AI is going to make Big Tech even bigger, and richer

Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. This is our Friday show, and we’re talking about the week’s biggest startup and tech news. Mary Ann and Alex were lucky enough to have Kirsten aboard for the roundup, which means we got to tackle an even wider array of stories than usual: Updates from the trial of former FTX CEO SBF, more here from our own Jacquie. Deals of the Week: Mary Ann was very interested in I Own My Data, while Alex wanted to talk more about AgentSync's latest venture round. Carta's CEO tried to beat back criticism, but wound up making more noise about his company's missteps. Cruise hit a roadblock with its self-driving program; we dig into how to handle a crisis and how not to handle a crisis. And to close out, notes on earnings from Alphabet and Microsoft and what they may portend for startup-related AI software demand. Equity comes out thrice-weekly for your delectation. We are back early on Monday with our weekly kickoff, see you there! P. S. Pay attention to our sister podcast Chain Reaction, we have more coming on the FTX trial that you will not want to miss. 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 foundersand 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.

• 0:11Speaker 00

  Hello and welcome back to Equity, a podcast all about the business of startups, where we unpack the numbers and the nuance behind the headlines. My name is Alex and I am joined today on this lovely Friday episode by my friend, it's Mary Anne Azzavetto. Mary Anne, hi, hello, and how goes your week?

• 0:26Speaker 01

  It's going good, Alex. It's actually raining here in Austin, which is a good thing because we've had like no rain for months and months. So I'm happy.

• 0:35Speaker 00

  Well, for once, my part of the world has better weather than you. We're having an odd June here in almost November, but it's been tank top season on the East Coast and I'm loving it. Thankfully, though, we do have even more geographic diversity on the show than just Texas and Rhode Island. We also have our dear friend from the Southwest, it's Kirsten Korsak. Hey, how are you?

• 0:52Kirsten Korosec?

  I am excellent, loving the desert weather right now, and actually just got out of the dunes out in Southern California for a all women's off-roading map and compass navigation

• 1:04Speaker 01

  Wow.

• 1:04Kirsten Korosec?

  competition.

• 1:05Speaker 01

  Wow.

• 1:06Speaker 00

  What were you driving?

• 1:07Kirsten Korosec?

  So I was just there for media because I get to do fun things like that. But it's actually a 21, it's, it's called the Rebel Rally. It's 2100 kilometers. It goes from Mammoth down into through the Mojave and I was there at the end. But the cool thing about it, which is relevant to TechCrunch audience, is that this year's winner in the four by four category was Rivian.

• 1:28Speaker 01

  Yeah.

• 1:29Speaker 00

  Oh, really?

• 1:30Speaker 01

  Interesting.

• 1:30Speaker 00

  The EV maker that's building trucks that people can now kind of see out in the wild, I think. I've seen a few.

• 1:35Kirsten Korosec?

  Yeah. And the team was two women who are actually engineers at Rivian, but the R1T won, which is a first for an electric, it's the first time an electric vehicle has won. So pretty cool.

• 1:45Speaker 01

  Very cool.

• 1:46Speaker 00

  Wow. But we are going to constrain ourselves to the following topics on this episode of Equity. We're going to talk about a new e-commerce startup focused on one-click checkout solutions with a twist and then agent sync intermezzo round. Then we're going to talk a little bit about Carta lawsuits and how to not go about not making noise about your floods. And then the AV taxi wars. And then finally generative AI and big tech earnings. It's going to be packed. But Mary Anne, as a quick little teaser to everybody, as we record this, something is going on in the legal world.

• 2:14Speaker 01

  Oh, yeah, you can say that. Everybody's paying attention to what's going on with Sam Bankman Fried, our friend at Wow, did a lot running a company called FTX. I mean, I can't wait to see what happens here. I don't know about you guys, but I just can't wait.

• 2:30Speaker 00

  Yeah, and the news is that he's going to take the stand in his own defense. And there has been a big question throughout the first three weeks of this trial. Will Sam take the stand? And the answer it turns out is yes, he's doing that pretty much as we record this. So we don't know what's going to happen. But if you want more about that, Chain Reaction, our sister show, will have notes. I think I'm actually going to be jumping on that with Jackie to talk it through. And we might throw that in the equity feed as well to get everyone up to speed. But big news in the trial. And when Mary Ann said Sam is our friend, she was being facetious.

• 2:59Kirsten Korosec?

  Yeah, not, not our friend.

• 3:00Speaker 00

  Just as a data point. We're going to get emails otherwise, you know?

• 3:04Speaker 01

  Not at all.

• 3:06Kirsten Korosec?

  Do you think they're going to sell popcorn at the courtroom?

• 3:09Speaker 00

  I mean.

• 3:09Kirsten Korosec?

  You know, so we can sit and eat popcorn.

• 3:11Speaker 00

  We do run a federal budget deficit. I'm not opposed to that being a side gig for the government, you know, some concessions.

• 3:17Kirsten Korosec?

  I'm just saying, if there was a testimony to like, you know, have a little popcorn and enjoy and sit back and listen and watch, that would be it.

• 3:24Speaker 00

  I'm going to do that from my home. And by watch, I mean, wait for Jackie to call me when she gets out of the court. They take your phone and laptop away mostly. So like, we've been doing this weird like telegraph reporting system, like it's like the 1800s. Anyways, let's dive into some startup stuff. Mary Ann, first up, there's a new company that you're very excited about, founded by an ex PayPal exec that wants to give consumers control of their own data, which I love in theory.

• 3:45Speaker 01

  Yeah, I mean, this was a little bit of a departure for me because you would think it's a fintech company, but it's actually really more of an e-commerce one. And it's called I Own My Data. And so, all right, first of all, I think we all know the pain of when we make a purchase online of having to create an account, a password, save it, do all that. I mean, I very often just click on guess because I don't want to deal with all that.

• 4:08Speaker 00

  Sure.

• 4:09Speaker 01

  I think many of us do. This company is claiming, because obviously it's still early days, right? But they're claiming what they can do is that when you go to make these online purchases, you don't have to do that. Your own phone can save all of that data. It can keep all of it there just for you so you can manage it, save it, all your interactions online, your purchases, your profiles. And the goal is, A, to make it easier for consumers to buy things and not have to share all their data. And then for the merchants, he's claiming, the CEO, who is, as you pointed out, a former PayPal exec. The merchants are more likely to get customers who follow through on a purchase so they don't get frustrated by the process of having to input 50 million things.

• 4:55Speaker 01

  And then, you know, maybe they don't want to get 50 million texts or emails afterwards. So they claim, okay, we're going to get more people buying stuff because it'll be faster, easier, and, you know, more repeat buyers.

• 5:05Speaker 00

  So my question is, who controls the data? Because if I, the name implies that I do, but I'm curious. Does my data live on my device and it stays there?

• 5:14Speaker 01

  Yes.

• 5:15Speaker 00

  Okay, so it's not going away to some centralized service where else?

• 5:17Speaker 01

  No, that's the whole point. So no cloud services. Right, so this is different from like single sign-on tools. Okay, it's not the same thing. And I asked the CEO about this because I was like, okay, what's the difference? Because we know that Facebook, Google, Apple, they've all tried to do this sort of thing. And he told me that, well, okay, that's, the accounts are sitting on other people's services, right? They're still on other parties' servers. So that's why you have to have the user ID and passwords. It's not entirely owned by the consumer. But then if your username or password gets compromised, it could be used anywhere you have that combination, right? But with I Own My Data, it's got a platform called Node. That data and who it's shared with is controlled only by the user.

• 6:00Speaker 00

  And then, okay, not to be utopian in person here, but generally speaking, when you remove the ability to make money in one way, you have to kind of replace it somewhere else. So if we're allowing consumers to conserve their own data, control it themselves and so forth, do I pay I Own My Data for this service? Does the merchant pay them for access to the system? How does it make money? Because otherwise, isn't data usually how people make money?

• 6:21Speaker 01

  That's a very good question, Alex, and one that we probably should not go over right now.

• 6:28Speaker 00

  Well, maybe they'll figure it out. I mean, they've only raised 2.75 million. Clearly, it's a cool technology product that isn't fully mature yet. But I will be very curious to see if they want my money for this because I'm curious if people will pay to have their own stuff stored.

• 6:39Speaker 01

  Yeah, I mean, they're very early stages. They're just getting into beta with merchants. So we're going to see how this plays out.

• 6:45Kirsten Korosec?

  It's interesting, too, because they're not the only ones going for this sort of novel approach. So how many people are, or how many different companies are actually going for this? And is there room for all of them?

• 6:58Speaker 00

  Oh, man. I mean, Mary Ann, we've talked about, you know, checkout.com, Bolt. I mean, these attempts to make one unified checkout experience. There's myriad of them.

• 7:06Speaker 01

  Yeah, there are a ton. And I think we could say this about almost anything we cover, right? And on TechCrunch, right, there seems to be a ton of competitors in every space. I don't know. We'll see. I do think that the CEO, whose name is Rohan Mahadvin, he was at PayPal for 15 years. And I think that gives him a little bit of, I guess, a little more credibility, I would say, than maybe some of the other players in the space because he's worked in the space for so long. And I feel like that helps a little bit, that knowledge, that experience. But we'll see. I did think it was very interesting, again, that he emphasized this company is not a payments company, but rather an information company is the way that he's describing it. They're not processing payments. They're just saving information back to a person's node. To me, it felt a little different, but

• 7:50Speaker 01

  it's one of those things that I can't 100% articulate, right? I think we have these gut feelings when we talk to companies or CEOs, and that's just what I had here.

• 7:58Speaker 00

  No, I mean, I absolutely dig it. It does go against what we've seen from most people, which is centralized data storage or the traditional single sign-on setup. But given the recent news with Okta and the, Okta had some data issues and the stock market didn't like it. And so I think that the risk is when you do centralize all the data, you have to have absolutely perfect security because otherwise everyone's stuff gets leaked at once. Whereas in this case with Node and I own my data, it does seem to be a bit more secure. And I think the idea, to use the compute lingo of keeping my own data at the edge, is pretty cool. I love that idea. Shocked that Apple didn't win this category to some degree, given that they're theoretically a privacy-focused company.

• 8:34Speaker 01

  They could always buy them.

• 8:35Speaker 00

  It's true. Apple does like to make some small purchases here and there. And a startup that raised 2.75 million, but it fit that bill. A company that would not fit that bill, however, because it is valued at a much higher price point, is AgentSync. And I covered them this week. Mary Ann, do you recall the fun times in 2020 when people were raising like three times in one year?

• 8:52Speaker 01

  Fun times may not be the phrase I would use to describe them, but yes, of course I do.

• 8:56Speaker 00

  Oh, come on. When things are exciting, we're exhausted, but at least we're entertained. You know?

• 9:01Speaker 01

  True, true. Yes.

• 9:02Speaker 00

  Anyways, Agent Think was one of those companies. I covered their like four and a half million dollar seed round. Then they raised an A, then they raised a B, all in like 15 months. And the B was like a $75 million, 1.2 billion valuation massive round. And then, you know, everything changed, time passed, and I got back in touch with the CEO, um, Niji, and they put together a $50 million Series B extension. Now, we've seen more extension rounds, I think, fair enough to say, around the world in the last six, nine months. Yeah.

• 9:32Speaker 01

  Oh, yeah, but not this big.

• 9:34Speaker 00

  Ah, that's the thing. I was very curious, why would they put together this round right now? How's the company doing? So got on the phone with them, actually for a couple of hours across two different calls, which I did not have time for, but was really fun because I think this is a cool company. Agent Think, if you don't know, has APIs inside of the insurance world to shuttle information back and forth between carriers and insurance agencies and about insurance agents themselves. There's a lot of paperwork, regulatory stuff that goes back and forth and they're making that a lot simpler. And it's a pretty cool API style business. We've seen this Twilio, et cetera, et cetera, et cetera. But it turns out, Barry, that the insurance market went into kind of a rough patch around the end of last year. Claims were getting more expensive. There were a couple of catastrophic events and things got a bit more conservative. So Agent Think had to kind of reset a little bit internally.

• 10:18Speaker 00

  And then they have long sales cycles. And I think that made some of their deals a bit further out than might have made initial sense in their, in their projections. And so they just needed to have essentially more cash on their books when they eventually closed those deals to not have potentially very large customers get worried about their viability. So they raised 50 million more from existing investors and didn't show the valuation. So I thought it was pretty cool. I dig it.

• 10:43Speaker 01

  I did too. First of all, InsurTech has been hammered in the public markets, right? We've seen a lot of companies not doing well, stocks tanking. So this was kind of a bright spot in the industry. And I was impressed that the CEO told you that was ARR was up 3X.

• 11:00Speaker 00

  Yeah, in the last two years.

• 11:02Speaker 01

  Yeah.

• 11:02Speaker 00

  Now, that's much slower growth than they had before. But as companies' revenue bases get larger, it's harder to grow more quickly. But what we don't know is how much of that was front loaded to 2022 versus kind of this year. And so we don't know the kind of relative performance. As Kirsten and other people who spend time in financial documents will tell you, the longer the time horizon displayed, the less you can kind of tell about what happened inside of that numerical point.

• 11:25Speaker 01

  That's true. It makes sense. But this overall sounds like a positive move for the company. Like you said, they're being strategic. They decided, okay, let's get the extension. They wouldn't tell you valuation. So, you know, we're guessing it was not a flat or an up round, which again, in this current environment we're in is not atypical or even necessarily considered that negative anymore. But it sounds like they're just being strategic. They're being smart like, okay, we don't necessarily need this money now, but we might in the future, we want to give our customers that comfort. And like you also said in your story, it's kind of like what companies do in going public.

• 11:59Speaker 00

  Yeah, yeah. The idea that, oh, Kirsten, please.

• 12:01Kirsten Korosec?

  I just have so many questions, though, because it does sound smart, but, but are they using this money to do anything like to grow, to add new services, to expand? Or is it just, what is it being used for? Is it putting its money to work?

• 12:18Speaker 00

  Yes, so it is. The company, I mean, I spent time talking with the CEO about new products they're putting together and how they're approaching markets. And one thing they're doing to kind of answer your question is going up market, working with bigger and bigger possible customers. And in the insurance world, the bigger you are and the older you are, the less fun you are, aka you're more conservative, deals take longer. And especially if you're working with a provider that might have a bajillion different like agents out in the field, it's going to take some time to get that deal across the thing. The transom, the finish line, pick your analogy. The capital definitely will probably help them feel confident in keeping working on what they have been. But essentially, it's kind of like what Maryam was pointing to. It's a bit like an IPO. Once you go public, people can see your books, they can see how much cash you have, they can just know that you're not going to disappear in six months. Some startups do.

• 13:02Speaker 00

  But in this case, they needed to have tons of cash on hand. So that way, when they finish some of these big deals, their customers were confident in their ability to stick around. Startups do have a relatively high mortality rate, so it's not that crazy of a point. So Kirsten, to your question, I don't think it's mostly for operations. I think it's mostly for this essentially cushion, safety net that they can have. But it certainly probably doesn't hurt their confidence in doing more operational investments.

• 13:27Speaker 01

  Okay.

• 13:28Speaker 00

  I think that's my guess.

• 13:29Kirsten Korosec?

  All right. Well, I just like to see if a company is going to raise, you know, really look into why. I mean, it sounds like they're trying to be strategic and playing a bit of a long game, but I also like to see if they're going into new markets, expanding because startups essentially, even ones that are becoming, are in a more conservative sector, should be growing, right? This is the growth phase. It's not necessarily the mature phase. So in your view, are they becoming and acting more like a mature company? Are they still growing?

• 13:56Speaker 00

  I think they're still in the startup phase. Yeah, I don't think they're out of that yet. The insurance market is bigger than you think in terms of total dollars that flow through it. And when there's that much data and money flowing around, the chance for startups to want to bring more operational efficiency to a sector that fits that profile is enormous. And so I think there's lots of growth for them. And, you know, I don't have all my notes from that call pulled up, but I think they're also working out on like FINRA regulatory stuff so people can sell annuities. So I think they are expanding their overall kind of remit while also trying to grow their customer base. So a broader pool and hopefully going deeper as well. So yeah, I mean, they're doing startup things. They're just trying to be tuned to selling to more conservative customers, whereas a YC company selling to other startups doesn't have to make the same sort of like, here's our cash balance, here's our viability, here's our health signals,

• 14:41Speaker 00

  probably to the same degree as this company does. So it's more of a market question. Okay. One last tiny little note on the extension front. This is the second time I've covered an extension in the last couple of months. Both times, the companies had long sales cycles and mostly raised from insiders. So my vibe here is that some companies will be able to go back to their prior backers, the other company was canopy servicing, and get more capital, close those big deals, and then with that new ARR base, go raise their next real next round at a much higher valuation and defend their business on a dilution basis. So that's what I'm thinking. But we'll see what happens next. Yeah. Okay. Right. This next story.

• 15:18Kirsten Korosec?

  I'm laughing already.

• 15:21Speaker 00

  Do you guys, are you familiar with the Streisand Effect?

• 15:23Kirsten Korosec?

  Sure.

• 15:24Speaker 01

  No.

• 15:25Speaker 00

  Okay. Thanks, Mary Ann. I appreciate that. The Streisand Effect comes from a 14 time in which the singer wanted a picture that was unflattering of her taken off the internet. And this request was mocked vociferously across the internet, and then the picture became one billion times more popular. So the Streisand Effect is essentially when you try to squash something and end up blowing it up. And I think, Kirsten, that what we're seeing here is a similar sort of thing. Fair enough?

• 15:48Kirsten Korosec?

  Very fair.

• 15:49Speaker 00

  Mary Ann, tell us what happened.

• 15:51Speaker 01

  Okay. Karda. Equity management company has been in the news over the past year or so for a lot of negative things. There's been allegations of sexual abuse on the part of executives, allegations of a toxic boys' club culture, things like indecent exposure. I mean, it's just not great. There's been a lot of negative headlines out there. Henry Ward, the CEO, took it upon himself last week to write an email to employees addressing all this negative press, which, you know, I guess that makes sense. Of course, you know, the employees are probably very much aware of all this bad stuff being reported on the company. But what was odd was yesterday, apparently, as I saw on X, he decided it would be a good

• 16:35Speaker 01

  idea to send an email to all of the company's customers as well, addressing the negative press. So first of all, what I wonder was going on through his head is like, what on earth would make him think this is a good idea? And then, second of all, according to a lot of the people who posted on X, many of these customers hadn't even seen the negative press that he was referring to. So to your point earlier, Alex, he just called attention to it. And one of the comments on X that was kind of amusing was, one user posted, "I feel like this is terrible comms work. Don't draw unnecessary attention to it for the majority of people who probably never saw anything anyways. If it doesn't directly impact me, I probably don't give a...

• 17:19Kirsten Korosec?

  Fuck.

• 17:20Speaker 01

  Yeah.

• 17:22Kirsten Korosec?

  First of all, Mary Ann, I just have to give you credit for really, like, you were sitting there thinking of like, what is the, not the nicest word, but when I was looking at this, in my head, I was thinking, what the hell were you thinking, you freaking idiot? But you said it so much more, you articulated yourself in a way that clearly I don't have the brain power to do so. So thank you for that.

• 17:46Speaker 01

  But the end result is this, just absolute cringe and a lesson for when you should have comms people, maybe like possibly steering you in the correct way. Like, don't put that out in an alert to all your customers that you have all these problems. That would be a good move.

• 18:06Speaker 00

  This is effectively a full employment news cycle for crisis comms people. And I know folks who do crisis comms and I know they're essentially the firefighters of the corporate world, if you want to think about it that way. And what happened here was the CEO took a flamethrower to a burning house. My God, it's not good. Karta has had problems. It's also incredibly essential to the startup world. And what that means is its customer base is everybody. I mean, there are other players in their market, but they have an enormous amount of share. And so to send this out, I think is just a big error. It was funny, though, to me to read these comments from, you know, various founders that I know who responded to this on X, I guess. And they were like, I didn't know about this. I Googled it and the news was paywalled.

• 18:48Speaker 01

  Yeah, right.

• 18:50Speaker 00

  And I was like, damn it. People report the news, but due to our failing business models, it's all behind a paywall and now people can't see it. But I mean, at least they were sent to it. It just seems so self defeating. But I have a hypothesis. So you're the CEO of a company, you're working hard, trying to do good things. Let's give you the benefit of the doubt and say you're a strong moral actor. Bad things have happened at your company. You tried to excise the rot. You're trying to do better. And then people keep writing stories about things that have happened and you're like, ah, stop it. And so you're like, I'll just tell everyone what's going on. And so you bulldoze your comms team and you send it out an email and you think you fixed it. That's my guess. What do we think?

• 19:23Speaker 01

  I don't know. Flawed. He framed his medium post as saying, oh, I know other CEOs have to deal with this. I wanted to share what I shared with employees in case it's helpful for you. So he was trying to frame it as if he was doing a public service to other CEOs. So that kind of, I think that framing shoots down possibly your theory here, Alex. I think he really was trying to frame it as like, how can I make myself look okay? I can try to do this so I can help provide a lesson to other founders who may have had some negative headlines, which, you know, obviously anybody reading this, I mean, he He went on in this post to talk trash about, you know,

• 20:04Speaker 01

  the former, some former employees, saying that the company had extensive documentation that the former CTO was inappropriate with women, abused his position, called him a racist. I mean, all sorts of things. It's like he just kept, he was making things worse. Everything, it's like everything I was reading, it was just getting, it made everything just seem worse.

• 20:25Speaker 00

  Here on Equity, though, we are big fans of radical transparency.

• 20:28Kirsten Korosec?

  Sure, but there's no corrective, as far as I can tell, and Mary Ann, you're closer to this story, but there was no corrective action.

• 20:36Speaker 01

  Well, he said they fired, he fired the CTO. I guess that is what he considers to be corrective action.

• 20:42Kirsten Korosec?

  But, but also, like, how do you create a better culture where that doesn't happen in the future? Or, I don't know, like, how do you set an example and make this less about, oh, we got some bad headlines and more?

• 20:56Speaker 01

  Here's what we're doing to change.

• 20:58Kirsten Korosec?

  Creating, yeah, yeah.

• 20:59Speaker 01

  Yes, I get it.

• 21:01Speaker 00

  I mean, the old comment, and car.com's, please don't text me about this, but the fish rots from the head and culture is set by the people in charge. Culture is what you do.

• 21:10Kirsten Korosec?

  You should definitely text Alex, so.

• 21:11Speaker 00

  I really, please don't. I'm, I'm, I'm still a thousand texts behind as always, literally, so leave me alone. It's especially tough to hear, I guess, that framing, Mary Ann, when the bad actors were directly reporting to the CEO. It's not like they were buried deep in the organization at a sub-office out in the boroughs of London, right? If it's your CTO and your former chief project officer, those are the folks you talk to all the time. You have tons of overlap with them. They are your first line of leadership.

• 21:35Speaker 01

  Right.

• 21:35Speaker 00

  So that's not very good. So the lesson here is if you have a lot of problems, hire some cons people, probably listen to them, and then don't tell everyone in the world, especially people who pay you, how badly you fucked up.

• 21:44Speaker 01

  And last thing I'll say, even one of their investors described the whole thing as weird. So, you know, it's not just us.

• 21:51Speaker 00

  No, it's not just us. And if you don't like what we said about it, text that investor. All right. After this break, we are going to talk about the driverless taxi wars, one of my absolute favorite topics, and who is betting big on autonomous vehicles. And as a hint, it's going to point out who's paying the most and how much it costs to be in that game. Right back.

• 22:13Speaker 00

  Hey everybody. This is Alex from the future. We recorded this next section just a couple of hours before Cruise announced that they're going to pause all driverless operations for the time being. So if you want the most up to date information on this next topic, check out Kirsten's coverage over on techwatch.com. But in the meantime, here's what we were thinking at the time before that news came out. Thanks, everybody.

• 22:37Speaker 00

  Kirsten, the best part of having you on the show is that I have an excuse to talk about my favorite thing in the world all the time, which is self-driving cars. And once again, back in the news, however, not for the best reason.

• 22:47Kirsten Korosec?

  No, for a really bad reason. You want me to tell you more?

• 22:51Speaker 00

  I would love that, please.

• 22:52Kirsten Korosec?

  Okay. And Mary Ann will, this is just going to cement all of her feelings about self-driving cars.

• 22:58Speaker 00

  No!

• 22:59Kirsten Korosec?

  So, the big news, probably the biggest autonomous vehicle story of the year so far, is that after years of getting all the appropriate required permits to not only test driverless vehicles in the state of California, but to be able to carry and charge passengers for a commercial robot taxi service, Cruise just received the final permit back in August. And now, they are all taken away. And there's a couple of reasons why. And it kind of ties in perfectly with the story before, which is creating a much bigger and worse problem as a result of your actions. So here's the quick. Cruise, all of its permits were suspended.

• 23:43Kirsten Korosec?

  It can test if it has a human safety operator behind the wheel, but that's the literal starting point now. The DMV, which regulates autonomous vehicles, suspended the permits, followed very shortly after by the California Public Utilities Commission, which is the commercial carrying and charging rider's permit for driverless vehicles. What this means is that Cruise, which is headquartered in San Francisco, effectively cannot operate at all in San Francisco or California. So, the reason why the permit was suspended was really twofold. One, there was an incident in October 2nd in which Cruise was not the primary strike vehicle of a pedestrian. A human-driven vehicle hit a pedestrian. That pedestrian then hit that vehicle, landed in the opposite lane.

• 24:27Kirsten Korosec?

  And the cruise vehicle went over it. I had the unfortunate experience of watching that video about a dozen times. So I can confirm exactly what happened. But here's where it gets a little tricky. Cruise showed me an abbreviated video. It showed the vehicle braking, hard braking, going over the person and then stopping. And the DMV says it was given that exact same video. But it turns out that there is another seven seconds that follows that. In which after braking and stopping, the cruise robotaxi then attempts to quote unquote, pull over, dragging this person about 20 feet, obviously causing more injuries.

• 25:09Kirsten Korosec?

  Cruise claims and insists that DMV saw the whole video. But the problem is they have admitted to me that they didn't show me the whole video. And so it's a little bit like, who do we believe here? At the same time, you know, I'm obviously digging into what's been happening, but I'm not getting anything from GM, which owns Cruise, or Cruise about safety culture. I'm hearing the opposite. I'm hearing the opposite from employees. I'm hearing nothing from management that we will make sure this never happens again. Because even if you put aside the fact that they didn't show the whole video and basically pissed the DMV off, that vehicle still performed a maneuver

• 25:54Kirsten Korosec?

  that was unsafe and should have never happened. And instead, they're rather defiant. So that is my soapbox, and that's to fill everyone in. But it's quite problematic.

• 26:05Speaker 00

  Okay. So first of all, lesson from politics. Watch some West Wing, learn this. It's not the crime, it's the cover up. Now, clearly, in this case, I don't, I don't think crime has been committed. I'm not trying to say that someone should go to jail. What I am saying here is, this is terrible, clearly, but trying to obfuscate it.

• 26:23Kirsten Korosec?

  It made it much worse.

• 26:24Speaker 00

  Yes, yes.

• 26:25Kirsten Korosec?

  Yeah.

• 26:25Speaker 01

  I mean, I'm infuriated, honestly. I'm, it just makes me livid. First of all, the trying, like I visualized in my head, this poor person being dragged. She was stuck under the self-driving car, essentially, right?

• 26:40Kirsten Korosec?

  Right.

• 26:40Speaker 01

  I mean, that's like my worst nightmare because you all know how I feel about these these cars anyway, but like, imagine you're just walking. Okay, yes, she did get hit by another car, but then she might've been okay or not hurt so bad, but then to get dragged by this self-driving vehicle on top of it, it's horrifying. It's absolutely horrifying. So first of all, that that makes me kind of sick. But then this, oh, let's just not share the last seven seconds of the video makes me even more angry because accidents do happen, but not taking accountability. And to your point, Kirsten, not saying, okay, yeah, you know, really, this shouldn't have happened. We need to make sure it doesn't

• 27:21Speaker 01

  happen again. Like, they're just glossing over it. It's an insult. It's offensive. And it makes me very, very angry.

• 27:28Speaker 00

  Okay, so Mary Ann, I love you and I've known you for so long and I agree and I support all your feelings here. But what kicked off this chain of events? It was a human driver smacking into a human. How many people die? How many people die in car crashes every year? It's like 40 to 50,000 a year.

• 27:47Kirsten Korosec?

  It's about 45,000.

• 27:48Speaker 00

  Thank you. I had 46 K on my screen. I was just going to give it a range to avoid being too precise. Every one of those is a tragedy, right? Because every one of those is someone removed from family and friends and community and everything else. And so to me, yes, Cruise clearly did something wrong here, but I just hope that doesn't scare us off from moving towards a future in which we can reduce the number of deaths from car accidents.

• 28:15Speaker 01

  Before I let Kirsten take over, because she's obviously much more intimately familiar with this topic than I am, I would like to point out, and we talked about this during our prep, is that Waymo doesn't seem to be, we don't seem to be seeing a lot as many accidents occurring. So in the defense of self-driving technology, I think it can work. But when it comes to Cruise, it feels like they still have a lot to work on internally with regards to safety.

• 28:42Kirsten Korosec?

  Right, agreed. And that's the perfect segue here. I think what we're seeing is Cruise has often been described as a company that's very aggressive. And there's nothing wrong with being aggressive. I think that there comes a point where risk and appetite for risk. Crosses into reckless. And Cruise's response, like a company makes a mistake and then you learn from it and then you take appropriate action. And right now, at least, I'm not seeing that or hearing that. But then there's Waymo, which in the past, I've felt that they were very slow, easing into things, really probably pouring through money.

• 29:25Kirsten Korosec?

  There's not a lot of transparency in how much money Waymo has gone through, but we know what Cruise is spending, which is about $244 million cash burn a month. Wow. So about $732 million in this past quarter. So we know that it's very expensive, but Waymo has managed to avoid these same problems. And in fact, just this week, announced they had long partnered with Uber, but now we're seeing the result of that partnership, which is that Waymo's driverless cars are now available on the Uber app in Phoenix. So you're seeing that progress is happening in Phoenix. They have scaled and aren't as, let's say, a lower risk for appetite, but it's starting to pay off for them.

• 30:08Kirsten Korosec?

  And I'm not so sure that Cruise's current strategy is going to pay off for them.

• 30:14Speaker 00

  Okay, I agree with that. And I don't want to come across here as someone who is hedonistic about human life. This is disappointing. Cruise made a mistake. Clearly, they should not have tried to edit this and hide it because, I mean, come on, guys, this is going to come out. I just, I just hope that this doesn't become the story about self-driving cars versus the stuff that is working, that is doing fine, that is, you know, showing up around the world. We're just at the really beginning of the monetization or the commercial viability of these cars, which means we're at the very beginning of kind of seeing how fast they can expand and improve at scale. It would just be so disappointing to me to fumble the ball here, if that makes sense.

• 30:56Kirsten Korosec?

  Right, and there's high stakes, right? Waymo, there's very few companies left with the amount of money to really scale this. You have Waymo and Cruise being the top two, but then there's Motional, which is the joint venture between Hyundai and Aptiv. You have Zooks, which is owned by Amazon. They haven't really made many moves on the commercial side of things yet. Motionals definitely further ahead. But you have about four companies and then some sort of secondary tiers in self-driving trucking and things like that. So there's not a lot. If one of them really truly fumbles the ball to make most people, consumers mistrust self-driving vehicles, I don't care how safe your company is, you're going to get pulled in to the fray.

• 31:37Speaker 00

  And that's why Cruise's actions here weren't just bad for Cruise, they were bad for Waymo as well. And I would say bad for the most important person in my life, me, because I don't want to drive anymore.

• 31:47Kirsten Korosec?

  Well, we don't know if it's really hurt Waymo yet, actually. We'll see. I think that you've seen some activities in Los Angeles with Teamsters protesting and opposing and some city officials opposing Waymo's presence in Los Angeles, but we're not seeing that in Phoenix so much. And right now, at least, Waymo is the differentiator. You know, it's actually kind of benefiting a little bit. But if this continues, then it's going to get lumped in, I think.

• 32:13Speaker 00

  Yeah, I mean, everyone recalls the time that one of Uber's self-driving cars hit and killed somebody and the human at the wheel wasn't paying attention. And that was an enormous setback for Uber. Kirsten, would it be unfair to say that that was kind of the end of ATG at Uber?

• 32:26Kirsten Korosec?

  Oh, 100%. Yeah, that company died as a result. It was later then bought in a weird, complex deal with Aurora. But the thing wasn't just that it had a bad safety culture in which the human safety driver wasn't paying attention. They were actually watching a video. But that also, there was a lot of stories that came up around there, including investigations about like how that happened. It wasn't just the one person, but how that happened. And that like the automatic emergency braking was turned off in that vehicle, which is, which is an essential advanced driver assistance safety feature, not an autonomous driving feature. But because that was off, that also, it basically, it snowballed into Uber ATG essentially shutting down.

• 33:08Speaker 00

  And that's the kind of stakes here, not just in human life, but also in business terms. So getting things right, especially in areas like this, are of high importance. Now, let's talk about something that's less risky, AI. Because AI is certainly not going to be an issue ever. It's going to be perfectly fine. Do not worry. It's big earnings season, everybody. And so I've been tracking this, basically trying to find the results of generative AI inside of big companies. Kirsten, you were telling us earlier about there's actually a generative AI startup in the, right?

• 33:33Kirsten Korosec?

  Yeah. Well, so it's interesting. I felt like I was a little bit removed from generative AI a little bit, just because in the transportation space, there's certainly a lot of AI going on in there in terms of the development of autonomous vehicles, but not necessarily generative AI. But I just this month met a startup called Aionix and they're really interesting. They are using AI and also generative AI in the development of EV batteries, specifically the electrolyte. So it just goes to show that it's creeping in everywhere. And I'm really curious to see where else it pops up.

• 34:10Speaker 00

  Yeah, that's the interesting thing. I was also reading some news from Nvidia about how they'd use generative AI to make robotic hands learn more quickly. And I bring that up before I talk about the results, Kirsten, not just because I wanted to put you on the spot out of sync with our notes doc, but to point out that generative AI is not a small thing. This is not just going to be Dolly making images or people having it write, you know, fake Eminem lyrics about their favorite condiment, right? There is a lot more going on here. And one thing that I'm trying to figure out is where it shows up in big tech earnings. Are these investments actually bearing fruit? And it seems to me the answer is, at last, kind of, which is kind of exciting.

• 34:45Kirsten Korosec?

  Sort of.

• 34:45Speaker 00

  Sort of.

• 34:46Kirsten Korosec?

  Sort of.

• 34:46Speaker 00

  Well, I mean, here's the problem. GitHub Copilot, which is a $10 a month tool that Microsoft sells to help developers make more code appear, has, I think, a million subscribers now. So 10 million a month, $120 million a year, huzzah, big business. At Microsoft, that's not enough money to do anything compared to how big they are. And so we have to actually kind of wait and see until these numbers get big enough to really change things. But we are seeing a couple of points in growth at Azure, and that does indicate what's going on. Google was talking about how 80% of its customers use its AI tools to generate more ads, and that's helping them in their ads business. So I think we can now kind of say that generative AI is having an impact on big tech. And Mary Ann, my thesis is that because we're seeing the work they're doing across many different

• 35:31Speaker 00

  parts of their business, cybersecurity, et cetera, that it probably bodes well for startups, that there is real market demand for generative AI-based software.

• 35:38Speaker 01

  Yeah, absolutely. I mean, it's still very early days, right? I mean, just because we've been talking about this for so, what feels like a long time, we have to keep in mind and keep the perspective that, I mean, this is still super early. So there's still a lot of time, there's still a lot of, a lot of ways that these companies can incorporate AI into what they're offering and make money off of it. So for sure, this is good news for startups. Definitely encouraging and it validates, I guess, that AI, generative AI is not just a buzzword, right? That there can be actual tangible results seen in the way of better financials.

• 36:17Speaker 00

  Yeah. And you know, Kirsten just made a really good point. Well, she was patiently waiting for me to move us to the conclusion and wrap the episode. She was waving one of her new Mac dongle converters in her hand. I think generative AI will truly have arrived when it's probably a bigger business than Apple makes on peripherals. That might be a fun way to think about it. It's finally besting out all the dongles that make our computers work because Bluetooth is trash. And then we can say generative AI has truly arrived. Much like the end of the show, which is right here, right now. We're done. We're out of time. We're way over time. In fact, we're going away. If you want more equity, of course, we are on X and threads under Equity Pod. And of course, our sister shows Chain Reaction and Found come out all the time. They are fantastic. And if you want more about Sam Bankman Fried and the Trial of the Year, I guess, that'll be on Chain

• 37:00Speaker 00

  Reaction this weekend. Equity, use that as a code to save money on TechCrunch Plus. Am I forgetting anything, guys? Is that it?

• 37:05Speaker 01

  I think that's it. Goodbye. Yeah, bye.

• 37:08Speaker 00

  We'll talk to you guys on Monday. See ya. Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azvedo. We are produced by Teresa Loconsolo with editing by Kel. 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.