Who shuts down the shut down-ers?

Here's what Mary Ann, Alex and Kirsten got into: Mentra wants to help neurodivergent jobseekers find ideal jobs: We love a startup that is doing good for itself and doing good for others. This deal that Mary Ann wanted to chat through seems to check both boxes. SimpleClosure raises $1.5 million: What happens if your startup dies, and you need to wind down? You might need a simple way to close things up, right? Enter SimpleClosure. Argo AI founders are building something new: What just raised more than $1 billion to take another crack at self-driving trucks? This company. All Things YC: You can find demo day favorites from day one here, and day two here. And, for an overview of sectors, here you go. EU x Regulation: We wrapped with a quick look at regulation from the EU that will impact a bunch of major tech companies. It led to a conversation of what sort of market regulatory structure is most conducive for startup growth. For episode transcripts and more, head to Equity’s Simplecast website. Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more! Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:10Speaker 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 and I am joined, as I am every Friday, by my dear friend, its senior reporter on the fintech beat, Mary Anne Ezevedo. Mary Anne, hi.

• 0:26Speaker 01

  Hi, Alex. How are you?

• 0:28Speaker 00

  I am slightly, like, I would say underwater, but also like run over. So I'm kind of like run over underwater is how I feel right now. It's been a busy week.

• 0:36Speaker 01

  You are leading our YC Demo Day editorial coverage and that's no easy task.

• 0:42Speaker 00

  And juggling various other things. So it has been a few days. But the good news is, Mary Anne, we are not here as a pair. We have brought along our dear friend, it's Kirsten Korosec. Kirsten, welcome back to the pod. Thank God you're here.

• 0:54Speaker 01

  Yes, we're so happy you're here.

• 0:56Kirsten Korosec?

  Yes, I'm glad to be back too. I'm fresh off of another vacation, like two in a summer. It's, I don't even know, I've turned over a new leaf. I'm no longer a workaholic and I go on two vacations this summer now.

• 1:09Speaker 01

  Good for you.

• 1:10Speaker 00

  I mean, teach us your ways, one, and two, I didn't know you were European.

• 1:14Kirsten Korosec?

  Yeah, exactly. I am trying to take a page from our European colleagues and actually take vacation.

• 1:20Speaker 00

  Yeah, really, that was a self-hating American comment about how poor our work culture is versus the dis of our European friends. But I will say, we can all work a little bit less than things would be, okay? But not right now, because we have a packed show for you. And on the pod today, we have deals of the week, including Mentra, Simple Closure, and Stack AV. Then we are going to talk about YC's Demo Day. It's been two days of startups. We have seen hundreds of them. We have a couple of favorites to call out to bring to your attention. And then we're going to close up with the EU cracking down on, quote, "gatekeepers in tech", and what that means for not only major American tech companies that compete abroad, but also for startups that want to build something that really does straddle the globe. First up though, Mary Anne, I hear Disrupt is right around the corner. What's going on there?

• 2:03Speaker 01

  Oh, my gosh, I cannot believe how close it is, Alex. Like, I mean, we are less than two weeks away from when we'll all three be sitting together on stage, recording Equity.

• 2:15Speaker 00

  Yep, I bought a jacket, I bought some pants, I bought some hot new shoes.

• 2:19Speaker 01

  A jacket? I'm trying, I don't think I've ever seen you in a jacket.

• 2:23Speaker 00

  Except for last year, I disrupted.

• 2:27Kirsten Korosec?

  So I have, I have an important audience question. Should I wear my bright sparkle sequin jacket just for the live show?

• 2:36Speaker 00

  Yes.

• 2:37Speaker 01

  Oh, I like that idea.

• 2:40Speaker 00

  I'm trying to think of a counter argument as to why you shouldn't. But I mean, like, should I have fun while doing the podcast? The answer is yes. I, I, I might buy a silly hat just for the show. If you're going to wear a sparkly jacket, why not?

• 2:50Kirsten Korosec?

  I will, I will pack it. It's going to go in the suitcase.

• 2:53Speaker 01

  Okay. What color is it though? So I don't like clash with you.

• 2:57Kirsten Korosec?

  It's like silver.

• 2:58Speaker 01

  Okay, cool.

• 2:59Speaker 00

  That's pretty neutral.

• 3:00Kirsten Korosec?

  It's full silver.

• 3:01Speaker 00

  Ooh. Mary Ann, can you bring cowboy hats for us?

• 3:05Speaker 01

  Just because I live in Texas doesn't mean I own cowboy hats.

• 3:09Kirsten Korosec?

  You know, Mary Ann, stereotypes save time is what Alex is trying to tell you right now.

• 3:14Speaker 00

  Wow. This is what I get for reaching a hand down to the southern states and their different culture and trying to bring it into the, uh, the west coast vibe. You know what I get? I get called the meanie pants. Not into it. All right. We'll be at Disrupt. You should come. Use the code Equity if you don't have a ticket yet. It's going to be a blast. We're all in like hardcore conference prep mode. So for a little stress test, it's because we are. Anyways, it's going to be great. But back to the podcast. Mary Ann, you have a story on the site this week about a company called Mentra that I absolutely fricking love. Tell us about it.

• 3:42Speaker 01

  I was really excited to cover Mentra. It's obviously not fintech, but when one of the co-founders emailed me and told me about the premise behind the company, I was intrigued. I hadn't heard about anything like it. And so what Mentra does, it aims to match neurodivergent job seekers with jobs that they would be really well suited for. And their premise is not only would they be well suited for these jobs, they may even be better out them or outperform other people doing those certain jobs. So I love that. I feel like this is a population that I don't want to say is ignored, but not, well, not given enough attention to, especially in the workplace.

• 4:21Speaker 01

  So, so what Mentra is trying to do, it's an, it's an AI powered, neuro-inclusive employment network. They're trying to match large enterprises with, uh, employees that have cognitive differences such as autism, ADHD, dyslexia, OCD.

• 4:36Speaker 01

  Love it. I love that they're they really look at all these factors around a person's neurotype aptitude, environmental sensitivities. All three founders are artistic. One of them, the CEO, has a brother who's a non-speaking autistic individual. And it was it was in trying to help him communicate that kind of sparked this idea in her mind that we needed something like this.

• 4:58Kirsten Korosec?

  So I have a question. How does it work? How do they find these people? And how do they get these folks to not just any job, but the job that's built for them?

• 5:09Speaker 01

  That's a really great, a really great question. So I honestly, I'm not even sure. They've got thirty three thousand people. They said mostly word of mouth so far. So I'm not sure if they're using any other marketing channels. They didn't talk about that. But they are working with, I think they said seventeen employers so far. And what I oh, I can't believe I forgot this. Sorry. They were backed very early on by Sam Altman, who's OpenAI's co-founder and CEO, with I think a million dollar seed round. And he backed them again this year. That was a pre-seed round. He backed them again in a seed round. So anyway, they've got thirty three thousand job seekers on their site today, which is incredible.

• 5:55Speaker 00

  You know what's really amazing about Sam Altman? I just realized this. And this is a little bit off topic, but roll with me. It's funny how if you do something that's bigger than the thing you did before, what you did before, it's kind of pushed aside. Like, I met Sam Altman at Demo Day IRL in the Bay Area a thousand years ago, when he was like running YC. And now, when you talk about Sam Altman, it that that his time at Loops, like, all that is now like, like historical detritus. It's OpenAI is the thing he's doing. It's impressive to have a third act that is so big. It towers over what you did before.

• 6:27Speaker 01

  Exactly. I think so, too. But I was intrigued that he he's backed this company not just once, but twice.

• 6:33Kirsten Korosec?

  Well, and the interesting thing, this is again, a slight sidebar, but it kind of makes sense that he's interested in employment, because he also is really interested in the concept of universal basic income, which is like, when AI takes over all of our jobs, like, what happens? So he he clearly has this interest in the future of work and in how people will work. And while these seem divergent, maybe there's maybe there's some overlapping there.

• 7:05Speaker 00

  Yeah, I think that's a good point. The way that I was thinking about this actually was lessons from being a stroller person. So I take my daughter on a lot of walks. And one thing that I have realized is how inaccessible many buildings, locations and areas are, even in Providence, Rhode Island, on college campuses, which are some of the most accessible places. And it's really got me thinking about what is accessible in our economy and our job market especially. So to me, this company is really trying to like, not only help, you know, make things more fair, but also get people access to stuff they're going to be like just really good at. And so the idea is just so, it's rare that I talk about a startup that like warms my heart. But here we are, like, this is like a human good. I like that.

• 7:48Speaker 01

  Yeah. And to that point, another investor, Shine Capital, which led the C round, Mo Kueifman, I think, how do you pronounce his name? He was saying exactly this. He was like, it's so, so rare to come across a company that's doing something economically positive and productive for society at the same time. It's like, super rare. And he also raised another good point. And in terms of talking about like, specific things, I thought this was interesting. For example, there are folks with Asperger's or some form of autism that tend to be way better at like, data labeling tasks. So anyway, overall, I, my heart was in this story. It was something that I had to cover. I couldn't say no. And, and also to his point, it's, it's making

• 8:30Speaker 01

  money. I mean, the company started out profitable, they said, and that was with a traditional per higher pricing model. But they decided that might limit them and being able to scale. So they transitioned to a more scalable SaaS model where employers can subscribe to access, you know, the talent pool and the recruiting products. So I think that's great. These are sharp, young people who've started this company, very enthusiastic. I love it. Can't wait to see where they go.

• 8:56Speaker 00

  Yep, I'm with three and a half million more dollars, certainly off to a good start. But if things don't go well for Mitra is good news on the horizon because Simple Closure would be there to help them close down simply. My deal of the week is the grim reaper of startup land. It's a company called Simple Closure, just raised 1.5 million in amazingly enough, less than 24 hours, and their goal is to help companies shut down. It's actually not a small problem because you have suppliers, you have vendors, you have bills, you have IP, you have employees, you have furniture. In the old days, you used to have like servers and stuff that you might have to clean before you can sell. But you know, we talk a lot about how startups usually don't work out on average. And so this type of thing makes a lot of sense to me.

• 9:39Speaker 00

  Kirsten, I gotta say, I, it's a very clear and cool idea, but it almost seems like it's designed for a period in time in which we're expecting a lot of startups to close, which is a little bit sad.

• 9:48Kirsten Korosec?

  Well, actually, we've gone through a lot of consolidation the last few years. So I felt like this would have come in handy for many startups in the sector I cover, like autonomous vehicles and maybe prop tech, but that's another area. But what was really fascinating to me is that this little fact that it's a little sad fact, actually, 93% of startups that raise will shut down.

• 10:14Speaker 01

  Wow, right.

• 10:14Kirsten Korosec?

  That's a huge number.

• 10:17Speaker 01

  Yeah.

• 10:17Kirsten Korosec?

  So to me, that shows that there is quite a business case for simple closure. But the question is, if simple closure doesn't make it, and I'm not saying that they won't, but who will, who will help them shut down?

• 10:30Speaker 00

  Who watches the watchers and who shuts down the shut downers?

• 10:34Speaker 01

  Good question, Kirsten. I, this was another company that caught my attention just because the model was a little more unique than what I'm used to seeing. I was surprised. I was like, you mean, this doesn't already exist? I mean, maybe it does, and I just haven't heard about it outside of like the legacy providers, but they're claiming that, that what they can do is help companies shut down, I think it was weeks instead of like a year and at a fraction of the cost. Okay, I don't know for sure if that's true or accurate, although they, they had a customer quote, but I did think it was interesting how they raised the money. So the co-founder said he was at Fintech Meetup and was just kind of presented something about the company where there were investors in the crowd, no pitch deck or anything.

• 11:19Speaker 01

  And then within 24 hours, they had raised 1.5 million dollars, which I thought. Okay. Hmm. That's interesting.

• 11:27Speaker 00

  Well, that's what scared me about this. The fact they raised money so fast for a it's cool that a company raised money. Good for them. Happy for them. But when you're digesting failure and people want to fund you to help you do that, it makes me worry.

• 11:41Speaker 01

  Not a great sign. Yeah, it's not a great sign. I mean, obviously, if a lot of investors are clamoring to invest, then they must think that we're going to be seeing a lot more companies shutting down.

• 11:51Kirsten Korosec?

  Well, maybe it's not that they're going to see more, but clearly there is, you mentioned earlier, like sort of the legacy providers that probably have very expensive services and maybe aren't really geared towards startups and more for the large corporations winding down. And so maybe there is a lucrative niche here for specifically handling startups. You know, there are whole banks, Silicon Valley Bank being one of them that caters to startups. No jokes, Alex.

• 12:24Speaker 00

  Sorry, no jokes.

• 12:25Kirsten Korosec?

  So maybe this is, investors are seeing that this is just an area that isn't provided. And I would love to see the financial metrics around here, but what caught my attention was that it's at a fraction of the cost, you know, what is the actual number? But if they can do it cheaper, that's really valuable to a startup that probably doesn't have a lot of money anyway.

• 12:45Speaker 00

  Yeah. Have you guys seen those ETFs that are like inverse NASDAQ that kind of go do the opposite of what a thing is doing? You can buy them as a way to like short or go long, kind of in a contrary way? Well, that's what this is to me. This is like an inverse startup bet because simple closure should do best when things are worst for startups and it should do the worst when things are the best for startups. Because if things are good, startups aren't shutting down, it has less business. But given where we are in the economic cycle and where venture capital is, it's kind of a cool way to bet on the downturn.

• 13:16Speaker 01

  I'll say one last thing. I know we need to move on, but. Here's my thought too is though when things are good, though, there's a lot more startups usually out there, right? Anyway, so the you see like ratio wise, we're probably still going to have a lot of shutdowns either way, just because, you know, even when things are good, there's more startups, there's more startups that could fail. Does that make sense?

• 13:38Speaker 00

  Well, yes, it makes great sense. And it completely undercuts my relatively, I thought, neat point about inverse ETF. So I'm just so much for that.

• 13:46Kirsten Korosec?

  Well, not only that, Alex, I was going to make the exact same point. So two out of the three people on this podcast smartly came to that conclusion.

• 13:54Speaker 00

  And then we're incorrect after Mary Ann brought a bat to the pinata we had of an idea. Anyways, earlier we were talking about making money while doing good. And I can't think of a better example than self-driving cars. So, Kirsten, what's going on?

• 14:10Kirsten Korosec?

  I know Mary Ann has comments about that. So a little bit of a, it's not a surprise, but it's really an interesting story and kind of a stunning turnaround. So I don't know if you remember this, but about 11 months ago, I actually had the scoop on this. Argo AI, sort of a darling of the AV industry, considered one of the leaders, had, you know, burst on the scene in 2017 with a billion dollars of backing from Ford. Then VW came along and it was like, seemed like this company that couldn't fail because not only were they making progress and well respected, but they had two huge OEMs backing them. They had avoided, you know, the constant raising of rounds. And then suddenly they shut down

• 14:54Kirsten Korosec?

  because VW and Ford pulled their backing. That was last October. And that startup was Argo AI. Well, today, or this week, the founders of Argo AI, we had heard that they were working on a new startup, but didn't really know who the backers were. And the news came out that SoftBank Group Is the sole investor in these three co-founders new startup called Stack AV focused on self-driving trucks. So still autonomous vehicles, but now applying it to class eight semi trucks based in Pittsburgh. And Bloomberg had this piece, which was that the investment was upwards of $1 billion. Yeah, a lot of money.

• 15:39Kirsten Korosec?

  So a couple of important points or one other important point. This is not SoftBank Vision Fund, which has previously invested in a number of autonomous vehicle companies, some which are still around, but this is SoftBank Group. So a little bit of an interesting difference there.

• 15:57Speaker 00

  I have so many thoughts, but I want to, I want to let Mary Ann tell us why this is going to kill us.

• 16:03Speaker 01

  Well, I feel bad because I feel like I'm a broken record, you know, with my distaste for self-driving vehicles. I think I'll set that aside for a moment and just try to speak a little more objectively. I feel like we've been talking a lot about self-driving truck companies shutting down, right? So like, this just feels weird. Like, how could a company entering a space where we're seeing all these closures? And I think consolidation too, raise like a billion dollars or more? I'm just confused, Kirsten, help enlighten me. Why do you think this happened?

• 16:37Kirsten Korosec?

  I interviewed the CEO and co-founder Brian Slusky and asked him that exact same question. I was curious why he was really striking a very confident and bullish tone. Not only because here he had, you know, had a failure less than a year ago. Not only had he rebounded, but he had raised a billion dollars and was feeling very confident. And he really homed in on two points. One, that they come with a lot of experience and that the self-driving truck companies that have survived, Kodiak Robotics and Aurora being the two main ones, also have a lot of experience. And he sort of used those as examples of, listen, it's not because this, this isn't a good business model, but it because these are the companies that have risen to the top.

• 17:21Kirsten Korosec?

  And, you know, of course he put, he put Stack AV into that. And then also the business model, which is there's a clear use case here for trucking. There's job shortage and all of this sort of facts that other AV trucking companies have put out there, that there's a real need for this and that the economics are clear. So those were his two. Reasons and he really struck a very confident tone when I interviewed him earlier today.

• 17:48Speaker 00

  Yeah, I gotta say, I'm really with Mary Ann on this one. It surprised me because I've tracked TuSimple, which is spelled T U simple, which does self-driving trucks for a long time. Kirsten, you and I are both stock market dweebs. We know what's happened to this company. Shares traded above 60 bucks a share back in 21 and today it's worth about a buck 35 a share. So like, and the whole company is worth 310 million dollars now, which is, you'll note, less than a third of the venture capital round that Stock AV just raised. That said, if anyone's going to drop a billion dollars on this, it's SoftBank and I love them for it. SoftBank just rolls in, it's like, hey, it didn't work out the last couple of times? Let's go. Here's a check. Here's a billion dollars. Go figure it out. Call us when you got it to work.

• 18:28Speaker 01

  You're right.

• 18:29Speaker 00

  I just, I love that.

• 18:31Kirsten Korosec?

  They're very positive.

• 18:33Speaker 01

  They made a lot of bets, right? Yeah, a lot of big bets. Some have not fared well, others.

• 18:38Speaker 00

  Others have done great. They like, I thought DoorDash was a complete dog. Turns out, ha ha, proves what I know. They made a pile of money off of that, you know? And they're taking Arm public. That's, that was also a great bet. All right, you know, cool. And frankly, Mary Ann, even though I know you're worried about self-driving cars in general, trucks on the highway mostly drive straight. Like, you know, like it's not the most complicated driving and it's also boring and you know, like to me, it's a great combination.

• 19:05Speaker 01

  They fall asleep at the wheel, right? They fall asleep at the wheel because they're, there's such long hours that they're in these trucks.

• 19:10Speaker 00

  And computers can't fall asleep. They can only run with power or internet connection. So nothing can go wrong. So it's going to be fine.

• 19:15Speaker 01

  I just made a statement that was pro self-driving.

• 19:18Kirsten Korosec?

  Yeah, there you go.

• 19:19Speaker 01

  I can't believe it. We have to write this down.

• 19:21Kirsten Korosec?

  Yeah, yes. One, one note though, about the SoftBank Vision Fund investing. I wanted to list some of the companies that SoftBank Vision Fund has invested in the past. Aurora, also self-driving trucks now publicly traded via SPAC. Cruise, DD Autonomous Neuro and Robotic Research. And the interesting thing about Cruise is that GM, which now, you know, owns Cruise, they bought SoftBank Vision Fund's stake. In cruise for $2.1 billion last year. So they so something's out of that now. So there is the one conflict to me is Aurora, which is also self-driving trucks. But the others are really more either robotaxi or delivery based, not direct competition.

• 20:05Speaker 00

  Yeah. And the thing that I want to throw in here, just because I've been thinking a lot about it. There I finally got Aurora's stock price pulled up worth $5 billion. So not everyone is too simple in the space. And people are doing quite well. Self-driving cars, we talked about them expanding in San Francisco, and we're hearing runways about other geographies. To me, like, slowest moving revolution of all time. But it does seem to still be trucking along. And that's pretty exciting.

• 20:28Kirsten Korosec?

  Oh, my God. That was terrible.

• 20:32Speaker 00

  If I can't make them grown, my jokes are too good. So that's just why I'm a joke. All right, we are talking about why combinators demo days one and two, including our favorites. But first, a short break.

• 20:46Speaker 00

  I love Demo Day. I just do. Demo days of all sorts, shapes, sizes, student demo days, big demo days, regional demo days, thematic demo days. Kirsten, I love YCU Demo Day because it's all of those in one. It's an enormous cavalcade of startups. I mean, what more can you ask for?

• 21:00Kirsten Korosec?

  Is it your favorite of all demo days?

• 21:03Speaker 00

  I love all my children the same. And by that, I mean, probably. I mean, who else? Who else rolls out a two-day, you know, six-hour Demo Day-a-thon and hits you with like 220 companies? Like, you go to a Techstars Demo Day, it's like, this is the Techstars Chicago Music Accelerator. And it's like nine companies, and they're all like, doing music in Chicago. YC is like, you know?

• 21:27Kirsten Korosec?

  Well, it was big, right? There was, what, 218 startups, not as big as winter 2023 batch, right? So that was, what was that, about 270? So there was fewer. Why is that the case?

• 21:44Speaker 01

  And that's a pretty significant difference, I think, right? 52?

• 21:48Speaker 00

  It's actually come down more historically, Mary Ann. I think it almost ran the 300s before. I think it just got too big. I think, I think, you know, what YC was not ever lacking was people who wanted to participate in its program. They love to talk about how their acceptance rates, like, you know, 1% or 0.1% or, you know, whatever it is. It's harder than Harvard is what people like to tell me. So they just let some more folks in for a while. And that seemed to be kind of, I would say, in keeping with the times at the time, back in the 2021 era. But they brought it back in, they made it a little bit more, I guess, exclusive. And as a result, I do think, and this is just my impression after watching both days, that the average quality of company that we saw was higher. So unsurprising there, but it's still several hundred companies twice

• 22:32Speaker 00

  a year. So it's not exactly, you know, a pretty small group. Have you guys ever been to a in-person YC Demo Day?

• 22:39Speaker 01

  No, never have.

• 22:41Speaker 00

  Okay, I almost missed them because they were like very, very low budget affairs. And so there was kind of this like this charm to having like all these rich people sitting on chairs looking uncomfortable while nerds kind of paraded in front of them. They've done a really good job bringing that to the digital realm, but I'm looking forward to going back in person sometime soon. But yeah, we're done. We've done the, this was the summer 23 batch. So we are done with YC for the year. And I was hoping if I could bore you guys with some of my favorites.

• 23:09Speaker 01

  Oh, no, I'd love to hear more about them.

• 23:11Speaker 00

  Well, I know Mary Ann loves neo-banks and that of all the fintech subgenres, nothing makes her happier than neo-bank. And that brings me to Envelope, which wants to bring automation and auto-budgeting tools to neo-banks for consumers. And one thing that I love is fintech applications that make the average person more of a super user, can help them save money and have a better financial footing. So Envelope is kind of cool. And given its focus on budgeting, it reminded me of the envelope method for budgeting, which if you don't know about, it means you probably have enough money. But-

• 23:40Speaker 01

  I love that because I was like, where did they get that name from?

• 23:43Speaker 00

  So I wrote it in my blurb that it is where they got the name. And then we published the story and I was like, I really should have asked them if that's the case because it seems so obvious to me.

• 23:51Speaker 01

  Right, right.

• 23:52Kirsten Korosec?

  Yeah. So you're making it up is what you're saying?

• 23:54Speaker 00

  Well, if you name your car company Charger and you're not named after the Dodge, you know, I think you're just misdirecting people. Mary Ann, am I wrong?

• 24:06Speaker 01

  Um, yeah, I can see what you're talking about. It makes perfect sense to me, but yeah, I mean, who knows? There could have been some other story there, but they didn't correct you, right? So maybe, obviously, I think you were on the right track.

• 24:16Speaker 00

  I've been on calls the entire time since that story has gone out. So maybe they have.

• 24:21Speaker 01

  That's right. I forgot you don't check your email.

• 24:24Speaker 00

  I don't. Email is a curse on humanity. Anyways, if I got that wrong, I will buy you a coffee the next time I see you. All right. Next up on my favorites list was Dilly. Are you guys familiar with the phrase do Dilly? Slang for due diligence.

• 24:37Kirsten Korosec?

  Oh.

• 24:38Speaker 01

  I've never heard that before.

• 24:41Kirsten Korosec?

  No one I have ever talked to has ever said, I gotta do a little do Dilly on that startup.

• 24:46Speaker 01

  Oh, my goodness.

• 24:48Speaker 00

  Which is why I said in my story, if you say that it's a good way to look silly while trying to appear cool. Dilly helps people do diligence on potential deals using AI to kind of help you kind of look at things and compare deals and so forth. Or as I like to call it, the anti full employment for junior I bankers application. I just love that this is what they picked to apply technology to. And I love when people are bringing a technology thing to a product I presumed they would wanted to have had in their past, you know?

• 25:15Speaker 01

  So that was fascinating. Yeah.

• 25:17Speaker 00

  Yeah. And there was a lot of companies that were favorites. I'll just call it a couple of these. We liked Silimate, which was a way to automate chip design workflows. We talked a lot about chips in the U.S. and around the world. So lovely to see people working on the software side of hardware from Y C. Anna Heim from our European team picked Pareya AI, which does debugging and monitoring for L L M application developments. There was lots of AI. I don't know, y'all. I just get excited about these things. Like, I love seeing the little baby companies, you know, talking about how they've grown 50% week over week. I love it.

• 25:47Speaker 01

  I love how much you love it, Alex. That's what, that's what I think I love. It's just seeing you get so excited about it. It's just really cool.

• 25:55Kirsten Korosec?

  I have a question, though, about on the investor side. We saw fewer startups this year, but that was on purpose. Were there fewer investors participating this year?

• 26:05Speaker 00

  So hard to say, probably not. One thing that investors love to do is complain about Y C because it does have a history of helping. Accelerate successes. We all know the list of, you know, former Y C companies, like I think Dropbox, I think Coinbase, et cetera. Maybe it was Airbnb that I'm getting confused there. But anyways, a lot of companies you've heard of that have gone through. And so Y C leavers that and its companies get relatively strong valuations at the early stage, and that makes investors snippy. And so every year, we hear investors complain about valuations, a demo day, and then they still write a bunch of checks. So it's hard to say, but I think they're going to be fine. Kirsten?

• 26:48Kirsten Korosec?

  Well, we did have a story, right, that kind of talked to a few investors. And there was an interesting little stat here is that a handful of them, let's say seven, seven or eight of them, said they wouldn't be tuning in at all, partially due to the high valuations investors need to pay to get access. Thoughts?

• 27:08Speaker 00

  Yeah.

• 27:10Kirsten Korosec?

  More complaining?

• 27:11Speaker 00

  Yeah, I mean, Mary Ann, I might be too cynical here.

• 27:14Speaker 01

  I don't think so. I think this is kind of typical. I feel like this year, there's been a more controversy in general around this whole thing. I mean, and not to change the subject, but isn't, wasn't there also like a lot of chatter on, on Twitter about some investors saying they'd already invested in the current cohort? So like, why even do a demo day if it's it kind of, it's almost like a show if a lot of, I think it was a quarter, according to Becca's story, a quarter of the investors she surveyed said they'd already invested in the current cohort. And I think Gary Tan got a little upset.

• 27:44Speaker 00

  There's a lot of nuance around that and what qualifies an investment. Is it a closed round? Is it a single check? Is it a commitment? I mean, the, the, the justice that companies often do raise before demo day, not all of them. Many of them are pitching to raise money or to attract attention for customers at demo day itself. So I wouldn't say demo day is archaic. And then if Natasha was still here, she would tell us her spiel on, on demo days and if they are still good or not. But what, what demo day from Y C does give you is a very well produced, like, like machine gun fire of very early stage companies. And to me, the nuance of exactly how much they've raised before versus not, how maturely are versus how new, where they should be priced, what mechanism.

• 28:25Speaker 00

  All that's kind of like details, but I just love seeing hundreds of people from around the world that are trying to take new technologies or recently tried business models and apply them to different areas of the economy to help things go faster. Cause that's kind of the theme, right? It's technology. It's trying to speed things up and make it more efficient. I don't think we're ever going to get away from the same YC conversations. Is YC still relevant? Our demo day is still relevant? Why are evaluations so high? I mean, twice a year, right?

• 28:53Speaker 01

  Yeah, I have, I know we probably again need to move on. Just one other quick point, though. I was disappointed to see that 84% of the cohort was based either in the US or Canada. I was expecting more international companies.

• 29:06Speaker 00

  So getting over my skis a little bit, I think when YC did have larger batches, they had an ability to have more folks from around the world. But if I recall Gary Tan's opening riff from the start of Demo Day, day one, clearly discussing San Francisco in person, trying to bring back IRL Demo Day. And one thing that having a single geographic location does is it's a very limited for who can be there.

• 29:34Speaker 01

  Right, that makes sense. That makes sense. Okay. I didn't think about it from that perspective. Yeah, probably there were more international companies when they were doing this virtually.

• 29:43Speaker 00

  Yeah.

• 29:43Kirsten Korosec?

  That was the one huge benefit of virtual, like all virtual is that people from, and because I think that there's a real interest in international companies participating in YC, but getting there when you're a startup is an expensive endeavor, especially if it's not a guarantee that you're going to raise any money.

• 30:04Speaker 01

  Right.

• 30:05Speaker 00

  Yeah. Well, I mean, if you get into YC, you will raise some capital from them. But if you want to raise more money, just stay in the, I mean, let's be honest, still very expensive Bay Area. It's going to be costly. I'll just say this. I thought it was a fine set of companies. A bunch caught my eye. I didn't even get to get through half of my favorites from the two days. So post her up on TechCrunch, if you're going to read them. And good luck, everybody. I hope it goes well and you make lots of money and tell us about it. So we'd love to know how it's going. Now, to close this off, let's talk about the European Union, everyone's favorite regulatory body that apes as an international coalition. Kirsten?

• 30:39Speaker 00

  What's going on with the Digital Markets Act?

• 30:42Kirsten Korosec?

  Thanks for ending it with such a light topic. I really appreciate that. So the story here is that they're cracking down on quote unquote gatekeepers to foster competition. So the EU confirmed six mostly US tech giants that will be subject to the Digital Markets Act. And really what they're doing is sort of applying a new set of pro-competition rules on these tech gatekeepers. What I hope maybe one of you two can answer is, you know, like, how do they define gatekeeper? Is it purely just, these are the biggest companies that have monopolies? Or is there some other reason?

• 31:22Kirsten Korosec?

  Or there's some other factor in here because the gatekeepers named were Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. So that's kind of what it seems like, like, these are all companies we've previously gone after on a regulatory front. So, so what makes a company a gatekeeper?

• 31:39Speaker 00

  Well, according to my understanding of the quote DMA, there's a certain kind of threshold where market power becomes large enough that they, these companies or their services in particular, will fall under the rules. And this includes more than 45 million active local users to the EU, turnover, AKA revenue of more than seven and a half billion euro, so call it, I don't know, 8.2 billion USD, and then a market cap that's over 75 billion euro. So essentially, if you do become very, very large, if you do have very, very large reach, or if you're driving a lot of economic activity, they're going to want you to play by these rules. Mary Anne, is that a fair summary?

• 32:16Speaker 01

  I think that is a fair summary. And honestly, I mean, these, a lot of these companies do operate sort of monopolistically. Is that a word? Monopolistically? Yeah, okay. So I don't know. Yeah, I mean, I- I don't necessarily see this as a bad thing. I was surprised to see that Samsung didn't make the list, though. It just seems odd that we would have these other tech giants on there, but not Samsung.

• 32:40Speaker 00

  Okay, there are some questions. In our coverage of this, we talked about things like Bing and iMessage that aren't currently a party to the DMA, but are under discussion for it. When I think about Samsung, though, Mariette, actually, I'm kind of on the other side of this, because when I think about the services we're talking about, you know, Google Search, YouTube for video, these are digital services. And when I think about Samsung, I think about smartphones and dishwashers and fridges.

• 33:05Speaker 01

  More hardware, more like, yeah, okay, I see that point.

• 33:09Speaker 00

  Yeah, so Samsung doesn't have an OS that competes at the same level as like Android, Windows, you know?

• 33:15Speaker 01

  Good point.

• 33:15Kirsten Korosec?

  So right now, virtually all the companies listed here are US companies, with the exception of ByteDance. Are you surprised that there aren't more Chinese companies on this list? Or you expect that to happen in the future?

• 33:27Speaker 00

  The only reason why ByteDance is on this list is because it owns TikTok, right?

• 33:31Kirsten Korosec?

  Right.

• 33:32Speaker 00

  So what other Chinese or based in China companies have digital services that are sufficiently popular in the EU market to hit that 45 million user threshold? In the US, we might think about clothing companies like Temu, Shine, et cetera. But in terms of apps in the EU from China that are popular, I don't have a list that comes to mind. And if I don't, they're probably not big enough to meet the threshold, Kirsten. That's my guess.

• 33:59Kirsten Korosec?

  Yeah, there's some big ones, but they're big in China. They're not big in the EU, right?

• 34:03Speaker 00

  Absolutely. And so, you know, when I think about this for startups, I bet people are asking, why do we care about regulation for the largest companies? What does this have to do with us? We're building a company. We only have 45 users in the EU. Shut up and stay on topic. Well, I think we're seeing several different global regulatory approaches. There's the US approach, which is Congress is purchased by corporate interests, and therefore mostly businesses get what they want. There's the European Union method, which is Congress equivalent is purchased by activists, and therefore they get what they want. And then there's the kind of Chinese model, which is the government's in charge. Shut up. And I'm very curious to see How venture and startup results play out in the three different approaches to kind of like

• 34:44Speaker 00

  technology and business regulation. I think the US is certainly in the middle in terms of what it's doing. The EU is on the cutting edge of regulation, you might say, and maybe that's the right way to go. But it does set up kind of a natural experiment for us for three major zones of economic activity in the technology sector. And that to me is just super interesting to watch as an economics dweeb and a fan of kind of watching international competition.

• 35:06Speaker 01

  But I guess, Alex, help me better tie this into like, what does it mean for startups, though?

• 35:13Speaker 00

  Like, I would say it comes down to like, the structure of competition, because, okay, so when I was on parental leave, I had some spare time because our nanny arrived early before I went back to work. And so I had like, three or four weeks of like, not having much to do. It was amazing. And so I wrote some stuff. And one thing that I wrote about on my personal blog, because I wasn't back at work yet, was startups should love strong antitrust regulation. Because in my view, if we do have at the national or national block level, the ability to say, no, you can't buy their company, you're too big, or no, you can't act anti-competitively and crush small companies, it's better for startups.

• 35:50Speaker 01

  Right. Gives them more of a chance, right, to succeed.

• 35:53Speaker 00

  But you'll often note that a lot of the people who are in favor of startups and venture capital are actually opposed to antitrust regulation because they want to build the next incumbents. So I think you have to decide if you want a rich area for startup development, or if you want to allow, you know, leading tech companies to remain as big as they are forever.

• 36:10Speaker 01

  You can't have it all. You can't have it all.

• 36:12Speaker 00

  I don't think you can, Kirsten. Am I being too simplistic here?

• 36:15Kirsten Korosec?

  I wish I could have it all, but no, I actually, I was thinking of like, a devil's advocate, but we can have it all. No, you can't. You've got to make a, you've got to make a choice. So, no, I think that that's a good point. I'm really curious to see if there are other companies that end up getting added to this that might be surprising. Like, none of the companies on here surprise me. I'll be waiting to see if this is a, an ever-evolving list, or if this is just going to pretty much stay as is.

• 36:43Speaker 00

  Yeah. The last thing, and I made a joke about Europe earlier, but just to be clear, no beef. But I will say, It's got to be slightly embarrassing to be the EU and be looking at leading technology companies in your jurisdiction that meet the threshold for anti-competitive activities, and none of them are based in your region.

• 36:59Speaker 01

  Oh, I didn't even think about that. Oh, my gosh.

• 37:02Kirsten Korosec?

  I was thinking about that. It's all US companies with the exception of ByteDance. So I guess we're just maybe waiting for that big EU social media company to launch.

• 37:12Speaker 00

  I cannot imagine a market apart from China. I would rather not build a social network than the EU. I'm pretty sure if you started to do that, the EU Commission would just kick your door down and just strangle you like, no. And those emails go to [email protected]. All right, that is the end of our time for today.

• 37:30Speaker 01

  So thankful you got that wrong, Alex.

• 37:32Speaker 00

  Yeah, actually, I do know your email address now that I think about it, and I will not share it. It's actually kirsten.coracac.

• 37:39Kirsten Korosec?

  No, because if you share my email, then we'll be forced to share your phone number in which we'll encourage all PR people and founders to reach out.

• 37:49Speaker 00

  I'm pretty sure that's already happened. I've had the same phone number for so long. I'm still at like 1,000 unread texts right now. So like, I don't think I'm ever gonna dig out. All right, we have to go away. But Equity is back next week. And then the week after that, we are going to San Francisco. We are taking Partn Disrupt. It's going to be an absolute blast. If you need more from us, in the meantime, though, don't forget, we are EquityPod on Twitter and Threads. And we have two sister podcasts, including Found, which is all about founders and the founding story, and Chain Reaction, which is all things crypto interviews and crypto news. But because we have Kirsten, we have to give her a shout out for her very own podcast. Kirsten, drop it.

• 38:24Kirsten Korosec?

  The Autonicast, which can be found at theautonicast.com. Or we also put stuff on that place that once was called Twitter.

• 38:32Speaker 00

  The artist formerly known as. That's all the time we have for today, everybody. We love you. We'll talk to you soon. Goodbye.

• 38:37Speaker 01

  Bye.

• 38:38Kirsten Korosec?

  Bye.

• 38:41Speaker 00

  Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azavetto. We are produced by Teresa Locan Solo with editing by Kell. Bryce Durbin is our illustrator. And a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening, and we'll talk to you next time.