OpenAI is shooting for AGI but landing in Studio Ghibli

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

• 0:00Anthony Ha?

  This episode of Equity is brought to you by Schneider Electric. Schneider Electric, your energy technology partner.

• 0:17Speaker 01

  Hello and welcome back to Equity, TechCrunch's flagship podcast about the business of startups. I'm Max Zeph, a senior reporter at TechCrunch.

• 0:24Anthony Ha?

  I'm Anthony Ha, TechCrunch's weekend editor. And I'm Sean O'Kane, a senior reporter at TechCrunch. And we are going to be covering, you know, deals and trends. Before we get to that, just wanted to mention a little update on CoreWeave, which is a former crypto, now AI infrastructure company that we've talked about a lot on Equity. Basically, in a filing, they've acknowledged that there were maybe some challenges, or not challenges, financial hiccups that they hadn't disclosed before. Basically, they'd taken out, you know, this $7.6 billion loan, and then they had to admit that they had triggered technical defaults on the loan. I didn't even know what a technical default was, but it's basically when, it's not that you're not making the payments, but you're not holding to all the terms of the loan.

• 1:08Anthony Ha?

  In this case, it had to do with how CoreWeave had taken a bunch of money it's borrowed and then started spending it in Europe, which it was not supposed to do. And so the lender, which is Blackstone, was like, that's fine. We're not going to like cancel the loan because of that. But it does indicate both just the scale of like the money and the loans that CoreWeave is taking out and also, hey, like, these guys maybe don't fully have, are not fully on top of all their finances.

• 1:34Speaker 01

  Yeah, I think there's been a lot of kind of interesting signals ahead of this CoreWeave IPO. Bloomberg actually reported this morning that CoreWeave cut the size of its IPO from $2.7 billion to now $1.5 billion. We also saw earlier that the founders of CoreWeave pulled a bunch of shares off the table ahead of this IPO. It's one of the most hotly anticipated IPOs of the year so far. But we do have a lot to get to on today's show. We have deals of the week from Rivian and OpenAI. And later, we're going to get into some layoffs at Block and some controversy around the startup 11x. Getting right into it, we want to start off with Rivian, which is spinning out a new micro mobility startup. Sean, can you tell us what's going on over there?

• 2:19Sean O'Kane?

  Yeah, this was really interesting, if only because it kind of came out of nowhere. Rivian, for a few years, has been working on, buried in a lot of secrecy, what we thought was an e-bike project of some kind. There was a trademark filed a few years ago. The CEO of Rivian, RJ Scaringe, actually sort of talked about e-bikes when he was on stage at Distraught in 2022. And so we knew that they were up to something. There was some reporting from Bloomberg a few years ago as well. But Rivian's a company with a lot of things going on. They're making multiple models and have others in the pipeline of their passenger EVs. They have commercial vans for Amazon, and they've now opened that up to other companies. They have plenty of things to do, so it's been easy to overlook

• 3:02Sean O'Kane?

  the fact that they were maybe still working on this project. And then this week, we found out, we got an update on that. And the update is basically, not only are they working on this, they want to do a lot more in micro mobility in general, two-wheelers, three-wheelers, maybe even small, low-speed four-wheelers, like you'd see, you know, they're sort of called neighborhood electric vehicles. And they want to do it all around the world, but that's a lot to add to the sort of pretty full plate they already have. And so they decided to spin that team out. It's a Skunk Works team that has grown to about 70 or 80 people, and they're spinning it out into its own thing. And Rivian's going to be a minority shareholder. RJ Scaringe is going to be on the board. We spoke to him the other

• 3:44Sean O'Kane?

  day about this project, about this new company. He's very excited about it. So I can imagine he will be offering them a lot of input, even though this is going to be a separate thing. And the company is called Also. Bit of a weird brand choice. It makes it hard to know exactly when someone's talking about the company in an interview, I learned this week. But yeah, we don't really know a ton more. We know that it has 105 million in funding from Eclipse Ventures and that. Really came to be because Jitin Bell, who used to be the Chief Growth Officer of Rivian, when he left Rivian, he went to Eclipse. And so he spoke to us as well. He talked about how, you know, in 2019, he was really talking with RJ Scaringe about these ideas of going into

• 4:26Sean O'Kane?

  other form factors that weren't really cars or trucks or anything. And so he's been invested in this for a long time, sort of mentally. Now he's invested in it financially. They're going to show off some of the first vehicles from this company later this year. They'll put one into production next year. And then, you know, really, the sky's the limit. They're being very ambitious with where they want to take it, even if they're being a little coy right now as to what they're working on.

• 4:50Speaker 01

  So kind of help us break down what to make of all of this. I mean, Rivian is a company that is trying to, you know, really revolutionize the car transportation industry. That's what I think a lot of people know them for with their electric vehicles. And now, you know, they're really putting a very concerted effort behind this microability startup to kind of venture into bicycles or tricycles, like these kind of electric, like multiple, you know, smaller form factors. I mean, what are they really trying to do here?

• 5:18Sean O'Kane?

  It's a good question. I mean, one of the things that RJ told us was that this is something that's been on his mind since even before he founded Rivian in 2009. So it's clearly a passion thing for him. You know, Rivian's really oriented around trying to, you know, similar principles to what we've seen Tesla claim over the years, which is sort of advancing sustainable transportation. You know, Rivian really focuses even more sort of strongly on the climate aspects of all this. And there's really no better way, there's really no cleaner transfer other than walking around than, you know, electric bikes, electric scooters. If you use these to replace car miles, you're doing way better than you are even with all electric vehicles, just because the energy needs and everything.

• 6:00Sean O'Kane?

  And so it's been a big passion for the company for a long time. And it's also just, I think, a pretty big opportunity for them if they do it right. Micro mobility in general is very scattered, kind of all around the world. There's places where two-wheelers and three-wheelers really dominate, like Southeast Asia, or even parts of South America. And it's a big Your challenge to get people to adopt that stuff here in the United States, especially just because so many of the cities are really not built for it. But they have, you know, the know how in house. They've been working on electric motors. They, you know, they are not one of these kind of electric vehicle companies like we've seen like Fisker, which went bankrupt last year, which was really trying to piece together a lot of third party components and really go asset light.

• 6:43Sean O'Kane?

  Rivian's really been at this for a long time, developing, refining their electric motors, their battery knowledge, their drivetrain in general. And they really think they can apply a lot of that learning to micro mobility and also some of the sensibility that they have. Like Rivian, I think, has a really strong brand because they really understand who they want their customers to be. It really informs the design of the products, the design of the marketing. And, you know, it just, to me, having these conversations with the people who are involved in this this week ahead of the announcement, you know, I was telling them, I can only imagine that at your retail stores around the United States, people probably were already asking, why don't you sell e-bikes here? So it really fits that sort of profile of the people that they try to sell to,

• 7:26Sean O'Kane?

  of people who are either outdoorsy already or in some capacity want to think of themselves as outdoorsy. And so, you know, I think the big challenge here is like, will they be able to tackle the cost? They say they'll be able to make really high quality, very desirable products in these form factors, but at a lower cost by leveraging all of Rivian's sort of supply chain know how, design expertise and all of that. That is really the biggest thing that remains to be seen because they are doing so much of it in house. That's going to be, that's going to be a challenge. One of the reasons that so many e-bike companies do still source from all these disrupted supply chain, you know, sections around the world is because it's just the easiest way to get the costs down below $4,000, $3,000.

• 8:11Sean O'Kane?

  And we've seen a lot of electric bike companies that try to do a lot of things themselves fail because it's just, it's hard to be good at all of these things. So if anyone can take up that challenge, I think it would probably be them.

• 8:24Anthony Ha?

  And you mentioned that they've been kind of coy about what the initial product is. But when you sort of imagine what it might look like, do you, should we, do you expect it to sort of look like? A standard e-bike with a sort of Rivian take on it? Or do you think it's gonna be something a little bit more out there?

• 8:38Sean O'Kane?

  I'll put it this way, we've heard, we've heard competing things. Kirsten, our transportation editor and I, as we worked on this story, we, so I actually am not totally sure. But we tried to get an answer out of them from all the different people we spoke to in the lead up to this announcement. And, you know, we were able to get them to confirm that it'll have, this first product will have a seat. It'll have two wheels. It'll have a screen and it'll have a battery. And I think that's as far as we got. So I, I would imagine some sort of, I think that, you know, the most likely bet is probably some sort of like throttle assist seated e-bike. If you were to imagine a Rivian e-bike, I think it will probably fall into a lane like that. That won't be terribly surprising. It's gonna be something you can really use.

• 9:23Speaker 01

  Definitely interested to learn more details about the product later on. It seems like they kept it very vague, but we have to move on to another kind of vague deal, which is that OpenAI is close to finalizing. It's $40 billion SoftBank-led funding. Bloomberg reported that OpenAI will finalize the $40 billion funding round very soon. But it has some kind of interesting details attached to this. SoftBank is reportedly investing an initial $7.5 billion in OpenAI, the ChatGPT maker, with $2.5 billion from an investor syndicate. Then later on, there's a second tranche of $30 billion coming where SoftBank is, you know, expected to provide, you know, more than $20 billion of that. SoftBank has already committed a lot of funds to the Stargate project.

• 10:08Speaker 01

  They're kind of stepping into this role, kind of replacing Microsoft in a certain way as the biggest funder and backer of OpenAI, which is a really interesting shift here. This is a massive deal. I mean, this is the biggest funding deal of all time, coming at a really interesting time for OpenAI. I'm just curious kind of what you guys make of this as it's coming to light and kind of the nuances of the deal, Anthony?

• 10:32Anthony Ha?

  Just to underline what you just said, like it's the largest funding deal ever. And that for a company that had previously set the record for the, like, the largest funding deal ever. So these are, you know, just numbers that like, I guess occasionally you might see for public companies. But for, you know, a company that's still private to be raising this much money, it's just bonkers.

• 10:52Speaker 01

  Right, it is. And I mean, another kind of note here is just that, you know, OpenAI is, the business model of OpenAI is still kind of ambiguous in a certain way for all these AI companies. I mean, it's still unclear how they make money. I mean, so OpenAI, it was recently reported that the revenue in 2025 is expected to triple to $12 billion, up from $3.7 billion in 2024. That money mostly comes from ChatGPT subscriptions. And the fact that we are, you know, the biggest funding round ever is being put into a company that is selling subscriptions just feels crazy. It feels like we've kind of learned from the streaming wars that subscription models just don't work very well. But

• 11:32Sean O'Kane?

  It makes me, you know, thinking about what we were talking about earlier with CoreWeave, makes me really want to know what some of the terms are on, especially that that large second tranche of $30 billion that's going to be hanging over OpenAI for the next few years is like, what, what could go wrong? Although, you know, we've seen in the past, SoftBank maybe doesn't have the most, shall we say, restrictive terms. They like to put a lot of money in things that may not work out. So maybe they won't be on such a short leash as I imagine you would with a $30 billion addition to the initial investment.

• 12:06Anthony Ha?

  You would hope. Max, just to push back a little bit on something you said, I mean, it's not that I think that subscription business models are inherently bad. It's just that I think when you have sort of a high growth subscription model, there can be a lot of speculative and optimistic math about how big you can get, how low you, how quickly you can lower costs. And I, I don't think it's crazy to imagine that those concerns also apply to OpenAI, that like SoftBank is not writing this check based on the strong fundamentals in OpenAI's business. They're just like, wow, this is the company, however much money we can put into here, let's do it. But I think also beyond the financing, I did want to also talk a little bit about something else that that OpenAI, you know, did this week that got a lot of attention, which is they released new tools that, a variety

• 12:51Anthony Ha?

  of new tools, but what really got attention was this ability to take existing images and make them look like Studio. Okay, I'm going to reveal my ignorance here. Is it Studio Ghibli or Studio Ghibli?

• 13:02Speaker 01

  I think Ghibli.

• 13:03Anthony Ha?

  Okay, Studio Ghibli animation stills. And I'll say like just upfront that like, whereas like so much other AI art, I sort of have like both philosophical like reservations about, but also I think it looks bad. This is the first time where I was like, this stuff actually looks pretty cool, but I still think philosophically it's kind of a boring. And Matt, you wrote specifically about some of the copyright concerns, right?

• 13:27Speaker 01

  Yeah, yeah. So I mean, this is like, while OpenAI does have its sights set on AGI, like let's, where are we today? We are at Studio Ghibli images in ChatGPT. I mean, that is really their business right now, driving subscriptions by basically creating images in the style of Japanese anime. So I mean, there's a lot of copyright concerns that this kind of highlights, but nothing especially new. Like, OpenAI's image generator is able to create these images that look exactly like Studio Ghibli, but people have turned Elon Musk and Donald Trump, the Lord of the Rings characters into these kind of Studio Ghibli style versions.

• 14:04Speaker 01

  The obvious kind of answer to how OpenAI was able to achieve this is by training their AI models on tons of stills from Studio Ghibli's movies. There's a lot of popular ones like, you know, The Boy and the Heron just came out earlier this year. Those are copyrighted. I mean, this is like kind of the same conversation that we've been having. I talked to some lawyers who are in this space who say, this is just something that is still being hashed out in the courts right now. And while the courts are hashing out whether it's legal to train AI models on copyrighted content, OpenAI is just continuing to ship these features, which are super popular. Like people, this thing went crazy on social media this week, but they're kind of just throwing caution to the wind here and saying, let's just, you know, drive usage up of this thing.

• 14:47Sean O'Kane?

  To be clear, and maybe this is some of my ignorance showing, because I don't do a lot of image generation and have only sort of lightly played around with some of the different LLMs. But this was part of They were bringing things together, right? Like, they they've had Dolly available in the app before, but this was streamlining and adding better image generation into the regular chat GPT workflow, right?

• 15:10Speaker 01

  Yeah, yeah, it's so it's GPT four O native image generation is what they launched. So they launched this GPT four O Omni model a while ago, and it basically this image model is a part of that core AI model. So it's supposed to be smarter than Dolly. While Dolly could just generate images, this new image model can understand context. It can understand multiple kind of inputs and, you know, it can generate text. I mean, it's it's it's really an impressive achievement. It comes on the heels of Google doing something similar last week. Definitely represents a step forward for the industry, but it is kind of an interesting moment to see, you know, where we're at in the copyright race. There's a lot that we could talk about here, but we do have to segue out.

• 15:52Speaker 01

  After the break, we are going to talk about some layoffs at Block. Stay tuned.

• 16:01Anthony Ha?

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• 16:39Anthony Ha?

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• 17:05Speaker 01

  Fintech Block laid off 931 people this week. That's roughly 8% of the company's staff. We saw an email that Jack Dorsey, founder of Twitter and founder of Block, sent to the company, basically explaining his rationale about this. So there were basically three buckets that they pinned these layoffs on. One was strategic realignments. The largest bucket was underperformance. And then 80 of these positions were managerial positions. So basically, they're trying to flatten the company. They're trying to get out their underperformers and they are strategically realigning. To me, I thought that this was surprising. The people I talked to at the company were surprised by this.

• 17:48Speaker 01

  They've seen Block go through a lot of shifts and reorgs in the last couple of years. They own Cash App, they own Square, kind of these financial services that streamline the process from these legacy finance companies. But what sticks out here is this emphasis on cutting underperformers. We've seen Jack Dorsey cozy up to Elon Musk. Seems a lot more like he's into this idea of efficiency these days. I don't see broader layoffs in the fintech space right now. So to me, I thought that that was the thing that stuck out.

• 18:23Anthony Ha?

  Certainly, I think with the scale of the layoffs, I mean, 8% of the company, like, that is a really big chunk of the company. And I think that there have been reports around Block having financial challenges and having to make cuts before. So I don't think that this is totally unprecedented. But I guess I have two minds of like, A, you don't cut 8% of the company unless something's going pretty wrong. But also, yes, I do think that it seems like Jack Dorsey in general seems to have this be part of this kind of political, moral realignment in Silicon Valley where it's much more about, let's just cut people. Like, it's all about "efficiency." Although, it was interesting also that he specifically said, "This is not about replacing people with AI."

• 19:07Anthony Ha?

  I mean, we'll see. But it does seem like he wants to push the company in a specific direction. I also just wanted to mention one thing that I found kind of crazy, which is that the email, at least as we're reproducing the TechCrunch story, is all lowercase, which I think is a crazy thing to do when you're laying off hundreds of people.

• 19:28Speaker 01

  Yeah, very, very Jack Dorsey. Sean, you kind of cover, I think, a lot and you pay attention to a lot of these people who are, you know, really running Silicon Valley with their own ethics kind of driving the car. Can you kind of talk about, you know, what you make of figures like Jack Dorsey these days and, and this decision in particular?

• 19:47Sean O'Kane?

  The timing of it is really interesting to me. I mean, listen, I, a lot of layoffs tend to happen on the early end of every year. So to a certain, a certain amount, I'm not terribly surprised by it. But, you know, to your point about this push for quote unquote, efficiency around the industry, you know, there definitely was a window where post slaughter at Twitter, there were a lot of people seemingly taking up the same kind of approach. Because, you know, hey, if it's working for Elon, I want to prove that I can do the same thing. So it's interesting to me that it's almost sort of like outside that kind of, not grace period, but like it's outside the window of where, where we saw a lot of that activity happening. And yeah, it does, it really does make me wonder.

• 20:30Sean O'Kane?

  I mean, I haven't followed Block too closely, but I know that Jack Dorsey is still someone who kind of has himself scattered in a lot of different ways, not just in his focus on his businesses, but also geographically. He has, you know, a place in Costa Rica, like there have been a lot of reports of him doing stuff like this before where he's clearly, you know, near the beach in Costa Rica, laying people off or, or issuing different edicts on like how the company should be run. So, I don't know, there's, there's a lot of that swirling and where he goes as the most powerful people in tech continue to ascend through the government or adjacent to it is a really interesting storyline, I think, for the rest of this year.

• 21:09Speaker 01

  Right. There is a lot going on there. Another kind of influential leader in Silicon Valley is Andreessen Horowitz, who is coming up on our next theme that Anthony has more info about. Andreessen Horowitz backed this startup 11x, which is involved in a controversy. Anthony, can you walk us through it?

• 21:25Anthony Ha?

  Yeah, absolutely. And to be clear, I'm summarizing a great story that our colleagues Dom and Marina did, and hopefully our listeners will check that out as well. But basically, things seem to be not great at this AI sales automation startup 11X. The seemingly most egregious, I mean, I think there's sort of a whole constellation of things that are maybe somewhat common at high-growth startups, like just sort of a really stressful environment. But I think what is, again egregious, is the fact that they have claimed a number of customers. They said Airtable is a customer of ours, ZoomInfo is a customer of ours. And both of those companies are like, nope, that is not true. And in fact, there's some threats of legal action.

• 22:09Anthony Ha?

  And then I think that is also sort of indicative of maybe some broader problems with the product and the fact that they do seem to have a really high churn rate and in fact are sort of both product, but also just some of their practices. That again, it seems like there's some people who, customers who feel that they were basically misled into signing up for these longer subscriptions and then trying to break out of them. And so paints a pretty negative picture of 11X, which has then sort of led the company into having some financial issues now. Should say that there's definitely been some pushback against the story, particularly from Ben Horowitz, who has pushed back against a number of TechCrunch stories about his investments and activity in the past.

• 22:50Anthony Ha?

  But Dom and Marina report that A16Z is not happy about what's happening at 11X. But I'm wondering, you guys obviously have done a lot of reporting about startups, about bigger companies that have kinds of dysfunctional, problematic practices. I mean, to what extent, when you read this story, did you feel like, oh, wow, these are a lot of red flags?

• 23:08Sean O'Kane?

  Oh, man. I mean, it's pretty chock full of them. To me, I think one of the biggest, as a reporter, a reporter that does a lot of stuff more on the investigative side, I'm always interested in how hard a company pushes back if they disagree with what we've been told by. Employees, investors, analysts, whoever it is that we're using in a story. One of the things that really stood out to me in the CEO's response to this story that he tweeted out and that Ben Horowitz retweeted was one of the bullet points he felt was worth sort of spelling out was that, yes, some of these customers lapsed, churned, or whatever the

• 23:50Sean O'Kane?

  language was that he used, and we should have done a better job removing them from the website, and we're going to work on speeding up our process of removing these churned customers from the website. And I'm just, I was reading that thinking like, we've got, you know, Studio Ghibli means flying out the, like, filling everybody's social feeds, like, AI is, AGI is here. What are you talking about, like, removing these more quickly from your website? Like, that's just, so when I see stuff like that, you know, it's, it's like, it looks like you're padding out a list to make it look like you have more disagreements than really makes sense. So, you know, it seems concerning. It was really great reporting. And yeah, it's a lot.

• 24:32Speaker 01

  Yeah. I mean, one thing that Dom told us before the podcast was that, you know, a lot of people told them when they were reporting this, that this is normal, you know, like, startups kind of inflate some of their metrics, you know, they put companies on their site that they just worked with for a little bit. And I think that's a good point. I think the bigger question is like, is that right to do? Like, should you do that as a startup founder? Should you invest in startups that do that? I think that's, you know, up for individuals to decide, really. But I think it's a good thing to note that this is something that does happen kind of on a broader scale. And I think Dom and Marina's piece really laid out how this happens in a very detailed way at one company in particular that's generating a lot of buzz.

• 25:12Anthony Ha?

  Right. And I do think that often, like, when we publish stories like this, you know, we being just tech crunch or the tech press, like, there can be these questions like, oh, why are you picking on this company? Why are you picking on this founder? And I do occasionally think there's some fairness to that of like, it's easy to be like, oh, this company is the bad company, and implicitly, most of the other companies are good companies, which I don't think it's usually that black and white. But then I think usually what often people complain about what they really mean is like, you shouldn't publish. Stories about companies doing this kind of stuff at all as opposed to like, no, let's publish this and then contextualize it. So we understand that this isn't totally unique behavior.

• 25:45Speaker 01

  Right, right. We could talk a lot more about 11x, but we are out of time. So Equity will be back next week. Kirsten will be back on the show next week, too. She was out this week. But until then, you can find Equity under the handle at EquityPod on X and Threads, and we will see you next week.

• 26:05Rebecca Bellan?

  Equity is produced by Teresa Loconso Lo with editing by Kel. We'd also like to thank TechCrunch's audience development team. Thank you so much for listening and we'll talk to you next time.