Equity Monday: Where fintech is strongest as SBF heads to court

Welcome to Q4 2023, the period in which we are all going to pretend to have gotten enough done this year. Here’s what we got into on the show today: Stocks are mixed around the world while crypto tokens are enjoying a nice price-upswing in recent days. A recent article argues that Apple has all the ingredients it needs to build a search engine to take on Google and Microsoft. At issue? The fact that Apple makes so much money not having a search engine. For startups, more competition here could be good. EU telcos want to get paid twice, unsurprisingly. While the Amazon-FTC case is still big news, this week we’ll see the trial of former FTX maven SBF kick off. TechCrunch is ready. And to close out, why are we seeing so many Seed-stage fintech deals? Here’s the answer. Stick close to TechCrunch this week, it’s going to be busy. 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

• 0:10Speaker 00

  Hello and welcome back to Equity, the TechCrunch podcast where we unpack the numbers and the nuance behind the headlines. This is Alex and good morning. It's Monday and that means it's time to take a look back at the weekend and look at the week that is to come. Today is October 2nd, 2023 and on the podcast for you this morning, I have a quick look at the financial markets, Apple, search and startups, net neutrality, once again, the upcoming SBF trial and why seed stage investments are catching our eye in a key startup sector. Let's go.

• 0:48Speaker 00

  Now, a look at the world of money and that means stocks. Shares are mixed in Asia despite better than expected results from China, which saw its PMI rise to 50.2, which implies expansion in its factory activity. That was very welcome. Stocks are slightly negative in Europe today because EU manufacturing data has looked miserable and that is not helping. And then stocks are mostly flat in pre-market trading here in the US where we're in the midst of yet another internal fight to merely pay our debts. What fun. There are no earnings this week. You're welcome. But we are on the precipice of all the Q3 venture capital data. That's just around the corner. So do expect a lot of charts on the site regardless.

• 1:31Speaker 00

  From stocks to crypto, well, the news gets better. Bitcoin is enjoying a recent updraft, rising nearly 4% in the last day alone and is up a little more than 8% in the last week. Buying one Bitcoin will now cost you more than $28,000 again, and that's according to recent coin market cap data. Ethereum's token is doing even better, up just over 10% in the last week to more than $1,700 per ETH. Solana, Cardano, Polygon and other chains are also seeing their native tokens add a lot of value in the last week. If you own crypto, you're probably feeling pretty good. But do you know who's probably not feeling that good? It's Sam Bankman Fried, the former CEO of FTX.

• 2:14Speaker 00

  We are going to have a lot of coverage of that trial, more on that on the show coming up. But also this week, Chain Reaction and Equity are going to do some crossover episodes, work together and make sure we are chewing through the trial for you. And if you want even more crypto in your life, well, last week I went on Chain Reaction to talk about, and I kid you not, pudgy penguins. Check it out.

• 2:36Speaker 00

  And moving on, big news that matters. Now, the tech news item that I thought about the most this weekend was a Bloomberg article reporting that Apple has all the pieces it needs to build a search engine. These include a search engine for its own apps, code named Pegasus, that's according to Mark Gurman. It has a web crawler and it has an ad tech team. So you have search chops, the ability to collect data and the ability to monetize that information. Well, that is a search engine. This bit of analysis comes in the wake of learnings from the Google antitrust suit that Apple had considered buying Microsoft's search engine Bing, but wound up not doing so. The underlying current to this particular news stream is that Google pays Apple a lot of money

• 3:19Speaker 00

  to be the default search provider on iOS. So, Apple in the search mix? It could be, it could happen, but for now I doubt that the company is willing to do something so bold to a critical cash cow. Still, the world needs more search competition, clearly. And AI is currently shaking up search. It made Bing kind of cool again. It put the current generation of Google's core search experience in flux. Now, we may be on the cusp of a new generation of search, but perhaps even when we get there, we may still have the same players from the old world. Now, why should startups care? Because more search competition would be good for startups. They are buyers on the ad market to try to get the word out about what they're building.

• 4:04Speaker 00

  And they're kind of stuck living in a world where Alphabet and Meta control around half the global ad market. That's not great. So here's a place where more competition really would be great, even if not great for Google shareholders or maybe even Apple shareholders. But, you know, we can hope, we can dream. Apple, pull the trigger, get into search. Next up, one more dance with our old friend net neutrality. Over in Europe, a key tech market and the leading edge of government regulation, there's a push to force tech companies to pay for consumer bandwidth consumption. Now, the argument goes something like this. Adding capacity to internet infra is expensive. Certain companies' content takes up a lot of space on internet pipes, and therefore, those companies should pay for it.

• 4:49Speaker 00

  On the face, it sounds reasonable. That said, the reason why there's demand for internet infra is due to consumers wanting to access digital content and services, and those consumers already pay for internet access. And as the FD points out in an article about this, tech companies themselves argue that they are already shelling out massively for, quote, "internet infrastructure, including subsea cables and data centers, as well as content and services." It seems that the net neutrality debate will never end, and while some tech companies remain rich, they will remain a target. And I have to say, far be it from me to try to run defense for wealthy big tech corporations,

• 5:29Speaker 00

  but ISPs working the regulatory refs to try and get paid twice for doing one bit of work will never be odd to me. And the latest item in this particular saga, which is actually not new, is that a bunch of chief executives from around 20 telcos have sent a letter basically saying, "Hey, EU regs, make these tech companies pay us." And I have to say, between big tech and ISPs, I know which side I prefer. Next up, a series of small legal updates. If you are not caught up on the Amazon antitrust case, it's time to get caught up. The American government is making an attempt to regulate the country's largest tech companies a bit more closely, and let me tell you, they are not enthused. But this brings us to a question.

• 6:14Speaker 00

  I have long wondered what the most startup-friendly posture is to take here, or put in simpler terms, what stance should we expect from startup founders and venture investors on the question of big tech antitrust regulatory activity? Now, on one hand, founders want to build the biggest companies possible, and investors want a piece. So they should oppose limits on corporate size and power for that reason. On the other hand, it's hard to build a startup that can challenge incumbents if the latter can simply bend the market to their will. So while I suspect that politics will keep tech luminaries on the anti-antitrust side of things, I do think ultimately that's the wrong posture to take if you really want to back upstart tech companies that can shake up the existing order.

• 6:59Speaker 00

  Now, regardless, the other big legal doo that will consume oxygen this week, as we mentioned above, is the kickoff of the trial of former FTX CEO Sam Bankman-Fried. The trial of the infamous SBF will commence on Tuesday and Tucker Crunch will be there. More to come on that front shortly.

• 7:22Speaker 00

  To close this out, regular listeners of Equity will recall that on the last episode, Mary Ann noted that she was seeing a lot of seed deals in the fintech space. And frankly, I was very curious about that. Isn't fintech really suffering? Well, she and Christine Hall, another Equity alum, reported over the weekend that when it comes to fintech, they just aren't seeing Series B or even Series A rounds. It's pretty much all seed. And they spoke to venture banker Samir Khaji. He's the co-founder and CEO of Allocate. And he said essentially that, yes, private markets do take their cues from public markets, and that's actually why seed deals are doing so well. He said, and I'm going to kind of quote here, "Seed is typically the least affected by a downturn because those companies are just too early to really feel like you have to

• 8:06Speaker 00

  worry about where the public markets are." So while no one knows what a unicorn is worth or why the IPOs stop as suddenly as they started, seed investors can kind of go, hey, this won't hit the markets for another eight, 10, 12 years, so we're going to put our money where the good companies are and everyone else can figure out the rest. That's probably why, even in fintech, a much battered sector, we are seeing a lot of seed deals. So early-stage founders, go get it.

• 8:33Speaker 00

  That's our show for this fine Monday morning. If you need even more equity before we are back in your ears, we are EquityPod on Twitter and Threads. And of course, we have two sister podcasts, Chain Reaction and Found. They're fantastic. I love them both. Give them a listen. All right, Equity's back on Wednesday. We're back on Friday. Talk to you then. Goodbye. 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 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.