer to the reality than aqua hire, reverse aqua hire. Like, you know, when I, if I'm a big company and I purchase a small company with 50 employees, and then I kind of shut them down, like, that's an act. Aqua hire because I wanted the team and I bought the company so I could have your 50 employees. And then I'm like, you know what? I'm sorry, but your product has no future at this company and we're going to sunset it. Okay, that's a legit thing that has that can get attention to. But in this case, they're not even doing that. They're not hiring. They're not Aqua hiring the company. They're just poaching the leadership. They're like slipping the meat out of the sandwich, you know, it's like they can't you and then you leave this husk of a company behind, which in this case, it's with pie and inflection because before they were like, we're probably going to

• 29:30Speaker 02

  kill pie this, you know, personal AI thing. And now they're like, oh, we're gonna, we're gonna keep it online, but it's going to be capped for free users and we're going to have a new thing. What this produces is a total lack of certainty for users, investors, potential partners. They're like, well, wait, so is pie going to exist in a year? Does it depend on, you know, whether you get enough subscriptions? Why is it free? What are the caps? They haven't announced it like this is not, these are not the acts of a company that knows what it's doing.

• 29:57Speaker 00

  Yeah.

• 29:57Speaker 02

  They're the act of a company just desperately treading water.

• 30:00Speaker 00

  Yes, that's what it feels like.

• 30:03Rebecca Bellan?

  And I think it's really worth seeing this a lot more specifically with AI companies because it's actually really expensive. Well, at least this is what I'm thinking because it's really expensive to do AI, right? So then who who can afford to do AI, you know, the big players. And so they're kind of taking advantage of that to try to pull off these moves.

• 30:20Speaker 00

  Yeah, that's a good point. That's a really good point. Wow. Time flies when you're having fun. I can't believe we have to wrap up. I feel like we could have gone on for a whole other 35 minutes. Yeah. So Devin, Rebecca, thank you so much for being on the show today. Thank you, listeners. We're gonna have to wrap it up, but Equity will be back next week. Until then, you can find us under the handle at EquityPod on X and Threads. Hope you have a wonderful weekend. Bye bye.

• 30:48Speaker 00

  Equity is produced by Teresa Loquenzolo 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.