The PHP Armageddon reminds us that the internet is held together by glue and dreams

The internet is having an off week, to say the least. Security researchers at OpenAI and Google-owned Wiz used AI to uncover critical flaws in PHP, the open source language behind roughly 70% of websites, including those built on WordPress, WooCommerce, and Magento. The holes date back more than a decade, and now that a fix is out, companies are scrambling to patch their systems as attackers try to exploit the them. On this episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and Anthony Ha dig into why AI-powered bug hunting could make this the first of many internet-wide scares, what Elon Musk’s careful choreography says about where a Tesla-SpaceX merger is headed, and more of the week’s headlines. Listen to the full episode to hear more about: Elon Musk’s pledge to give every kid in America a SpaceX share, announced just hours after Anthropic unveiled its public benefit fund Character. AI’s bankruptcy, Disney’s deal to hire most of its staff, and Anthony’s case for rethinking what “acquihire” means OpenAI’s acquisition of Orchestra Bio and what it says about the company’s “no side quests” strategy Otter’s surprise $320 million raise from General Catalyst’s growth fund Subscribe to Equity on YouTube, Apple Podcasts, Overcast, Spotify and all the casts. You can also follow Equity on X and Threads, at @EquityPod. Chapters: 0:00 – Intro: PHP security crisis, Tesla and SpaceX, and Otter.ai's $320M raise 0:55 – TechCrunch Disrupt recap and the Elizabeth Holmes documentary 2:50 – Critical PHP vulnerabilities threaten millions of websites 8:01 – AI's role in discovering and exploiting cybersecurity flaws 13:09 – The future of AI-powered cybersecurity 17:07 – Are Tesla and SpaceX finally merging? 19:10 – Elon Musk's influence over both companies' boards 22:50 – Why a Tesla-SpaceX merger could make financial sense 25:27 – Musk's plan to give American children SpaceX shares 27:08 – Character. AI's bankruptcy and Disney's involvement 30:21 – OpenAI acquires biotech startup Orchestra Bio 33:00 – Otter.ai raises $320 million from General Catalyst 35:30 – Outro 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.

• 0:00Kirsten Korosec?

  Researchers revealed critical flaws in PHP, the programming language behind more than half of the web. Now organizations are scrambling to fix them and it's raising big questions about AI's role in the future of cybersecurity. Also this week, we're looking at the latest twists and turns in the Tesla SpaceX merger saga, plus a couple of deals that caught our attention, including a surprising $320 million payday for AI note-taking startup Otter. Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. I'm Kirsten Korsak, Transportation Editor here at TechCrunch, and I'm joined as always

• 0:44Kirsten Korosec?

  by our co-host, Sean O'Kane, Senior Reporter, Special Projects, and Weekend Editor, Anthony Ha. Hello you two. It was great seeing you in person, by the way, just last week.

• 0:54Anthony Ha?

  Yeah, likewise. I had a great time at Disrupt and also, I think, incredibly biased, but certainly on a personal level, recording that episode, a live episode of Equity was definitely a highlight for me.

• 1:06Kirsten Korosec?

  Yeah, we had a full house and the one thing that I will say that I was a little bit jealous of is on our last day, one of our reporters left a little bit early to go see the movie everyone's talking about right now, which is everyone's watching the Elizabeth Holmes documentary. And I'm wondering if either one of you watched it over the weekend.

• 1:31Anthony Ha?

  I've seen it twice, actually.

• 1:33Sean O'Kane?

  I did not, unfortunately.

• 1:34Anthony Ha?

  So we balanced out. And I should say that I didn't see it twice because I was just so desperate to see it, but because I already had plans to see it midweek with some friends and then because of some family, my sister-in-law really wanted to see it. So I went with her as well. And it's great. I highly recommend it. I think it's, unlike some of the other material about Elizabeth Holmes, which also kind of focuses more broadly on Silicon Valley culture, this is really, really focused on her. And then there's some like really wild twists that kind of happen in the course of the story. So I would really encourage people to see it soon because it's going to get harder and harder not to get spoiled.

• 2:14Sean O'Kane?

  Yeah, I'm feeling that pressure right now, really real. I haven't been able to read Amanda's piece or any of the other pieces that I know a lot of other folks who I'm eager to hear their thoughts on have written. And that's in large part because the only theater in my town that's playing it apparently really underestimated the popularity of this thing because they only bought it through, I think, today, like as we're recording it, or maybe even on Wednesday was when it left that theater and it is not here after that. So I'm going to have to get creative if I want to see this thing in the near-term future.

• 2:50Kirsten Korosec?

  Yeah, definitely jump on that. A couple of other big things happened while this was in the backdrop and probably the biggest blow up was a little thing called PHP. And it's not a drug, just so you know. That's my attempt at a joke, sorry. So this is everywhere and I'm wondering if one of you could just give us the broad strokes of why everyone is talking about what one of our editors calls the PHP Armageddon.

• 3:25Sean O'Kane?

  Yeah, I mean, the internet is breaking in lots of ways this week, it seems, right? I mean, I think the best way to think about this, if people are coming into this kind of cold, is that we've seen, how many times over the last, call it 10 years, have we had these moments where something breaks or something nearly breaks, where one person maintaining one tiny repository, like as a hobby or whatever, happens to catch that something nefarious is going on and saves us from the infrastructure of the internet completely crumbling. Now multiply that by a billion when people have access to not only extremely advanced software in the form of these LLMs that everybody uses, but also

• 4:09Sean O'Kane?

  the ability to sort of task them to go out and do it themselves with creating AI agents that are sort of single-minded at accomplishing those things. And it seems to be, we're seeing a balance of like two things happening this week. One is a bunch of the labs and companies like Google and OpenAI actually had people go out and find a bunch of vulnerabilities, including the one with PHP. And then we also have a bunch of people seeming to rush to take advantage of those vulnerabilities to try and hack into websites. So we have governments taking down websites. We have really popular websites that are going down briefly to be able to fix this vulnerability. This is a real reckoning moment where we're going to

• 4:52Sean O'Kane?

  find out the downside risk of building so much of the internet on open source technology like PHP where things are really, when you really get down to the bone level of the internet, it is held together with glue and dreams. And it's a tough moment to be thinking about right now.

• 5:13Anthony Ha?

  I think the internet is held together by glue and dreams is something that we got to put that somewhere. The tagline has to be used by someone. I mean, there are so many things that were striking about this and one of them is the fact that, as I understand it at least, and I'm not a cybersecurity reporter, but is that this is not like a new vulnerability. This is something that is a vulnerability that has existed in PHP for decades, which in PHP has been used as a programming language to build so much of the web. So this vulnerability has been there for decades, but just no one knew about it. And so what happened is essentially that these big AI companies were able, including

• 5:53Anthony Ha?

  Wiz, now owned by Google, they were able to find these vulnerabilities using LLMs. And presumably, I guess, part of the calculation is, A, we need to patch this because if we can find this vulnerability using LLM, so can other people. But the only way we can sort of get the patch out there is to announce the vulnerability. And so it creates this very kind of panic situation where it's like, okay, this vulnerability has existed for decades, you have to patch right away. And if you can't patch right away, just take your website down. It's that severe a vulnerability.

• 6:26Kirsten Korosec?

  Yeah, I mean, I think that the important thing is a lot of people don't even realize that their websites have PHP, which is this, as you mentioned, decades-old, open source programming language. For those who don't know, it is hypertext preprocessor is the official term.

• 6:43Anthony Ha?

  I didn't know that.

• 6:44Kirsten Korosec?

  Yeah. This is really like the core ingredient behind content management systems that are used throughout. So WordPress, Drupal, something like 70% of websites, PHP is there. So we're talking tens of millions of websites. So to me, it's the scale. It also made me immediately think two things. One, this is just the beginning. There's going to be some other, like what other decades-old, bad software is out there that is going to be exploited? And the other one was something that actually 404 Media, which had a really

• 7:28Kirsten Korosec?

  great breakdown of, mentioned, which is link rot. Because a lot of people, companies, governments, maybe like that small neighborhood website, they're shutting these down. And so we're going to have so much link rot and also websites that maybe had a little piece of history out there that aren't going to be accessible anymore as opposed to patching it. So to me, it's like near-term and then like the scarier, doomy, like, oh God, what else is out there?

• 8:00Sean O'Kane?

  Yeah, I mean, Anthony, I think you made a really good point, which is like, I've seen a lot of people unhappy with the disclosure rollout here, kind of the, a bit of the chest beating that OpenAI seems to have done in its post about it. Also about, it seems like a couple of people got ahead of kind of the embargo of this release, which set off kind of a race among the hacker set. I think it was, you know, Cloudflare CEO Matthew Prince already posted about seeing it escalate to millions of attempted hacks of the PHP2 shell. The thing with these vulnerabilities, the way in cybersecurity this typically works is like if you're stress testing, A company's software, you know, even if it's a fundamental piece of software

• 8:42Sean O'Kane?

  that that helps run a lot of different computers or or parts of the internet or whatever it might be, you can go to that company and and disclose it. And it sort of stays within that bubble. But when we're talking about something that's as as deep as and as fundamental as this, there isn't, you can't go around really and tell everybody discreetly, right? I mean, maybe you could if if the AI was advanced enough and you could task a billion agents to go send an email to every single person who has control over some part of a website, you know, like we are now ruining the the days when we had webmasters who were easily identifiable. And maybe that would have solved the problem to some extent. There's just no easy way to do this.

• 9:26Sean O'Kane?

  And so, you know, I think we really are, this is the beginning of what's going to be a lot of back and forth and clearly a new frontier in cybersecurity.

• 9:38Kirsten Korosec?

  Well, I mean, Matthew Prince's social media post was, to me, really telling and pretty scary. It also, I don't know if either of you saw this, but Amazon also put out a blog post. You know, this is a very well capitalized company, so they have the tools and a team to sort of catch what's going on. They actually have, they operate basically a honeypot network or like a decoy. And and they actually saw that there were attempts to exploit that vulnerability before it had been publicly announced. So clearly there was activity. To me, again, it goes back to this, Amazon has the tools and the capital like and the know how to fight these things. There are so many websites and even potentially government websites

• 10:22Kirsten Korosec?

  that just don't have that level of attention. And so to me, that's really like kind of the scary part. And there is some, I think, AI employees out there that are probably going to take this to the next level of like prepper doom, because you could see how banks could get exploited and, you know, data and privacy concerns. It just, it feels a lot bigger than we can fix right now. So I'm kind of interested to see two things. One, how extreme people's behavior gets. But also, I'm wondering if some new startups are going to pop up as a result of this, or if we're going to be more turning to some of the open source tools like Nvidia has

• 11:07Kirsten Korosec?

  to create these security layers.

• 11:09Anthony Ha?

  Yeah, I mean, to your point about that, just sort of the the level of concern and alarm. You know, when I first saw this, I think my instinct often with sort of AI kind of like panics is is to sort of be like, oh, this probably isn't as big a deal as it sounds. And and one of the things that that really made an impression on me was I think that with, obviously, that we've talked a lot about OpenAI hugging face from a few months ago, was that was a situation where there was a sort of a lot of alarm. But then when you sort of dug deeper and saw kind of what a lot of cybersecurity folks were saying, including the folks we, you know, were quoted in a lot of the coverage in TechCrunch, is they're like, yes, this is like a very serious, you know, this is a real breach. And it's concerning that AI agents are doing this.

• 11:53Anthony Ha?

  But in terms of what actually happened, it's not that crazy. And so in that case, it seemed like a lot of the security folks are trying to like turn the temperature down a little bit and say like, hey, like, let's not totally get spun out here. That doesn't really seem to be happening here. In this case, the cybersecurity community is not a monolith, but but that it seems like, no, this is like a very, very real concern. And that part of the nature of the problem is not that like we have these super sentient or powerful AIs yet, but but simply, and again, I thought the the 404 media piece was did a great explanation of this, that part of what an LLM can do is essentially kind of brute force the internet and that like, it's not that it's super smart, but it's like thorough.

• 12:35Anthony Ha?

  Like it can sort of just go, if there's a vulnerability somewhere, it can probably find it. And it can try everything. And so I think, definitely, I can imagine sort of opportunities for startups here in terms of, I guess, and I think we've talked about this in past episodes, like what does sort of cybersecurity, what does hacking look like in the future? The the sort of most obvious vision of it is sort of, you know, agents versus agents and one trying to keep ahead of the other. But, you know, for a problem of this scale, I do wonder like, is is a startup solution something that that most people are going to turn to? I don't know.

• 13:09Kirsten Korosec?

  Yeah, I think that that's what people are glomming on to in terms of the the bit of the Doomer set, which is not that this specific vulnerability is that advanced or anything, or like, you know, the exploit or the tools you need to do. It's that LLMs were able to find it in a way. And like you said, brute force attack. And so it really sort of, we're seeing this big shift, sort of like a fundamental change in terms of, you know, the on the defensive side, like the tools that cybersecurity needs to use, but also on the offensive side. And, you know, OpenAI, which I think you referred to a moment ago, their blog post talks about that, sort of like this dual issue, which is AI can be helpful to find these things. AI can also be used to find these things and exploit them.

• 13:53Kirsten Korosec?

  So where does that leave us? You know, it reminds me a little bit of, you know, a side note, but one of the startup battlefield finalists like was using AI agents to battle spam. And so you can see these scenarios. I just don't know how effective they are going to be and how many of these companies can sort of exist, you know, like, will one rise to the top? Or will there be all these like little subcategories of companies that put up these AI agents to attack other agents for very specific tasks?

• 14:25Sean O'Kane?

  Yeah, that runner up apate last week. Yeah, it makes me wonder if it's protecting people from scam bots and stuff. I wonder if they're thinking about expanding their horizons now that they have a bit more of a profile on them. The only other thing I'll add to this that I think is important to think about is like, this kind of thing is not something that no one thought about, right? Like, a lot of the people who have spent the last few years trying to model out like, and I think probably in large part, they were dismissed by a lot of people because people assumed, you know, they were just BSing about this idea of like AGI. But a lot of the people who were trying to forecast like when the advances would really

• 15:05Sean O'Kane?

  start exponentially coming, were assuming that something like this could happen. And it just like leaves me asking that question that we keep asking ourselves. And we were asking ourselves during the live taping last week of like, why aren't these companies better set up for this? I mean, they are in the sense that they're running programs like Patch the Planet, et cetera. But like, it just, you know, it certainly leaves me feeling, you know, lacking from these big companies that have all these resources to not really, you know, a post is nice and the program that they're running is nice, but it just, I don't know, it feels like we're in that situation again, where where they're just kind of like the hot dog guy. And it's like, you know, it's not necessarily that they're the the ones who did this,

• 15:49Sean O'Kane?

  but like their technology is being used for it. And and we, a lot of people saw this coming.

• 15:54Anthony Ha?

  Yeah, I mean, although to maybe push back on that slightly, I do think part of the challenge of discussing the risks of AI is that there are so many potential risks. And so there's this question of sort of like what to take seriously. And and then this is also where something I'm a little bit skeptical of some of the the all out Doomerism is because I worry that if if somebody sort of talks about AGI all the time, then you're like, well, sort of if it doesn't get there, then maybe the AI isn't a threat. And this, in this case, it's a situation where even if the AI is not that smart, it's still create, you know, there's this potential to discover these kinds of vulnerabilities. And and so, you know, not to disagree with what you said, but I do think there are challenges there.

• 16:37Anthony Ha?

  And part of the challenge is sort of like disentangling, what are the immediate threats? What are the long term threats? I don't think we're going to have a solution for that on this episode. So maybe we can move to our other big theme. Yeah, let's just leave it very, very unsettled. And it's something that's much more reassuring, which is Elon Musk and his influence on his companies, on our society. I mean, there were, you know, it's been a couple of weeks, you know, since we didn't talk about this last week, with a lot of news about Tesla, some news about SpaceX as well. I mean, where should we start?

• 17:07Sean O'Kane?

  Well, I mean, I think the big thing here is, well, we had both SpaceX and Tesla earnings back to back this week. And and just as they are collapsing, the proximity between them and their earnings calls, the the proximity between them as corporate entities is collapsing as well. Because we finally got something of an answer to the question that a lot of people have been asking, which is not necessarily will Tesla and SpaceX merge, but but when will it happen? And that answer is. That, you know, both companies have set up special committees to review the idea and the feasibility of it. And, you know, Musk put on a pretty, you know, interesting face.

• 17:47Sean O'Kane?

  It's always interesting to me when he decides to care about following rules and when he doesn't. And in these moments, he always, you know, puts, it makes me feel like he's like in a little, you know, sort of like schoolboy suit. And he's just sort of like, oh, and you know, I think the couple of terms he uses, like, you know, he has to do like a kabuki dance or like tiptoe through the minefield. Like, he's trying to be so careful about not swaying the outcome of this discussion that the boards are having, you know, in large part because he faced a very big, years-long lawsuit over SolarCity and Tesla's acquisition of that. And so, you know, he's clearly listening to his lawyers here. But, you know, he likes to make it seem like he's not convinced necessarily that this is the best idea, but

• 18:32Sean O'Kane?

  he sees reasons for why it would be a good idea. But it seems pretty clear to me that that they're heading towards this happening at some point. And I have to imagine the only way it happens is SpaceX acquiring Tesla, if only because he has just authored through the IPO so much more control over that company than he currently has at Tesla, where he only has about 20% of the stock and the governance structure, all of that stuff at SpaceX. It just makes more sense to me that that that will be the thing that absorbs Tesla. And so, you know, I think we will, we will see how this plays out over the next couple of weeks, couple of months. I don't know. What do you think, Kirsten?

• 19:10Kirsten Korosec?

  I'm going to say before the end of the year, I do want to, yeah, I do want to mention one thing, which is this special committee is made up of independent directors. And this is another one of these moments where I kind of have to do a little bit of a head nod and eyebrow raise while I was listening to this. This was during the SpaceX earnings, Tesla earnings for the following day. So on the Tesla board, there are two quote unquote like dependent or non-independent directors, and that's Elon Musk and his brother Kimball. And the rest are considered independent under NASDAQ rules. And then over at SpaceX, there's also a number of independent directors. But if you look at their business ties and the fact that at least one of the current Tesla board members is also on the SpaceX

• 19:54Kirsten Korosec?

  board, the one, you know, there is, there is a lot tied. These are also people who have been, many of them, personal friends or investors in Elon Musk for a very long time. The only one who really has been declared not independent, who's not a family member is Antonio Gracias. And, you know, he has made a significant amount of money with Valor Equity Partners investing in SpaceX, but also doing leaseback deals on their AI compute. So it's like, they're so tied to it. He clearly is going to influence the outcome, whether he sits in that room or not. And so I do think it's inevitable because of that. It

• 20:38Kirsten Korosec?

  will dilute shares. And so, you know, I don't know, I'm interested to see how Tesla shareholders receive that information. Also, Elon Musk made this point, which is, it has to be 50% 50% of shareholders, not just 50% of the vote. So that means a lot of people have to show up and actually vote for this thing for it to happen.

• 21:04Anthony Ha?

  Yeah, I mean, going back to that, you know, what the board, you know, this special committee might do, I was thinking about also that metaphor of the kabuki dance, which again, I'm not an expert on cybersecurity, also not an expert on kabuki dance. But like one way to interpret that metaphor is also that like, it's, it's really for show, right? That like, that there's a version where it's really like, that this outcome is predetermined, and I have to go through these motions so that, you know, I don't get in trouble, I being Elon Musk in this case. But that like, I'm curious if and how seriously anyone takes the idea that, that he is not going to, that the outcome is not going to be what he wants it to be. I also wonder about how much of a difference it would actually make from

• 21:48Anthony Ha?

  a day-to-day basis. I mean, because I'm assuming it will, but I also think about the fact that for a long time back when he had this whole portfolio of companies, many of which are now sort of consolidated under SpaceX already, that he seemed to treat them all as one company, right? That there was a lot of sharing of resources, of team members, in a way that I think sometimes Tesla shareholders in particular were kind of like, hey, wait a second, like, this is not like how I think business should be done. But then ultimately he got to generally, and it didn't really seem to stop him, did it?

• 22:17Kirsten Korosec?

  No.

• 22:18Sean O'Kane?

  No, I mean, there's a lot of that going on for years.

• 22:21Kirsten Korosec?

  Yeah. And continued across everything he's done. I mean, you see Megapacks being used, their energy storage system being used over, like, under the auspices of SpaceX, which includes XAI now. You see Tesla Cybertrucks being used over at SpaceX. I mean, there's always been, even the roadster story that Sean, you know, just wrote about that happened on, what was that, Thursday? SpaceX engineers were involved. There's a lot of crossover.

• 22:50Sean O'Kane?

  Yeah, I think in Tesla's 10-Q that was released this week, it was something like SpaceX is like 16% of like, the accounts receivable coming out of this past quarter. So yeah, there's, there's always been a lot of transaction happening between his companies. You know, I think, to your point, Anthony, there's like two things that Matt Levine over at Bloomberg brought up in a story that he wrote about this, this week, that really, I think, made a lot of sense and like clicked into place for me. One is that Musk has had all these kind of crazy ideas over the years, and he has certainly gotten a ton of venture backing, and has become quite close, as we said, with some of those people like Antonio

• 23:29Sean O'Kane?

  Gracias. But the things that he's trying to do now are sort of beyond even the like large capabilities financially of the modern VC environment, right? Like, he's trying to do, he's trying to build a massive spaceport, like a truly massive spaceport in Louisiana. He wants to make this incredibly large fleet of, you know, quote unquote orbital data centers. Like, he wants to launch thousands of starships a week, or whatever he's at now, you know, whatever big number he's fixated on. And those are just things that like the venture environment can't necessarily support at the scale that he wants to. And so by combining these things together, and we've already seen it because he's accessed

• 24:12Sean O'Kane?

  the debt markets since SpaceX's IPO, but the bigger you make these things, the better chance you have at sort of tapping these institutional sources of financing, which was kind of the only, you know, that even eclipses what the government can finance. So like, there is a lot of sense in doing it that way. And to your other point, like about sort of like how he manages it, I just want to read this from Matt Levine's story because I think it's really good. He says, like, of course SpaceX and Tesla should merge. It's crazy that they're separate companies. One guy runs two gigantic physical AI companies with huge overlaps. What a nightmare of conflicts of interest and red tape. Just merge them so one guy can come into the office each day with a simple mandate, make the max choice that'll maximize overall value for the big, complex company, et cetera, et cetera. Like,

• 24:56Sean O'Kane?

  if chips or engineers or drills or whatever should be working on robots, work on the robots. Like, I think even just from that perspective, it makes a lot of sense. I will say the end of Matt's section about this merger is sort of like, it would resolve a lot of conflicts of interest by combining these companies together. It might take one last big conflicted transaction to pull that off, which I think is just a very funny position to be in, at a time also when there's not a lot of, you know, antitrust activity at the federal level. So here we are.

• 25:27Anthony Ha?

  Yeah, you know, one, one last conflict of interest for the road.

• 25:30Sean O'Kane?

  Yeah.

• 25:30Anthony Ha?

  I, I think also, like, you know, this could all, as this is happening and whatever outcome here, you know, that's sort of the background also. For another, announcement might be too strong word, but, but claim statement that Elon made recently, which is that he's going to give every child in America a share in SpaceX. Which, yeah, I found interesting for another number of reasons, but I'm curious what, what you thought, what either of you thought about it.

• 25:56Sean O'Kane?

  The timing on this one is fantastic, because on Sunday, I think it was on Sunday, right? Anthropic announced that it was creating a sort of public benefit fund, and it was going to put 5% of its equity into it, and that will grow according to some set of milestones. With the idea being that like, as Anthropic goes to IPO in a couple of weeks, or whenever that will happen, you know, its valuation will explode, and then the rest of the world will benefit in some way. We don't know exactly how, it's just some LLC with not a lot of information about it. And they announced this, and then Musk is just sort of replying to them on X. And this is a pattern that I feel like happens so many times with him, where you see him go, you should do it this way instead. And then a few hours later, boom, he announces this thing about, you know, wanting to give a share directly to

• 26:38Sean O'Kane?

  all kids, you know, under 18 in the US, and through the sort of Trump account stuff, which is, you know, originally started as a like, we'll give you $1,000 in an account, and it'll grow, you know, according to the stock market. And it has now kind of morphed into this weird thing where like, business executives can donate shares into it. So yeah, it, you know, it's not to say that it was not an idea that was ever banging around in Elon's head, but it was certainly something that got activated when he saw Anthropic do this the other day.

• 27:07Kirsten Korosec?

  I'm sure there's many ideas banging around in his head, and then when the timing is right. Actually, I talked to someone years ago who had worked for him, and he did say that the one really true gift that he has besides being, you know, embracing risk, is the ability to sort of see out in the future and kind of time things correctly. So, you know, I think this is just another example of that. I want to swing to a very different outcome of instead of, you know, big successes and giant companies getting swallowed up by one. So Character AI, this interactive chatbot platform filed for bankruptcy.

• 27:52Kirsten Korosec?

  And now they're over at Disney. And I'm wondering if either of you have followed this at all. I guess I should have not been surprised that Disney, just because they have a lot of money. And this is something that they could influence and put in, in talk within their company. And it's so broad and vast, but it still did kind of go, oh, wow. Had a little head scratcher there.

• 28:11Anthony Ha?

  Yeah, and this is something that I think the sort of details about have kind of emerged gradually. Cause last week, you know, it kind of came, Character AI announced that it was going to be seeking bankruptcy protection. And I think at that point, Disney's involvement was already somewhat known. But then over, you know, kind of at the end of the week, then it became clear that, you know, Disney had also committed to hiring the majority of the Character AI workforce. They were going to acquire some assets, although I think some of this is also TBD because the company is going, you know, bankrupt. There is, you know, there's opportunity for other, you know, other bidders to emerge. Disney is a stalking horse bidder in this case. And also one thing that has already happened is that the former CEO of Character AI is already the first CTO at Disney.

• 28:55Anthony Ha?

  So there, there were a lot of ties there already. And, and I do imagine we're going to see more situations like this, whether it's AI companies going bankrupt or just struggling, but, but they're sort of getting snatched up. I mean, in a lot of cases by the AI companies or their tech companies. But in this case, it seems like, yeah, you know, you can imagine entertainment companies wanting to kind of get, get a little bit more into the AI world as well.

• 29:18Sean O'Kane?

  Yeah, I mean, I've, I've seen some people try to paint this as like the, the canary in the coalmine for AI companies. But I think people are forgetting this is, this was one of the, not earliest, but was on the earlier side of these kind of weird aqua hire deals, right? Like Character AI was, was started by these two sort of former Google guys that were pretty famous in the space. Noam Shizier being the biggest one. And, and in 2024, Google did this move where they kind of hired those guys back and a bunch of the top talent from the company. And, and this, you know, Character AI was like left to be what it, what it was going to be. Sort of like we saw with Scale AI and so many others. And so to me, this is like, not surprising in that regard.

• 29:59Sean O'Kane?

  And I know the bankruptcy filing sort of allowed people to look into some numbers of a pretty unsustainable company, it seems. But, you know, it's just sort of to me, the repercussion of, of that sort of original thing that happened two years ago now. And I don't know that there was ever going to be a way that they were going to be able to, to find a way out of the trajectory that they were on, which brought them to bankruptcy.

• 30:21Kirsten Korosec?

  I think we're going to see so many more aqua hires. I think we're going to see a lot of consolidation. And then we're going to see the, I guess, the rosier versions of acquisitions. So OpenAI, for instance, just acquired a startup called Orchestra Bio, which is very interesting to me because this is a biotech business. Very much, I think, to me, that really shows like what OpenAI is interested in pursuing. And they do have a lot of money, so they can, while they're burning through a lot of money, they, they are well funded. And, and I think they're looking for opportunities to build out their business. And this one, I think the startup had raised about maybe 20 million. And we don't know exactly how much this company was acquired for.

• 31:06Kirsten Korosec?

  But I can imagine that OpenAI and companies like OpenAI. So the anthropics of the world, OpenAI's of the world are looking for these opportunities at earlier stages of these startups' lives. So in the first couple of years of them being around for deals to drive different aspects of their business.

• 31:27Anthony Ha?

  Yeah, as we talk about, you know, potentially more deals like this, I did want to just kind of shake my fist. Very briefly, a, a, a little linguistic thing, which is that Sean, I think, saw me complaining about this on Slack. But that, and this does not describe the, the, the, this OpenAI deal that we're talking about. But it does sort of describe what's happened repeatedly to Character AI is this sort of what used to be called a reverse aqua hire is now just an aqua hire. And so words don't mean anything anymore. And so there's just total like collapse of meaning. I accept that. I'm just going to use the word aqua hire in the future. But I did want to say that I'm, I'm a little bit grumpy about it.

• 32:01Sean O'Kane?

  Hollowing out, I mean, there are definitely, there are definitely like more aggressive terms we could use if you want.

• 32:07Anthony Ha?

  Left for dead repeatedly.

• 32:12Anthony Ha?

  But in this, in this deal, which is not that, at least as far as we know, this seems like a much more traditional acquisition. I, I think one thing that is interesting, like you said, is sort of what does it reveal about OpenAI's priorities? Particularly after, you know, just a few months ago, we were having a lot of conversation and seeing a lot of reporting about this idea of OpenAI not pursuing, you know, quote unquote, side quests. You know, some of the people who'd been involved on the science side, leaving the company. And so I think part of that was like that they were, that was like often kind of more on the kind of consumer side. It was also on like, let's do science because we think it's interesting and cool. As opposed to, oh, let's do things that are science adjacent because we think it'll make us a ton of money. We can totally still do that, which it maybe is not a surprise, but is worth kind of thinking about

• 32:57Anthony Ha?

  in terms of OpenAI's broader strategy.

• 32:59Kirsten Korosec?

  I want to sneak in one more deal. And this is not an acquisition, so we're going to go back to traditional raising of money, but it is AI related. And I think this one will get both of your attentions or probably did. Because as we're talking about Otter AI raising 320 million from General Catalyst. And, you know, we're all familiar with Otter. I think we still use Otter at Disrupt every year.

• 33:25Sean O'Kane?

  Yeah, I mean, I was just saying a minute ago that the VC world doesn't have the kind of funding to support some of the craziest things that SpaceX and, and maybe Tesla want to do. But they certainly do have a lot of funding. That's a big chunk of change, especially for a company that had really only raised around 50 million to date. And, you know, I think I'm probably not alone here on this podcast when I see stuff like this happen. And that makes me worry about what does this do to the, the goals that are laid out for a company like this? I mean, talk about tales old as time in Silicon Valley. Like when, when you have venture investors who are looking for an exit that must be very big to put this kind of money in, the tool that I like to use right now is probably in for some changes

• 34:10Sean O'Kane?

  that may make it so that I do not like to use it. So I guess we'll find out.

• 34:15Anthony Ha?

  Yeah, that's exactly my fear. And, you know, it's, it's tough because I'm not going to say that the decisions that Otter is making are wrong for Otter. That, you know, particularly when they raised this much money, but, you know, they had venture money before. So, you know, what I think all of us use it for primarily is just as simple transcription. And, you know, it's been good at that for years. It's incredibly important, I think, to all of our workflows. But I can also understand that if you're building a venture backed startup, which fortunately, unfortunately, or unfortunately is kind of what they're doing, that's probably not enough, right? And so they've been layering on more and more AI tools already.

• 34:54Anthony Ha?

  And it hasn't totally, it hasn't ruined the transcription experience, but it has become this thing where it's just like, no, I don't want that. I don't want that. I don't want that. Let me just get to the transcript. And I just imagine that is going to continue to be the case. I, you know, Otter, if you're listening, I understand that you need to do that, but don't get rid of the core transcript experience. I'm begging you, we still need it. It still gets you so much goodwill, journalists. So please don't give up on that. And on that note, I think that's probably all the time we have. So Equity, of course, will be back next week. And you can follow us in the meantime at Equity Pod on X and Threads.

• 35:30Rebecca Bellan?

  Equity is hosted by TechCrunch senior reporters and produced by Teresa Locan Solo with editing by Cal. Subscribe on YouTube or wherever you get your podcasts and find out what's next at techcrunch.com/events. Thanks so much for listening and we'll talk to you next time.