Inside TC’s Techstars investigation and how AI is accelerating disability tech

Mary Ann Azevedo, Kirsten Korosec, and Alex Wilhelm had a lot to parse this week. We had notes on wallet-as-a-service’ startup Ansa's latest fundraise, and how Alex initially misunderstood its business model. Then Kirsten talked us through a simply massive deal in the self-driving space, while Alex wanted to riff on Beehiiv and its own funding round. $33 million is no small Series B in 2024! From there, we had a few minutes to discuss Anna Heim's recent reporting on disability tech and how AI is taking and industry and accelerating it. Even better, there appear to be a mix of business models approached by the startups we discussed. That means that there could be many avenues to making tech that works better for more folks into real, and large businesses. To close out, Dominic-Madori Davis joined us to chat about her reporting on Techstars. The company has been shaking up its operations for some time now, leading to certain departures from its ranks. TechCrunch's deep-dive into how it all went down is well worth your time. Equity is TechCrunch’s flagship podcast and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. 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 about the business of startups where we unpack the numbers and nuance behind the headlines. Today is Friday, May 3rd. I'm Maryann Azvedo and joining me is Senior TC Reporter Alex Wilhelm. Alex, how are you?

• 0:26Speaker 01

  Well, I'm doing good. I have 10% left of a Red Bull. Turns out I'm out of coffee, but we've already hit record, so no drinks for me.

• 0:34Speaker 00

  Oh, this is going to be fun. We're also joined by TechCrunch Senior Reporter and Editor Kirsten Korosec. Kirsten, how are you?

• 0:42Kirsten Korosec?

  I'm great. I'm trying to keep up with the chaos that is Tesla right now, but thanks for asking.

• 0:50Speaker 00

  Yes, there's been so much Tesla news. I don't know how you do it. Well, for the show today, we are going to get into a few very interesting deals of the week, including Onsa, Motionl and Beehive. And then we're going to dig into a very interesting theme around disability tech leveraging AI. And lastly, we're going to have a special guest, Senior TC Reporter and Found Co-Host Dominique Midori Davis, who did a very thorough investigative piece around tech stars.

• 1:21Speaker 01

  Hell, yeah.

• 1:22Speaker 00

  So first up is my story on Onsa, which is a wallet as a service startup, which you may be asking, what is wallet as a service? So let me help explain that for you real quick. If you've ever gone through the Starbucks drive-through and you have the Starbucks app and you use it to pay for your coffee, that is essentially wallet as a service. So that way you don't have to pull out your credit card, you don't have to pay in cash, you just reload funds into your Starbucks app and use it to pay. So a lot of mom and pop coffee shops would love that ability and that's what Onsa is trying to do. It's trying to give these mom and pop type retailers a way to accept payments through virtual wallets.

• 2:06Speaker 01

  Okay, first of all, drive-through Starbucks. How many of those are there? You said that like it was like the norm. I've always walked into Starbucks.

• 2:14Speaker 00

  Okay, well, I live in Texas where people don't walk. So we, most of our Starbucks have drive-throughs.

• 2:20Speaker 01

  I keep forgetting that you live in real America. Oh.

• 2:23Kirsten Korosec?

  No, they're everywhere. It's like every corner is a Walgreens or a drive-through Starbucks.

• 2:27Speaker 01

  Oh, okay. So apparently I'm a terrible American, but thank you, Mary Ann, that does put this into context for me. I have a question, though, about these wallets that, that Onz is doing. So let's say that I download the app, I get a wallet. Is it branded to a specific?

• 2:40Speaker 00

  Yeah.

• 2:41Speaker 01

  Okay, so I would download, you know, the, I'm trying to think of an example, the Tesla app, for example, and I could put money onto my Tesla thing, but I couldn't then take it to another service that has Onz's wallet?

• 2:50Speaker 00

  It's specifically branded to that merchant, which is what makes it so cool. So you may ask, what is the advantage for the merchant? Well, there's a lot of them. One, it helps them grow loyalty among their customer base. They save money on credit card fees and not just interchange. One thing that I learned in interviewing Sophia Goldberg, the CEO and co-founder, is that because these are such small purchases, the percentage fees that merchants pay, actually, the percentage that they pay in fees is much higher than, say, like on a hundred dollar purchase. So, for example, a $4 latte could cost a merchant like 12 and a half percent in fees. So by giving their customers a way to pay without a credit card, they're saving money in fees.

• 3:31Speaker 00

  They, they make themselves look really cool with this branded wallet and then they can build loyalty, offer rewards. And one thing I did forget to mention, I actually covered this company about almost exactly a year ago, when they raised their 5.4 million dollar seed round, they just closed on a 14 million dollar Series A. And over 95% of its investors in this round were female. But anyway, we'll get into more of that later, but I just, I just wanted to bring that up.

• 3:59Kirsten Korosec?

  I had a question about how it plays or plays nicely with other software that I think of like the local coffee shop I go to, and they all use some sort of point-of-sale management system so that I can use my phone, right, to pay. So maybe it's Square or one of the others. So how does this app walled as a service, which it sounds like it's white labeled, play with maybe a point-of-sale system? Can it be, do you know, like, the details of, or are startups having to pick like one or the other?

• 4:30Speaker 00

  No, I think it integrates with most of the modern payment service providers, including Square, Stripe, Braintree. So that way, it makes it pretty easy for people to, or merchants to onboard and, and offer it to their customers.

• 4:44Speaker 01

  So when I first read the story, I misread it and I thought it was essentially integrate with the Onzo Wallet app and then whatever, whatever business wanted to could access it and therefore I could have one centralized bucket of Alex money that I could then spend around. Does anyone else have app fatigue?

• 5:01Speaker 00

  Yes, very much so.

• 5:02Speaker 01

  Like my, my concern with this is I just don't want more apps. I already have like 12 and that's like eight too many.

• 5:09Speaker 00

  I get it. I get what you're saying. No, it's more of a white labeled what they call digital wallet infrastructure. And so I get the app fatigue, but also if there's somewhere that you go a lot, I think you're going to be a lot more okay with installing an app and just using it to pay because it just makes your life easier and more convenient too.

• 5:27Speaker 01

  Okay. But on that note, where do we go apart from Starbucks frequently enough that you, Mary Ann Azevedo, want to download an app specifically to pay for that service? Because you have to have frequency, you have to have a use case, for example, the drive through. So for me, this would be McDonald's because I'm obsessed with having fries as a little treat. But you know, I don't know if everyone has similar food habits, you know, so I'm trying to kind of sort out who this is for.

• 5:53Speaker 00

  I mean, there are local coffee shops, right? That people frequent. Not everybody wants to go to Starbucks. So for example, our local coffee shop.

• 6:00Speaker 01

  Okay.

• 6:01Speaker 00

  I have a group of friends that goes there pretty regularly. I think they would love to be able to earn rewards and do things like that through an app.

• 6:07Kirsten Korosec?

  You know, this also reminds me of, and I wonder if this is a growth area or just an area that's shut out of, which is there are similar app services that work with local gyms or where you can use that to sign in or sign up for a class, but also do the financial payments. Slightly different thing, but it is oftentimes like a smaller business. I'm not talking about the big chains here. I'm talking about your local yoga studio.

• 6:35Speaker 00

  Right, exactly.

• 6:35Kirsten Korosec?

  Or whatever. And I, and I wonder if that's an area where that they've played around in.

• 6:39Speaker 00

  Yeah, you're on the right track, though. Yeah, Kirsten, they're not going after the big chains. Their initial focus, like the coffee, quick service restaurant marketplace verticals are their initial core markets. Then they're looking at like retail and convenience stores as other target markets, smaller businesses that would really, you know, benefit from saving money on these credit card fees with each transaction and want to have a way to build loyalty. So yeah, you're right. You're right on target there.

• 7:05Speaker 01

  I know we need to move on, but I have one last thing about this. You know, we've talked ad nauseam about monetized media and subscriptions, advertisements, whatever. You know, people have always said, eventually we're going to do micro payments. So you can pay for an article. You can pay the Times a quarter to read that piece. And it never works because micro payments are terrible transaction sizes, as Mary is pointing out in terms of costs. Maybe we could try something like this for that. Like if there was a Washington Post account or a Bloomberg account, I could put $10 in and pay them per article. I'd do it.

• 7:34Speaker 00

  Startup idea. Before we close out of this, though, I do want to mention that Renegade Partners led ONSA's latest financing. Existing backers doubled down, including Bain Capital, Boggs Group, Wishoff Ventures. And again, impressive. Female investors contributed 95.6% to the Series A round. They seem very, very pumped about this company. I would say it's one of the buzziest fintics I have seen in a while. Now, Kirsten, I am very curious to hear about Hyundai and Motional.

• 8:02Kirsten Korosec?

  Yeah. So your favorite topic, by the way, which is self-driving cars. So the headline is that Hyundai is spending close to $1 billion to keep self-driving startup Motional alive. But there's important details in here. So Motional is a joint venture that started in 2019 with Aptiv, which is an automotive parts supplier, and with Hyundai. And the idea is that it was going to be a 50-50 partnership, a $4 billion joint venture, and it was going to be focused on developing essentially robotaxis. This past January, Aptiv was basically like JK. They want to pull out. And so then there was a big question mark about whether

• 8:43Kirsten Korosec?

  Motional, whose roots really, the company's roots really are in a startup called Neutonomy. Really interesting. Interesting AV startup that started back in 2013. If they'd be able to get the money needed to continue. So a couple of things, they're burning through a lot of cash. Would Hyundai step up or would they need to go and get an external investor? So this is sort of the answer to that. And what we learned today is that Hyundai is basically going to give a direct injection of capital to Motional, about $475 million. And then also spend about $448 million to start buying out Aptiv's common equity interest. So at the end of the day, what they end up with is about 85% voting share control

• 9:28Kirsten Korosec?

  and obviously putting more money into it. There's a question mark, though, about how much time this gives Motional. What's the runway? And do they get more external investors?

• 9:40Speaker 01

  I'm trying to sort out how much money Hyundai has by going through their financial filings. But what I've just discovered is that offhand, I cannot convert billions of Korean won shown in thousands into USD on the fly. So I don't actually know how much cash they have, but it does seem that they have lots of resources. So this is not an extravagance by Hyundai, Kirsten. More of a strategic choice just to not fall behind in this larger category?

• 10:07Kirsten Korosec?

  Yeah, so I mean, we've seen what has happened. A lot of these companies had very aggressive timelines. Those timelines moved back, more money had to be put in. And then we saw what happened with companies like Ford saying, actually, we're, we're going to pivot. We realize that we are going to have to put billions more into this to make a commercial enterprise. And then they've completely pulled out. This is what happened to Argo. With Motional, it seems like Hyundai is still committed. The platform, the underlying platform that they're using for their robotaxis is a Hyundai vehicle. And they have put together a pretty large investment in infrastructure, including

• 10:48Kirsten Korosec?

  the center in Singapore, where it's like a new innovation center that involves the IONIQ 5 robotaxis. So they're deeply integrated at this point. So if they were to change direction, which they still could, it would be quite a shift. And I will say this too, Hyundai has a lot of assets, including Boston Dynamics. So they're very interested in robotics, AI, autonomous vehicle technology.

• 11:16Speaker 01

  Does that mean that if you buy Hyundai stock, you're really taking out an option on the future of AI self-driving robotics? Because that sounds like it's quote, "not a car company." And I've heard that pitch from other domestic companies.

• 11:28Kirsten Korosec?

  Yeah, except for the difference is that Hyundai continues to understand that the money that they're making is from selling vehicles. And so they're not, you know, cutting entire teams randomly.

• 11:42Speaker 01

  Yeah, I'm not trying to segue into your pet topic here, but like this entire emotional thing really struck me because it just goes to show how hard autonomy in general is for cars. And then I'm just trying to square emotional, the bailout Hyundai, active, this entire saga compared to what we're seeing at Tesla. And it just seems that Tesla thinks we're going to get to the finish line of self-driving faster than it other groups do. And someone's wrong. I don't know who, but I can't stop thinking about it.

• 12:09Speaker 00

  Yeah, I have to say this total kind of aside, that's a pretty car or vehicle or whatever you would call it. It's really good looking.

• 12:16Kirsten Korosec?

  Yeah, the Ioniq 5, it's great. It's you can actually buy it, not the robotaxi, but it is a passenger vehicle that you can buy.

• 12:23Speaker 01

  You can steal the robotaxi if you see one, though. You just, it's like your own tequila. You just reach in, pull the person out and then sit in it and off you go.

• 12:30Kirsten Korosec?

  So one final point about this before we move on to our other deal. I think that the correlation that you're trying to make or the comparison, I should say, between Tesla and what Hyundai is doing. Putting the Elon Musk factor aside, Tesla's always been a company that wants to do it all, be completely vertically integrated. And other companies like Hyundai, with varying success, I will say, other automakers have chosen the let's invest in X and then build that up. Let's take a stake in this. Let's have a side project here. And that is turning out to potentially be the way to go if you're investing in what I would still call frontier tech, which is ways off. And Tesla is putting all of its eggs towards this autonomy AI basket

• 13:15Kirsten Korosec?

  while their profits are falling on their automotive sales. And they're trying to do it all in-house and they're completely restructuring the company to achieve that. That is obviously incredibly risky. And I'm not sure how that's going to play out, not to pivot this entire conversation back to Tesla. But, you know.

• 13:31Speaker 01

  I mean, it is the black hole of news in today's world, but do you know what's not risky or associated with Elon Musk or self-driving? Beehive and no, I'm not talking about ye olde apiary hobby. No, you don't have to get stung to understand this. Beehive is a competitor to Substack. It is a newsletter platform that is growing. And this week it raised a $33 million Series B. And Beehive folks have been pretty open about talking about growth on Twitter. So I think we've all known that Beehive has been doing pretty well. I just didn't expect it to land. What I'm gonna go ahead and say is a abnormally large Series B for this market. It does feel quite large. 33 million, I don't think would have caught our eye back in 2021, but for today, that's a lot.

• 14:16Speaker 01

  And also because I think as we all know, Substack did that equity crowdfunding campaign recently, presumably because the venture taps have been turned off. So it's a very interesting moment.

• 14:25Kirsten Korosec?

  First of all, before we even get into the deal, I just want to say, Alex, that I'm impressed by the number of honey-based and bee-based puns that you were able to fold into that little intro.

• 14:37Speaker 01

  I get, I get excited and then I think of the next one while I'm saying one, and then you just kind of keep going. And then you eventually you're like, we gotta stop this. It's not really the buzz anymore.

• 14:44Speaker 00

  Oh, my goodness.

• 14:46Kirsten Korosec?

  Ding ding, but to the deal, 33 million. Yeah, and I was interested in this because when I first saw the headline, I was like newsletter publishing platform. Like, wow, is there room for more? Like, what, why are people putting money into this? But maybe this is the state of our, the media industry and the interest in content, right? That they're still attracting money.

• 15:08Speaker 00

  Well, they're attracting money. And what caught my eye too was they had just raised or announced the 12 and a half million Series A last June. So we're talking about less than a year, which is not as common these days as it was a few years back. The investors that participated, there was NEA, Lightspeed. And also I really appreciate that they actually shared some numbers. They went from having 7,500 active newsletters last summer to around 20,000 now. So I mean, they're definitely growing and they were willing to share that growth. So all around, very interesting growth story.

• 15:45Speaker 01

  Yeah, and now I'm very curious what the WeWork style metrics here would be like, not community adjusted EBITDA, but like active email newsletter per dollar valuation. Like, that's what I'm now curious about. I think that the space, though, like how much room is there for these companies? Is infinite because what is the cockroach of the internet? It's email, right? I mean, everything else is kind of come and gone or is currently, you know, riding high. But email is the absolute sinew of the web. And as long as that remains true, people are going to send emails. They're going to need tools for it. The companies will change a little bit. The models will change a little bit. But here we have, you know, Beehive in 2024 with a SaaS model and an email product. And it's going gangbusters.

• 16:27Speaker 01

  I mean, that's like, it's the same shit we've been doing forever. But apparently there was more room. It feels a little bit like Ramp following Brex. So we were all like, ah, we already have Brex. And then Ramp went kaboom, you know? So here we are with Beehive post Substack.

• 16:41Speaker 00

  Yeah, but with both spaces, there's plenty of room for multiple players, right? I mean, it doesn't, this is not as we, you know, cliche winner take all category. There's room for plenty of them. There's a lot of people who are dying to put their words out there in a newsletter format. So I say kudos to Beehive for recognizing that and executing. Now, we're going to have to jump to break, but after the break, we'll get into disability tech leveraging AI.

• 17:12Speaker 00

  So I am super excited about this first theme because AI is everywhere. We've been writing so much about how it's creeping into battery development and other areas of the startup world. And this story by Anaheim is about how European disability tech startups are using AI to further their technology. Have you read this?

• 17:35Speaker 01

  Oh, absolutely. I thought it was super fascinating. Also, shout out Anna just for being fantastic. Her reporting is always the best. I think the world of her. But Kirsten, the thing that I was most excited about while reading this is the discussion of business models. Because when I think about accessibility tech, I think about something that sounds very important, that would help a lot of people and that might not have a venture backable path to monetization. And so it seems kind of like a bummer that a lot of the stuff that does raise money often has a good use, but doesn't have the same sort of like broadening access to information that accessibility is supposed to. And so I was really hyped to see this number of companies working on so many different things in so many different places.

• 18:15Speaker 00

  Yeah, I was also just impressed, yeah, again, that Anna was able to uncover four companies in Europe doing these very similar things in terms of wanting to to help people, especially I think she was focused on people with hearing loss who needed help with hearing. And so kudos to her again for that. I love this. So one of the companies, for example, is called VisualFi, which leverages AI to improve the lives of people with hearing loss. It's a Spanish startup. And this is really interesting because the AI here is sound recognition. So supposedly it can do things like recognize fire alarms and the sound of a baby crying. That was kind of fascinating to me.

• 18:51Kirsten Korosec?

  Yeah, so earlier there was the mention of like business models. And I want to back up and talk about before business model, what's the market size potentially addressing the need around hearing loss? So by 2050, 2.5 billion people are projected to have some degree of hearing loss. That sounds like a fairly large market size. So then it comes down to how do you either use new technology, leverage existing technology to address, come up with some sort of product or service for that group of people? And the one startup that you mentioned is super interesting. There's another one that is focused on speech, but this time a voice banking or storing a person's voice for later use.

• 19:34Kirsten Korosec?

  That's called a cappella, which was, I thought, super interesting, kind of a wild idea. But the point here is there's always been this need, but now this idea of using AI to push the technology forward in a real way.

• 19:47Speaker 01

  Yeah, absolutely. And I think when we just think about hearing loss, again, speaking from where I live, I live around a lot of college students. There's many universities and colleges near where I live. And there's only two forms of college kid. There is the person in group, talking with their friends, or there is college kid wearing enormous over the ear headphones. And I'm just gonna go ahead and say, I don't think those students are all practicing good hearing practices with their headphones. And that means that in 50 years, they're gonna need help. So the market for, I think, hearing loss and hearing assistance is going to get enormous over time. And also, because I think Gen Z have been noted for being big fans of subtitles, I think accessibility tech that other people might not think of is just becoming more normalized in their lives.

• 20:33Speaker 00

  Yeah, and I have to talk about one other of those startups that she featured is a company called Nisper, which uses AI to make speech more intelligible in environments such as cinemas, museums, public transportation. So I thought that was, that was really cool, too. I love, love when a hype technology is applied to like, really useful use cases. I mean, again, I say it all the time. I feel like such a broken record and such a cliche, but you know, using technology to really improve people's lives, make the world a better place. This is when we get excited, the most excited. So really love the idea behind all of these companies, ideas behind all of these companies.

• 21:11Speaker 01

  Yeah, one thing I've been, I've been excited about in this space has been watching Microsoft do some good work. They've built gaming controllers and worked on, I think, Windows and, you know, different colors for software and stuff. There's a lot you can do to make technology more accessible to more people. And that's just way bigger than any one company, even a major platform company. So to see, you know, so many startups using new tech, I don't want to sound silly, but like, it makes you feel kind of encouraged, you know, a little sunny, a little optimism. It's great that people are dedicating their time and energy and sometimes investor money to really make the world more accessible. Good. What a great thing to do with your time.

• 21:45Kirsten Korosec?

  So speaking of someone who has invested a lot of time and energy, I want to turn our attention to a reporter here at TechCrunch. She's been working on a story for three months, and she's, I think, going to come on the podcast, right?

• 21:58Speaker 00

  Yes. Yes. We are so lucky to have Dominique Midori Davis here to talk about her very in-depth investigative look into tech stars. Dom, tell us all about it. This took you weeks and weeks.

• 22:11Speaker 03

  Yeah, this took a few months since February, I think. Whenever Seattle shut down, which I think was in February, end of February, until, I guess, a few days ago.

• 22:20Speaker 00

  Yes. I mean, you had about 30 sources. So tell us the gist of it. I mean, there's a lot going on in this piece, but what are the highlights?

• 22:28Speaker 03

  Well, it's really interesting because like anytime I would ask someone about tech stars, they would just say, oh yeah, it's really crazy or really messy over there. And I'm like, but what does that mean? And so like, I think it all spurred from when Seattle shut down. We were like, I think it became a little more well-known that, okay, something is probably happening and it's maybe not too spilling out in the public, but there's definitely public indication that something is going on. And so just high level, it seems like looking back from the past two years, two or three years, Maile Gavat, she became CEO in 2021. And I mean, 2021 was like, obviously a really big year in venture, but it seems like Techstars has not been able to, I guess, find its footing since the market went down.

• 23:14Speaker 03

  They really, really struggled to balance the ambition to scale and grow with also just the realities of it is really hard to fundraise in addition to fundraising that business model, which doesn't look like it's compatible right now with VC funding.

• 23:30Speaker 01

  Dom, that's kind of what I wanted to ask about is, you know, clearly since 2021, a lot of venture capital firms and affiliated type entities have struggled. So when we think about the problems at Techstars, are they mostly the market changes? Or do you think they mostly stem from leadership and choices thereof?

• 23:47Speaker 03

  You know what? I was also trying to figure this out, right? And I think, I think if Techstars had better leadership, and when I say better, I mean, it seems like the CEO and the executive team, they don't have any experience in venture and startups. That was a thing that mostly everyone brought up. They were like, all of these amazing, incredible women, they came from these awesome places. You know, you had Amazon, Bridgewater, you had all these big names, but no experience in venture and startup. And so when you're trying to fundraise in this really, really hard environment, and you're trying to also scale like a company like Techstars, and you don't have any experience in venture or startup,

• 24:30Speaker 03

  I imagine that it's probably more complicated than it would be for someone who would have experience.

• 24:36Speaker 00

  I kind of started getting an inkling myself that something was up with Techstars last fall when I wrote a feature about Austin and different things going on here in the city. And one of the things that prompted that was that I had heard that the managing director, Amos Schwarzfar, who'd been with Techstars for, I think, about eight years, was going to be leaving. This came as a surprise. I think he seemed to be very, very dedicated to the accelerator and his decision to leave, although by all accounts was an amicable move, was still, to me, a sign that things were not all okay within the overall program. And then, as you mentioned, a few months later, we heard about Seattle and then so much more came out.

• 25:20Speaker 03

  That's why I had a little section in my story called "The Missing Managing Directors", because there's a lot of them that are just missing. And some of them have left on their own accord. Others have run into situations. And so, an interesting theme has been that it's been a lot of kind of, not like necessarily old-guard managing directors, but people who definitely aren't new. Like, they've been there for a minute. And so, what someone said to me was, as more of these older managing directors leave, you can kind of get a new crop of MDs in who might not challenge leadership, who might not necessarily know what it was like being an MD under David Brown and who probably don't know any different in terms of like even compensation

• 26:03Speaker 03

  and all the changes that were made. And so you're definitely running into a lot of tension where yeah, managing directors are going missing.

• 26:10Speaker 00

  Well, also, wasn't there like some, I believe it was her that changed the structure like managing directors used to have more power or control, I guess is a better word of the way their local accelerator programs were being run, but didn't something change that took that away from them?

• 26:26Speaker 03

  Yeah, she's trying to centralize the business model, which is another interesting decision. Techstars is really big because it was a very local thing. It was very personal. It was a very personal thing in the ecosystem to kind of take away that personal connection and centralize everything. In addition to the fact that managing director compensation was like tied to the carry of the companies that graduated from their programs. Now, I believe it's that any program that doesn't have a corporate sponsor, you know, they have a shared pool of capital, like things like that. The centralized business model is the big, big change that, I mean, we just have to see how that works.

• 27:05Speaker 01

  How do you think Techstars is doing operationally right now? Because I know we've talked a lot about the last couple of years, but they do have capital, they're still operating. So what's the health of the org now?

• 27:15Speaker 03

  You know, that is a big question because they do have money, they have capital, but we do know that employees are incredibly dissatisfied. There are big changes being made. We have to see about these corporate sponsorships that they're putting a lot of weight on. JP Morgan, that $80 million sponsorship, if that's not renewed, you have a bunch of programs that are just going to be wiped out in addition to all of the employees that work there. And so it's kind of like this year seems to be okay. We don't know about next year, though. It seems like there will be more cost cutting in the future. I guess that's why the piece kind of left on a, we have to see. Because what does it mean for Techstars to double down on San

• 27:57Speaker 03

  Francisco and New York when there's like Y Combinator that exists, you know? There's all these new accelerator programs. So why would you choose Techstars? And so I think that this is going to be an interesting year. We're just going to have to see what happens. The org seems okay, but we don't really know what's going to happen next.

• 28:15Kirsten Korosec?

  I'm really glad you brought up JP Morgan because part of your story kind of gets into one of the problems was these strained corporate relationships, which I thought was interesting because, as you mentioned earlier, they were bringing in all these people who had corporate backgrounds. I would have thought that that would have been an easy relationship to maintain. But how tenuous are those relationships now? For instance, with like Melinda, French Gates, Pivotal Ventures, and the Louisiana Economic Development Agency, JP Morgan? What's the status of those now? And are they essential for tech stars to continue with what they want to be doing?

• 28:53Speaker 03

  That's the thing is like if tech stars wants to put so much emphasis on corporate partnerships, they're going to need to do a better job of retaining these partnerships. And I know that they've said like, well, we have more partnerships than ever. And like, this is just natural churn. This is some big natural churn. Like, to lose an $80 million JP Morgan sponsorship is, that's a big loss. Pivotal Ventures stopped working with them. Louisiana Economic Development Fund, they stopped working with them. They announced something in like March, and that pulled out, I heard, early. I have no idea why they're not being able to maintain things. What I've heard from a few people is that a common problem is that they overpromise and underdeliver. And I think we kind of got a sense of that

• 29:34Speaker 03

  with the JP Morgan program because JP Morgan expected them to go in and give all of their money to specifically black, brown, and indigenous people. And tech stars had a much more broader definition of diversity. But when you looked at the numbers of, you know, the black, brown, and indigenous people that they were backing with the JP Morgan money, it's safe to say that JP Morgan probably expected much more. And I'm not talking about like 50, 60%. They're probably like, I'm giving you $80 million. Why isn't 70 to 80% of this money going to the people that it's supposed to go to? And so I guess, just little things like that. But then there were also, with JP Morgan in particular, there were issues internally. There were problems with like managing directors, arguments over, not

• 30:18Speaker 03

  arguments is a strong word, but maybe some back and forth over the naming of programs. So there were, once again, internal issues that also kind of said like, why would I, why would, why would I keep this going?

• 30:32Kirsten Korosec?

  Yeah, it sounds like there's the typical churn that happens, like, or typical problems that happen. Which you just mentioned, but really much bigger issues. And the problem with churn is that eventually you run out of people and partners, corporate partnerships. It's okay if you have some sticky moments here and there, but ultimately, if you want to land new people, you better get your act together. So I'm really curious to see your future coverage, Dom, because I want to see if they've kind of cleaned up their act and are continuing to not just get new corporate partners, but keep them.

• 31:11Speaker 03

  And I just want to say, we have no official word on if JP has renewed or not, but I wouldn't be surprised if they did not come back.

• 31:19Speaker 01

  I like that you call it JP's if they're like our bestie. You know, JP hasn't called yet and dropped us a new note on the future plan. So we're going to go knock on that door and see what JP is doing.

• 31:27Speaker 00

  Overall, I think honestly, this, this is really just kind of sad. I mean, Techstars always to me had a really, had a good reputation in the accelerator world. It was always seen as kind of prestigious to participate in these programs. It just bums me out a bit that this is what it's come to. I also found it interesting that when asked for comment, they really didn't comment other than to try to disparage your reporting. You gave them a really great opportunity to, to kind of share their side of the story, and they didn't take it.

• 31:57Speaker 03

  I know. I have no idea why they released that comment. They could have addressed anything in the story and they kind of skirted around it. And then also took a dig at us, which had to print that in full, but.

• 32:11Speaker 01

  I'm going to go ahead and read it just because I think it's kind of funny. Digging into the Techstars quote here, "It is reckless that TechCrunch has chosen to paint a distorted picture of our business by providing unnamed sources, a platform for unverified grievances."

• 32:26Speaker 01

  Everybody talk to us, it seems like.

• 32:28Speaker 03

  And unnamed sources, there was one woman who literally went on record. So that's why I was like, I wouldn't say unnamed, you know?

• 32:36Speaker 00

  Well, unnamed to the reader, not unnamed to us.

• 32:39Speaker 01

  Yeah, we know who we're talking to.

• 32:40Speaker 00

  Yes.

• 32:41Speaker 01

  Yeah. And by the way, why do people not want to have their name put onto something sometimes? Well, because they could get sued or because they have career worries. And so often, if we know somebody, have verified their time and so forth, we will use them as a source and protect their identity. But we set the same standards, like we have multiple sources on each thing and so forth. I, I think it just makes them look. Petulant.

• 33:01Kirsten Korosec?

  It also gives them more attention. A bad comment usually backfires on you and then everyone takes a lot more interest. You know, the dry sand effect, if you will.

• 33:11Speaker 03

  Yeah.

• 33:12Speaker 00

  Dom, just wanted to commend you again for your excellent and thorough reporting here. And also thank you so much for joining us to talk about it. We always love to have you on the show.

• 33:20Speaker 03

  Yeah, I know. My life has been all tech stars for three months, so always happy to talk about it. Always happy to talk about it.

• 33:29Speaker 00

  All right, well, we'll have to leave it there, but Equity will be back on Monday. Until then, you can find me on X, Bay Area writer, Alex on X, at Alex, Kirsten at Kirsten Korosec, and Equity under the handle EquityPod on X and Threads. And Dom, where can we find you?

• 33:47Speaker 03

  Please follow me on Twitter. I'm still trying to hit 10K. It's Dominic Midori. I've been trying for two years now. Please.

• 33:55Speaker 00

  And don't forget to check out our sister show, Found, which Dom actually co-hosts, which dives deep into the stories behind startups with the founders who built them. Bye.

• 34:08Speaker 01

  Equity is hosted by myself, Alex Wilhelm, and TechCrunch Senior Reporter, Mary Ann Azvedo. We are produced by Teresa Locan Solo 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.