Dropbox hearts AI, the creator-platform wars and why we’re bullish on fake booze

Mary Ann and Alex are back, and once again this week they tapped the TechCrunch roster for expert input. This week were lucky enough to have Kirsten Korosec back on the podcast. She's TechCrunch's mobility lead, hosts a podcast of her own, and is one of our favorite humans. Here's the rundown: Deals of the Week: Mary Ann wanted to talk about Robinhood buying X1, a deal that seemed inexpensive but we lack enough numbers for full confidence; Alex wanted to riff on Dropbox's new AI fund, even if it does feel a little small; and Kirsten had notes for the team on Cruise's latest app rollout. Even if Mary Ann and Alex cannot find a way to agree on self-driving cars, we all thought that the Cruise bus is cute. Twitch and Reddit try to balance corporate requirements with community power: Building off our recent show digging into the creator economy, the crew tackled the latest from Twitch (a new creator-corporate revenue split of sorts) and Reddit (where the battle between the company and its power-users continues to blaze). It's feeling more hot war than cold war lately on the Internet, with platforms struggling to find a way to keep revenue growth coming while not estranging the folks who make their services tick. The power of Not Boozing: How big is the market for non-alcoholic drinks? Smaller than the market for vodka, certainly, but we're curious. Also there's a new app in the market that is helping folks find non-booze bevies, which we dig. Before we let you go, don't forget to fill out the Equity listener survey. We want to hear from you! A big thanks to Kirsten for swinging by, and we'll chat with you Monday morning. For episode transcripts and more, head to Equity’s Simplecast website. Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders, one that details how our stories come together and more! Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:10Speaker 00

  Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. My name is Alex. It is June 23, 2023, and I am joined, as always, by my dear friend and my colleague. It's TechRanch Senior Reporter on the Fintech Beat, it's Mary Ann Azaveto. Mary Ann, how are you?

• 0:28Speaker 01

  Alex, I'm doing great despite 100-plus degree temperatures here in Texas. I'm not melting yet.

• 0:35Speaker 00

  Well, I'm glad to hear that. The good news is, we have brought you a comrade in hot temperatures today on the show. We do have Kirsten Korosec from the Transportation Beat. Kirsten, you're back on the pod. Thank you very much. Who has the worst climate, you or Mary Ann?

• 0:48Kirsten Korosec?

  Oh, Mary Ann. I'm in a dry heat environment, and I also like to disparage others. So like, here you go.

• 0:55Speaker 00

  I don't actually buy this whole dry heat, wet heat argument, because to me, anything over 90 should be banned by the law. But I do respect good old fashioned intra-regional competition. So I'm here for that. Kirsten's gonna be with us the whole show. And on the pod today, we have Deals of the Week, including Robinhood, Dropbox doing AI stuff, and what's up with Cruise's RoboTaxi app. Then we're going to be talking about the creator economies failed experiments lately, talking Twitch and Reddit. And if you heard the last Wednesday show, this should be very top of mind for you. And then we're going to talk about venture math in the non-alcoholic spirits industry, a niche in the startup world that we think has big hopes and big dreams, and perhaps also a big market. We're back from vacation, everybody. We were off for a little bit there. Now we are back. It feels good to be back.

• 1:36Speaker 00

  And Mary Ann, things are popping, including Robinhood getting busy with its very own credit card to go out there and buy something.

• 1:42Speaker 01

  Yeah, I was surprised by this news, I have to admit. Robinhood announced that it was acquiring a credit card startup called X1 for $95 million. I've written about X1. It's an income-based credit card that offers rewards. It actually didn't launch until last year. Yeah, when I covered the company in December, they had raised $15 million. When they claimed they had a 50% boost in valuation, they wouldn't share numbers. One thing that I did think was interesting at that time is they told me they were generating about $3 million in revenue as of last October with an annual revenue run rate. That's so hard. Hard phrase to say.

• 2:21Speaker 00

  Annual revenue run rate, not annual recurring revenue. It's the other ARR.

• 2:24Speaker 01

  Right. Annual revenue run rate of $36 million, which, you know, at that time felt really impressive. So I have to say, I'm, I'm kind of surprised by the, the purchase price here. $95 million. This company has raised a total of $62 million.

• 2:40Kirsten Korosec?

  Hmm.

• 2:40Speaker 01

  I don't know. It feels low.

• 2:41Speaker 00

  Something doesn't sound right.

• 2:43Kirsten Korosec?

  It's eyebrow raising. Yeah. But I also sidebar, I do love it when a company says that their valuation or revenue has grown by 50%, but they don't give you the baseline.

• 2:52Speaker 01

  Right.

• 2:52Kirsten Korosec?

  That's my, like, they're now valued $2.

• 2:54Speaker 01

  Exactly. Who knows what it really could be.

• 2:57Kirsten Korosec?

  Right. But the deal is interesting in that, as you point out, it really is not much more than they raised. So who's the winner in this?

• 3:05Speaker 01

  Right.

• 3:05Speaker 00

  Well, it's hard to say because, well, Robin, in, in theory, but what if X1's revenue, they told us was actually GMV and they were just conflating numbers there. It's much smaller than we thought and Robin Hood overpaid for it. Because one thing I think we've seen in the fintech markets in the last 18 months is a dramatic decline in valuations. So like, yes, it is cheap compared to its capital raised, but is it actually a cheap purchase price? I don't think we can say for sure that that's the case.

• 3:30Speaker 01

  Hmm.

• 3:30Kirsten Korosec?

  Well, it depends on what Robin Hood does with it, right? You know, when there's fears of recession and low valuation, if you have the funds, you can make some really great, smart buys. But of course, you know, the hard part is picking the right companies.

• 3:43Speaker 00

  Yeah, absolutely. Also, $15 million last December, Mary Ann. It's now late June. It's only a couple of quarters ago. They must've still had cash, right?

• 3:52Speaker 01

  I think so. Also, something else that really I thought was very interesting that had slipped my mind when I first heard about the deal is that when I talked to X1 in December, they told me they were launching this feature that would allow cardholders to buy stocks using their earned reward points. And then I was like, oh, light bulb clicked off in my head. And at that time, the CEO said that they were hoping to compete with the likes of Robinhood. So here they are now being acquired by Robinhood. So I don't know how much of that feature, you know, attracted Robinhood to X1 because there are a lot of credit card companies out there, but I did think that was probably not a coincidence.

• 4:32Speaker 00

  Yeah, probably not. I mean, Robin Hood needs more users, more total trading volume and more funded accounts, right? And if X1 can bring them a chunk of that, sure. I guess my concern is how many credit card points do you need to buy one share of Amazon? Like, a lot. So you have to spend a lot of money to like, actually earn that type of reward. So it's probably not super accretive, but you know, Robin Hood, they're still worth eight, nine billion last time I checked the thing. So this isn't that big of a deal for them compared to their current worth.

• 5:00Kirsten Korosec?

  So less of swooping up a potential competitor and more a opportunity potential?

• 5:06Speaker 00

  Yeah, I call it a tuck-in, frankly, more than anything. I don't think this is a shaking up Robin Hood's business, but it is nice to see smaller, not even nine-figure startup M&A in this relatively bad exit climate. This counts as a big deal for 2023. Woo! So there you go, everybody.

• 5:24Speaker 00

  Okay, next up is me, and we're talking about Dropbox, a company that TechCrunch covered ad nauseam back in its startup days, very famously raised like a $10 billion valuation back in the day, and then went public and has since kind of been worth the $78 billion range. Back on the pot today because they're putting together a $50 million AI-focused venture fund and have a couple of new AI-focused features for their service. I'm more interested in the venture fund for this show. The AI stuff is neat, but kind of what you'd expect from a Dropbox. The thing, Kirsten, is that $50 million for an AI-focused venture fund, sounds like they're going to do one Series A deal and be out of money.

• 5:57Kirsten Korosec?

  Yeah, exactly. Or maybe a couple of small, early-stage, interesting companies that they end up maybe acquiring at some point. It is kind of a low amount of money, but hey, it's AI. We better get into it, right? I mean, it feels a little bit knee-jerky.

• 6:15Speaker 01

  I think that's a good way to put it. Kirsten, I wouldn't, I wouldn't have pegged Dropbox as putting money into AI startups via a venture fund. It was a little unexpected.

• 6:25Speaker 00

  Yeah, I'm just trying to go ahead and pull up their operating cash flow. So in the last quarter, the quarter ending March 31st, 2023, Dropbox's operating activities generated 139.9 million in cash and free cash flow of 138 million. So they are putting roughly 35 days of their free cash flow into this fund, which feels, you know, why not do more? Add a zero, compete with Salesforce, get busy or don't, but what's the point of having one leg in the pool?

• 6:53Kirsten Korosec?

  Yeah, it's a little bit of a tiptoe into it, but I'm going to make up a new term. I feel like it's relevancy paranoia, which is everyone's talking about generative AI right now. And that's why, you know, it's like, we need to stay relevant. We should probably be a part of this, but we don't want to be putting too much money towards it because we're not exactly sure where we're going to land on this. That's kind of how it feels. Maybe I'm mischaracterizing it, but relevancy paranoia, that's, that's my new term.

• 7:19Speaker 00

  No, no, I love it. It's the fancier way of saying corporate FOMO.

• 7:22Kirsten Korosec?

  Yes, exactly. Yes.

• 7:24Speaker 00

  Also, and this is not, not a small thing, and I know this is not a public market show, but I'll just say this, if you have tuned into any earnings calls in the last six months, the first question is always, great quarter, what's your AI strategy? And I feel like Dropbox probably wanted to have some talking points apart from just building in some AI features to their service, which to be clear, looked pretty cool. But this gives them a lot more to kind of riff on when analysts are just pounding them for their, their AI strategy. So it's probably not that expensive of a way to have a good answer, especially for a company that had at the end of last quarter, 1.25 billion in cash and equivalents. So they have plenty of money.

• 7:59Kirsten Korosec?

  Yeah, it does feel though, that right now, like everyone is getting into generative AI. I mean, in the transportation world, even automakers, even cautious German automakers like Mercedes is, you know, declaring, hey, we're going to put chat GPT into our cars. It just, you know, so that's why I want to take this seriously, but also at the same time, I've got an eyebrow raised.

• 8:22Speaker 00

  You know what? So I was gonna let the Mercedes chat GPT thing just slide, but I had a really great idea. So

• 8:26Kirsten Korosec?

  You can't let it slide. You can't let it slide.

• 8:28Speaker 00

  Well, no, detection control is too good. What, what, sorry, automotive jokes. No, what they should do is they should just take all the F1 driver race engineer commentary, feed it through. And that way, every time you're like, please find the nearest gas station, it can say, oh, no, my tires are dead. No Lewis Hamilton fans on the show? Okay, that joke feels like.

• 8:47Kirsten Korosec?

  I got it. I got it. I got it.

• 8:49Speaker 00

  Okay.

• 8:50Kirsten Korosec?

  I think that we can guarantee with the Mercedes chat GPT thing is just like, they already have a really good voice assistant, which is why it's so peculiar. And again, like circling back to this like relevancy paranoia of like, maybe we should be a part of this thing. It's like, you have a good product. What are you doing? Giving people like another thing to do with their cognitive load aside from driving and then also like give them potentially bad information. It just seems like an odd, an odd choice. But hey.

• 9:17Speaker 00

  Well, I now know we're going to call this show the saga of relevancy paranoia. It's gonna be fantastic. We have one more deal of the week and I am stoked for this one because it is my, my pet, my hobby issue of self-driving cars. Kirsten, what's going on?

• 9:30Kirsten Korosec?

  Well, Cruise, which is the self-driving unit of General Motors, announced this week that it has developed an Android app. So they have a robot taxi service in San Francisco and Austin and in Phoenix. Those are newer and it's always been limited to people with iPhones. So now it is, if you have an Android-based smartphone, you can get on the waitlist. They tell me, Cruise tells me about 20, more than 20% of the people who have been on their waitlist are Android users. It's hard to know if there might've been more, but you know, they haven't signed up because they knew that they couldn't get on. And it's interesting. It's definitely showing a ramping up, right, of trying to get more people on board. But it's very controversial, not the Android app, but just self-driving cars in

• 10:15Kirsten Korosec?

  general. And we have at least one person on the show here who lives in a market. So Marian, I really want to hear your opinion because not only. Not cruise is interesting in Austin. Not only can they charge for rides there, which they can't do in San Francisco.

• 10:29Speaker 01

  Oh, I didn't know that.

• 10:30Kirsten Korosec?

  Yeah, they they're waiting for their final permit. So it's a little confusing, but they have different areas of service. One for employees, it's 24/7 in San Francisco, anywhere in the city. And then there's a much smaller footprint and also timestamp where you can hail it. But still, you're not being charged. They're waiting for a final permit from the CPUC in San Francisco. But in Austin, where you are, they can charge. And they're about to roll out the Cruise Origin. Have you seen the Cruise Origin? It's like, looks like a toaster?

• 11:03Speaker 01

  No.

• 11:05Kirsten Korosec?

  So they're testing that in Austin, and they are going to definitely deploy that in Austin. So you're going to have the little Chevy Bolts and the large toaster, like, fully driverless, you know, no human being. Kind of, it kind of feels like sitting in a train where you're facing each other.

• 11:21Speaker 01

  Oh, my God. Okay, that's just scares me shitless, to be honest with you. I mean, I, I am not a fan of self-driving cars in general. Maybe I'm counter to popular opinion there. They scare me. They freak me out. Texas drivers are already kind of crazy. It's already insane driving on Texas roads. Factor in self-driving cars. I'm sorry, I cannot get excited about this technology. I just can't.

• 11:44Speaker 00

  I just looked up the Cruise Origin, because I wasn't sure what Kirsten was talking about. I have seen this. It does look like a toaster slash, like, bus slash shoebox, I think.

• 11:56Speaker 01

  Yeah.

• 11:56Speaker 00

  Like, it's a strange-looking thing.

• 11:58Kirsten Korosec?

  Almost all of the AV, like futuristic AV driverless vehicles, kind of look like some version of like, a cute toaster bus. It's hard to, you know, reinvent the design. You know, you want to fit a lot of people. It needs to be accessible. Like, you're going to get a basic form factor. The interior is really interesting. I first saw the Origin, oh, in 2020, in January 2020, just months before everything went in lockdown. And they've made some really interesting improvements. But I have to ask, Mary Ann, so is there any, like, if I were to hail a ride in Austin, would you join me?

• 12:33Speaker 01

  Probably not. Well, remember

• 12:36Speaker 00

  What if I gave you $5 to do it?

• 12:39Speaker 01

  That's so funny. I remember when we were in San Francisco for Disrupt last year, Kirsten and you and one of, I can't remember it was Sarah or Ingrid, you guys were gonna hop in one of these self-driving taxis. And I refused then. So, I mean, I, I, I admit that the Cruise Origin actually looks really, really cool. I mean, it looks cool. It's just not something I'm comfortable with. And, you know, again, maybe it's just me being fearful. There's probably a lot of people who think this is awesome and will use it. I'm just one person.

• 13:09Kirsten Korosec?

  You're not alone, though. You're not alone. And so to wrap up this subject, I will say, even as Cruise is making the app more available to even more users and is hopefully getting this permit and scaling up, really scaling up, at the same time that Waymo is, there is pushback. And there's absolutely been some issues of blocking traffic, getting in the way of emergency responders. I believe the San Francisco Fire Chief even came out today saying like, this enough is enough. So this is not dialed in yet. Let's just put it that way.

• 13:39Speaker 00

  You know what's not dialed in? Drunk ass humans driving all the time.

• 13:43Kirsten Korosec?

  Yeah, true.

• 13:44Speaker 00

  Also, letting children drive. So when I was 16, I felt like I was 40. And I thought I should be allowed to drive for years. And now I look at 16-year-olds and they look like they're nine. So I can't believe we give them like 5,000-pound like Suburbans. They're like, oh, off you go. Buy some milk. So to me, self-driving cars make a lot more sense. And on the fear point, I just want to say, I'm an enormous wuss slash wimp, whatever you want to call me. I'm afraid of needles. And so I've never given blood before recently. And I did it for the first time. And I faced my fears and I helped improve society, just as Mary Ann could. She got behind self-driving cars. So that means she does not unleash her teenage son onto the roads.

• 14:22Speaker 01

  He's already there, too late.

• 14:24Speaker 00

  It's all good. Okay, let's move on. We need to talk a little bit more about the creator economy. And there's a couple of news items, one involving Twitch, and then we have to riff about Reddit. But first, a short break.

• 14:38Speaker 00

  Marian, I know that you are a resident esports expert, and so I'm very curious if you could give us just the TLDR on what Twitch is putting out with this new program that's changing up the revenue split for certain creators.

• 14:49Speaker 01

  Yeah, I mean Twitch is kind of upsetting a lot of people. They've added this new tier called Partner Plus, and at first glance, it sounds like a good deal because they're saying, "Oh, we'll give you, give the streamers a 70/30 revenue split." But the problem is, they make the requirements so stringent, they make it so difficult to actually be a qualified streamer, that it excludes most of the Twitch partners. So it's kind of one of those, "Let's pretend like we're doing a great thing, but you know, we're really not."

• 15:19Speaker 00

  Kirsten, how much attention do you pay to the creator economy? I know you're definitely off mostly in the transit world, but everyone at TechCrunch has kind of carte blanche to poke around a little bit. So is this a place you spent any attention?

• 15:29Kirsten Korosec?

  I mean, a little bit, just because I also, as a hobby, have my own podcast, so I'm hence creating things. Recently worked on a TV show, and a lot of people we interact with are creating things. So I do sort of monitor it, and I'm really fascinated with how to characterize the creator economy. It kind of reminds me of how to characterize the gig economy. You know, are they independent contractors? Are they, they're certainly adding to the bottom line, right? So how do we treat these creators? And to me, that that human element, or that economic human element, is to me what I find like the most fascinating, particularly because these companies are very reliant on creators, and just as

• 16:09Kirsten Korosec?

  Marian pointed out, they're trying to create these incentives, but it doesn't quite benefit them, right?

• 16:16Speaker 00

  It doesn't seem quite fair somehow.

• 16:18Kirsten Korosec?

  Yeah, and I, so I foresee, I'm gonna make a big prediction, it's not a big one though, but you know, I think that there's gonna be a lot of pushback, and creators are going to find really interesting ways, as we've seen with happening over at Reddit, to protest or hear their, make their voices heard. It's gonna be different than your typical labor movements in the past. It's going to be like a labor movement 2.0.

• 16:39Speaker 00

  I agree with that. And while I want to get back to Marian's excellent summary, and talk a little bit more about the details of what Twitch is talking about, what a great time to point out that if you You want to see more of Kirsten Korosec and you have a television and you have a subscription to HBO Max, now called Max, because HBO apparently wasn't a good brand name.

• 16:55Kirsten Korosec?

  Yeah, let's not get started on that one.

• 16:57Speaker 00

  You can check out Robert Downey's Car Park, which is a thing in which they turn cars into old fashioned steam locomotives to increase their carbon footprint and generally cause a mess. It's good fun. Is that fair? Did I do that right or did I do it backwards?

• 17:08Kirsten Korosec?

  No, like the exact opposite, exact opposite. It is taking all of his old hot rods and finding lower carbon footprint ways. Not all of them are EV, you know, resto mods, but it's called Downey's Dream Cars and it was super fun. Worked on it. I'm on it, which is scary, but hey, here you go.

• 17:27Speaker 00

  In my defense, I think Robert Downey's Industrial Car Park is a great idea for season two. Max, feel free to send the check in the mail.

• 17:34Kirsten Korosec?

  But back to, but back to creators.

• 17:36Speaker 00

  Yes, back to creators. Here's my vibe. I think Mary Ann's right that this is a company trying to find a way to look good without actually doing, doing that good because if you swap a 50 50 split to 70 30 for the first 100 K and you set a minimum, you're, you're kind of precluding many people from taking part and also ensuring that there's a pretty firm cap. So what this does is move $20,000 for some creators into their accounts after they reach a certain threshold and below a certain amount of money. It is the most McKinsey solution to unhappy creators that I've ever heard of. Like you can just tell like 10,000 accounts and consultants sat around and thought that this is the way forward. And of course it blew up in their face and everyone's pissed off.

• 18:15Kirsten Korosec?

  Right.

• 18:15Speaker 00

  The Twitch cut of 50% has always seemed excessively bonkers to me. I just don't know how that can default back to that.

• 18:22Kirsten Korosec?

  Yeah, it's a lot. Greedy, greedy.

• 18:25Speaker 00

  Greedy. I mean, did you guys see that the FTC is suing Amazon over how people sign up for Prime and then can't unsubscribe very easily? It came out this week.

• 18:33Kirsten Korosec?

  I saw the headline, didn't read all the details. Yeah. It is a labyrinth to unsubscribe to like anything on Amazon. So, you know. It really is.

• 18:42Speaker 00

  Really easy to subscribe, really hard to unsubscribe, to the point to which they called the unsubscribe path, the Iliad internally, given how labyrinthine the adventures of that particular Greek hero were. I'm starting to think that Amazon's not our friend. Over to you.

• 18:56Kirsten Korosec?

  Hmm. I have a question for Mary Ann though. What are you hearing from the creator economy on like, is there a rising up? Are they thinking strategy? Does this turn into something like we've seen on Reddit where there is full on protests?

• 19:11Speaker 01

  You know, I haven't personally seen a lot out of the creator economy, but I do agree with you that they're going to get tired of it, right? They're going to be like, I don't need you. And so it could totally backfire in Twitch's face somehow. It may take a little while for these creators to, I guess, kind of organize or figure out a new way to still make a lot of money. I think Twitch should be careful. You know, you've got to be careful in these situations. And also soon I'll be writing more about this, but the creator economy is becoming really more of a mainstream thing. I was talking to Visa's head of fintech recently, who really emphasized that this is a whole new market and they're paying a lot of attention to it. So I think Twitch is underestimating here the power of this community.

• 19:54Speaker 00

  The downside, I think, for creators is that there isn't as much competition for Twitch than there used to be. Like if you go back, like Microsoft had Mixer, Facebook was doing a live streaming push. And then it seems like a lot of that has just faded away and kind of died because I think major companies realized that it wasn't a quick way to build a new billion dollar revenue stream, which has always been the historical threshold to Microsoft, to which point a business unit becomes real. Now it might be two billion now, but that's kind of the gist of it. So I just feel sad that there isn't more of an indie option here for people to pick up.

• 20:21Speaker 01

  Right.

• 20:22Kirsten Korosec?

  But you had an interesting point, which is that now it's becoming its whole new marketplace. So while there might not be a lot of competitors to Twitch, people who are creators have more options to maybe go other places than they ever did before.

• 20:34Speaker 01

  Exactly.

• 20:35Kirsten Korosec?

  It might look differently, but they have more choice because it used to be a very like, well, we give you the platform, so you need us. And maybe, maybe they'll have other opportunities now as this market expands.

• 20:47Speaker 00

  I mean, you hope so because who owns the stuff fundamentally? Is it the creator or is it the platform? And I think that tech companies are not great at sharing ownership with individual users. And I think that's partially predicated on kind of the DNA of like constant digital optimization. And that means that the company is in the driver's seat very much so versus the people using the platform. And, you know, like not to just pass over to Reddit quickly, but like, oh my gosh, are we not seeing how that plays out in Reddit lately? Have you guys been tracking the whole mark the subreddit as NSFW as a way to try to undercut Reddit's ad revenues?

• 21:24Kirsten Korosec?

  Yes, I know that I'm afraid to open up certain subreddits. But I mean, I work from home, so I guess it's safe for work. Anything's safe for work, but still, like, maybe my spouse doesn't want to, like, see some things.

• 21:38Speaker 00

  I do most of my work on my work computer, and so I just, I use Reddit to track like the cryptocurrency subreddit, and that's it. Because I don't, I don't want to end up in a situation when I'm like talking to HR and they're like, why were you doing this? And I want to say like, well, there was a Reddit protest, and I didn't know that they changed the rules of the subreddit. And then, but yeah, the point is there's, the revolt continues. The pitchforks are up, and the Reddit communities are, it's gone from like a Cold War to a hot war, it feels, between the communities that make up Reddit and its, its corporate leaders. And once again, we see a divergence between people who think they own it and people who think they own it. And I think that Reddit is great because of its communities, not because of its software. And yet the software wants to retain all the power. And Marion, I just can't square why this has gotten to the point of being so broken,

• 22:22Speaker 00

  and why people didn't kind of call a halt to what it feels like an attack on the, the users from above.

• 22:28Kirsten Korosec?

  Great.

• 22:31Kirsten Korosec?

  How does this, though, like, where do we go from here is, I guess, my big question? Because it was one of those, I think it's like the, I'm going to quote Anchorman, it was like, that escalated quickly. When the, what, CEO or whatever, like, started really aggressively, like, pushing back, and it just kind of seemed to get out of hand very quickly, like you said, going from a Cold War to a Hot War. Where do we go from here? Like, how does this unwind? And I, I don't have the answer to it, but Alex, I'm waiting for your bold prediction.

• 22:59Speaker 00

  So, how does it all end up? I mean, I, I think there's a couple of options. One is that Reddit does not bend an inch, continues to enforce its top-down rules, meddles in the, the moderation of popular subreddits, demanding that they stay open, demanding that they don't do this, demanding they don't do that, and essentially says, look, we are in charge of all this, at which point I think we should just say, okay, cool, well, then you moderate it. Fair enough. If you're not going to let the unpaid labor run their unpaid communities, then it's now on you. And so that's kind of where I think they're going. And I don't think Reddit's thought this through, because if they don't have moderators, they don't really have communities. If they're communities, they don't have Reddit.

• 23:35Speaker 01

  Right.

• 23:35Speaker 00

  The other option is that they step down off their high horse and maybe break their ankles in the process, but it finds some way to reach a détente. To me, though, it seems that Spez, CEO, that's his Reddit name, isn't about to do that. And his comments about how he's been talking to Elon Musk about how to run a business, I think, indicates where his mindset is at.

• 23:55Speaker 01

  Oh, no.

• 23:56Speaker 00

  And I don't think that that's really going to land well with the community. So to me, the two places I spend the most time, Twitter and various niche communities on Reddit for things like progressive metal, city building, video games, you know, my faves. Hmm. Seems like I'm being kicked out of both my digital homes and I'm just going to end up on Blue Sky talking to like, I don't know, two people.

• 24:14Speaker 01

  That's dark. You just ended that on such a dark note. But yes, if Elon gets involved, I think, as someone who's covered the world of Elon because of transportation for more than a decade, getting advice from him might not be the best move. But hey, I guess we'll see what happens.

• 24:29Speaker 00

  If you are down in the dumps about chaos as your favorite social platform and want to kick back with a cold one, well, you don't have to do it with beer, because as it turns out, many people are digging into non-alcoholic spirits. And I'm going to go ahead and just say this, as someone who had to give up booze, non-alcoholic beer back in the day was miserable and tasted like just disgustingness. And now it's quite good. So I'm relatively bullish on non-alcoholic booze equivalent drinks. And I was just curious, have you guys had these? Do you like them? What's your kind of like level set here?

• 24:57Speaker 01

  You know, I actually haven't. I join you in your enthusiasm for non-alcoholic beverages. I was previously very skeptical of them. I used to kind of compare them to like decaf coffee, like, what's the point? But I've come around and I am glad, I'm happy to see that they're growing in popularity for a number of reasons, although I have not yet to try any.

• 25:18Kirsten Korosec?

  The interesting movement in this industry is that there was like such a stigma to a to not drinking at a party, right? Like, there was always this pressure around that social pressure. And I'm talking, go back a couple decades ago, in that the option was like, oh, duels, right? And there just wasn't much else. And, and it was like a big, you know, it wasn't a cool thing to be drinking. Like, it was all the things set up for it to not be great. Now, it's like gone to the other extreme. Like, the market seems so crowded. If you were to go through my Instagram feed right now, it's like literally cars, cats, and like no booze alcohol. And I drink, I drink alcohol, but I'm really fascinated by this industry because every, I

• 26:00Kirsten Korosec?

  know, every celebrity's got a brand. Like, I want to know what happens next, because we saw this happen in the booze industry, where celebrities like George Clooney and things were like creating these tequila brands with these massive buyouts. Right now, it seems more small startup-y, but like I'm waiting for the first big, the big buyout. Like, what alcoholic label is going to, you know, do the big $500 million buyout? Like, I don't see it here yet. But it seems like it's really picking up a lot of steam. My only concern is it seems like a skosh on the crowded side.

• 26:37Speaker 00

  Oh, no, for sure. And Rebecca Skutak on TechCrunch Plus did a relatively interesting piece, looking at the venture math in the non-alcoholic spirits industry, trying to sort out, how many dollars are really at play here? And according to one research group, the non-alcoholic spirit market, which I think is distinct from the non-alcoholic beer market, was worth about a quarter billion dollars in 2021. And of course, there's always that estimate, it's going to be 642 million by 2031. But the point is, even if it hits that number, it's a sub-billion dollar market, and that's just not that big, even with what I presume are pretty attractive margins on on this sort of stuff. Because, you know, you buy a bottle of vodka for, I'm at a date, how much is a, how much is a bottle of Tito's?

• 27:18Kirsten Korosec?

  Good question. I should have come prepared. I am so sorry. I did not come prepared.

• 27:22Speaker 00

  Well, okay, a bottle of Tito's is X. I bet it costs point one X to make. And, and so the margins are probably pretty attractive. I wonder if the fake booze will have similar margins? I think it's not going to be cheap, because people probably want to have some like sort of like, you know, enjoyment with it. But yeah.

• 27:38Speaker 01

  I don't know. I would just say in general, though, and maybe it's just because I'm the mother of a teenager, but I'm, I'm really happy to see that it's kind of becoming More cool to not drink as opposed to, I feel like what a lot of younger people felt so much peer pressure and historically like to drink. So, you know, I really actually like that shift and I hope it continues. You know, I think that's, it's a good thing that it feels like this generation and I guess it's the Gen Z'ers or just kind of like, you know, it's actually not so cool to get wasted and make a fool out of yourself.

• 28:11Speaker 00

  What?

• 28:12Speaker 01

  Yeah. I mean, I, I think that's an awesome thing.

• 28:15Speaker 00

  Yeah, yeah, that's reasonable.

• 28:17Kirsten Korosec?

  Yeah, absolutely. I know that like a lot of the advertisements I see and the celebrity stuff I'm seeing is, you know, geared towards let's say Gen X or millennials, but I actually think the biggest market is Gen Z's because my anecdotally on my end, any Gen Z's I've interacted with, you know, who are like my nieces and stuff, they're just not interested in alcohol. And like it's a very generationally feels very different. And there's like so many different options now. I've tried a few, but like Alex, I don't know if you've tried this one. Have you tried the Hoppy Refresher?

• 28:48Speaker 00

  Dude, the Hoppy Refresher is one of the finest beverages ever made, hands down.

• 28:51Kirsten Korosec?

  It's great, right? My only thing that I kind of wonder is that it's sometimes really hard to like find the identifying label to know if it's like alcoholic or not. It used to be so clear, right? And now it's like, is this the alcoholic kombucha or like the regular kombucha? Or is this the, you know, so I think there'll be some interesting labeling things or how you advertise that, but there's so many like great options. And I just think that the, the market really is the youngest market, which, you know, everyone wants to tap into Gen Z right now. So.

• 29:23Speaker 01

  I would agree with that.

• 29:24Speaker 00

  Teresa Loconsolo, our intrepid producer here on Equity, let me know privately that a bottle of Tito's costs about 30 bucks. So it's up about 10 from when I was buying it. Still an excellent discount, an excellent price, I would say on some Tomahatch American vodka. Put one of those in your freezer and never have a bad day. Just take a shot whenever you walk by. You'll feel fantastic.

• 29:41Kirsten Korosec?

  Words not to live by, but go ahead.

• 29:43Speaker 00

  Words not to live by. Right. Oh, sorry. I went to rehab. Right, right, right, right. There's a company called Applause. It's one of the startups that has raised money, raised five and a half million in a series A. So there is venture capital flowing into this space, rather interesting. And another company that we talked about on TechCrunch recently. It's called Buzz Cut, B U Z Z C U T T. And that is like a Yelp for places that have good and non alcoholic options, which 10 years ago would have been the dusty cannibal duels they had in the back that they forgot about. And now most places will have like a mocktail menu because what they really want to do is charge you $15 for a glass of fruit juice. And I will always pay it. So I think this is, it's cool. Restaurants can make money, as Becca pointed out.

• 30:22Speaker 00

  We can all live a little healthier. And for the Gen Z'ers out there who don't like hangovers, well, there is weed soda now. So there you go. I think that solves all the problems.

• 30:31Kirsten Korosec?

  I just am fascinated with the, how the industry is, it's not one note, it's very early. But that Buzz Cut is a perfect example of that. Like what other little sub related to the non booze market? You know, the, the first ones we saw were the bars. I don't know how well those will do because bars and restaurants are tough business, but the apps and like these little side tangential to the non booze sort of movement or market are interesting to me. I don't know how big it'll get. Like you mentioned earlier, it's, it's never going to be as big as alcohol. But I do find it fascinating to see all these little like sub industries within this.

• 31:09Speaker 00

  Yeah, there's even like a venture capital firm called, I think Distill Ventures, that's just working on, I think this problem set. So it's really cool. And all the jokes aside, I wholeheartedly agree that less alcohol is a net societal good. And you don't have to drink weed soda as a replacement. You can just have some fizzy water with, with lime minutes. So we got to wrap it up there, ladies and gentlemen, but we are back next week. We are back Monday, Wednesday, Friday, as always. Kirsten, it is so good to have you back on the show. What a lovely addition you make. We have missed you. What is your team working on and where can folks find you online, apart from HBO Max?

• 31:40Kirsten Korosec?

  Yeah, they can only find me on HBO Max. My team is working on like some really cool stuff around actually batteries. There's just so many of these big battery deals, of course, EV charging and all these companies moving over to the Tesla standard, the startup world, autonomous vehicles. We've got a lot in the mix. And this is the first summer, I feel like in three years where it hasn't been just like this hyper news cycle. So we're all kind of like taking a breath and doing some of the stories that we've been wanting to do for a while. So stay tuned. You can find me on Twitter, although, yeah, at Kirsten Corasek, but you can also really find me at TechCrunch.

• 32:19Speaker 00

  TechCrunch.com/author/Kirsten Korosec, if you want to find her there. Mary Ann, while we're doing shout outs, we don't talk about you enough. We just always say thank you and then bounce. So what's your Twitter? Where can people find your stuff on TechCrunch? Give yourself a little shout out.

• 32:33Speaker 01

  Well, my Twitter handle is Bay Area Writer, which I didn't think through not realizing I would be moving out of the Bay Area a few years after coming up with that. And yeah, I produce a fintech newsletter that comes out every Sunday called The Interchange. Would love it if you subscribed. You can do that at techcrunch.com/newsletters.

• 32:54Speaker 00

  Her newsletter is freaking great. I read it.

• 32:56Kirsten Korosec?

  Yeah, it's great. I love it.

• 32:57Speaker 00

  Yeah.

• 32:58Speaker 01

  Thank you.

• 32:58Kirsten Korosec?

  You should read it and subscribe to it.

• 33:00Speaker 00

  Yes, you should read it. You should subscribe to it. Mary Ann is a wizard of all things fintech and has taught me many things over the years and we're very grateful for her. All right. Don't forget, we have other podcasts here at TechCrunch, including Found, Chain Reaction, and of course, TechCrunch Podcast. And if you are a longtime Equity listener, we would love to hear from you. We are running our yearly listener survey. Go to bit.ly/EquityPodSurvey, capital E, capital P, capital S. Let us know what we can do better, what's going well, and we will make adjustments to the show as we always do. All right, hugs. Talk to you there. Bye. Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch Senior Reporter, Mary Ann Azevedo. We are produced by Teresa Locan Solo with editing by Kel.

• 33:41Speaker 00

  Bryce Durbin is our illustrator and a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening and we'll talk to you next time.