Pod Insights Equity Podcast Foundry is shutting down in slow motion About this episode On today's news round up, Alex, Mary Ann and Karyne are looking at:
Deals of the Week: Rasa’s $30 million Series C had our tongues wagging. The startup is building finservice-focused conversational AI tools. Karyne wanted to talk about the latest round at the intersection of AI and crypto, while Alex wanted to riff on Hippo Harvest’s $21 million round for indoor robot farming.
Venture capital’s year of transition: After OpenView called it quits, and Countdown Capital returned funds to LPs it became clear that venture is evolving. New news that Foundry is not going to raise another fund after its current $500 million vehicle added another name to our roster of venture firms that are taking a different direction in the future.
YC’s new call for startups: Well-known startup accelerator Y Combinator has a new request for startup list. Given the weight that YC carries in startup-land, we had to dig into what it’s proposing. Though we’re a little skeptical of the near-term impact of spatial computing, the other updates made good sense to our minds.
We’ll be back on Monday!
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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.
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Transcript 0:11 Speaker 00 Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. Today is February 16th, 2024. My name is Alex and I'm joined today by two of my long-running work besties. In one corner, we have Senior Tech One Reporter on the Fintech Beat. It's Mary Ann Ezebedo. Mary Ann, hi.
0:32 Speaker 01 Hi, Alex. How are you?
0:34 Speaker 00 I had really good donuts today, so it's been a pretty good day overall. Yeah.
0:40 Speaker 01 I'm jealous. Yum.
0:41 Speaker 00 Well, my stomach does not agree because I need to go for a run. But we also have Karine leaving with us. Karine, hey, how are you?
0:48 Speaker 02 I'm doing very well. Thanks for having me on the show again.
0:51 Speaker 00 Oh, my gosh, an absolute pleasure. This is just like all of our various meetings we've had over the last couple of years together, just now in a live recorded format. So nothing bad will happen whatsoever. But the good news is we have the right people today for this show because on the pod today, deals of the week are Rasa, Ultiverse and Hippo Harvest. A little bit of blockchain in there, a little bit of robots, even some fintech. It's going to be great. Then for the first theme, we are discussing venture capital's transitional moment and why this year is going to look very different in venture land than what we have seen in years before. And then we're going to close off with what YC wants to see from startups today. Mary Ann, though, kicking off with Rasa, which just put together a very nice Series C.
1:29 Speaker 01 Yeah, so I wrote about Rasa this week and, you know, I have to say, as you all know, I generally cover fintech, mostly just fintech. But this one kind of, there's some fintech involved because this is a conversational gen AI company that serves financial services companies. And it was interesting to me because, first of all, it's been around since 2016. You know, they've been doing this for a while. And the startup actually started out as an open source platform for developers to build chatbots, voice apps and other services that would employ conversational AI. Then a few years ago, they decided to shift toward the enterprise, which seems like it was a very smart move for the company. They hired a former Oracle executive, Melissa Gordon, as its CEO.
2:14 Speaker 01 And now they're counting, let's see, two of the largest banks in the US as customers, two of the world's three top banks, American Express, Deutsche Telekom. So their strategy seems to be paying off. They said their ARR doubled last year. And now what they're doing is they've developed infrastructure to give developers at these large enterprises the ability to build what they call robust generative conversational AI assistance that are more human-like and have more personal and meaningful interactions with users.
2:43 Speaker 00 So just to kind of boil that down into like idiot terms for myself, essentially, in the world of financial services, a big chunk of the economy, there's a lot of conversations. And so what Rasa is doing is building kind of like tailored AI chat tech to help companies in that particular niche better interface with their customers?
3:00 Speaker 01 Right, so that when the customer is having the interaction with the bot, you know what it's like, you can usually tell right away, this is a bot, right? But sometimes you actually kind of doubt it because the bot's kind of talking to you in a way that feels more human-like. And that's what Rasa's goal is, is to make it feel really almost human-like. And Rasa, again, it's not building the chatbots directly. It's giving these developers at these companies the infrastructure to do it themselves and to kind of more personalize and customize the chat so that they actually kind of have a way to vet potential answers beforehand, things like that. So something, though, that their chatbot can do is if you ask it to transfer money, you know, it can, not their chatbot, but a chatbot, their technology would help develop. You know, you could transfer money, check balances,
3:43 Speaker 01 even reset a router in someone's house if they're having an internet problem, things like that.
3:46 Speaker 00 So Mary Ann, the first thing that I thought of when I saw this, well, actually, I had two main thoughts. One, seeing more tailored AI work on a vertical basis makes a lot of sense, given that each industry is different. But then the second thing was, haven't we just talked about this a little bit with Sierra from Brett Taylor, former co-CEO of Salesforce?
4:04 Speaker 01 So I asked Rasa about that. And what the CTO told me that it's different because they said Sierra is more of an agent, whereas what Rasa's doing is not building an agent. It's more of an all-empowered chatbot.
4:17 Speaker 02 What's
4:18 Speaker 00 So this is when it gets a little dicey for me because you said that the Rasa technology will allow them to create things that lets people do things like transfer money, reset their router. Okay. Isn't that kind of the same pitch that Sierra is making? That these AI agents will help take actions for the end user?
4:35 Speaker 01 I think that, you know, the end result is the same, but the way they get there is what he's saying is different.
4:41 Speaker 00 Okay.
4:41 Speaker 01 And that's what he's saying. But one thing they do have in common is they both claim to be addressing issues like hallucinations where a large language model sometimes makes up an answer when it lacks the information to answer accurately. So that is something else they have in common.
4:54 Speaker 02 Yeah, I mean, that's what I was gonna say was imagine asking it to transfer money and it's like hallucinating how much money you have or where to transfer it. Like, I don't know how much I trust it yet. But at the same time, I also wonder, how is this any different than the options that they give you right now? So if you're using a chatbot and it's just instead of, you know, naturally talking to it, it's like, here are three options. Click this button to transfer the money. Like, how, you know, I wonder why this is any faster or easier than just selecting it yourself rather than having a chatbot do it.
5:27 Speaker 01 Well, I haven't used it, so I'm not going to be able to speak firsthand. But apparently, they just that they claim that the interactions are just the developers are able to customize them a lot more, I guess, accurately to what an actual person within the company would say. So that, again, these are all their their claims. Two quick asides, though, that I have to point out before I forget. Two things that I also found interesting about this company. One, PayPal Ventures was an investor. Did I mention that they just raised a $30 million Series C? I don't think I mentioned that.
5:57 Speaker 00 I teed you up with my intro of not saying the dollar amount. I was like, they raised a Series C. And then you're like, AI agents. So I thought we were gonna go backwards.
6:03 Speaker 01 Yeah, I forgot to mention that. They raised $30 million in a Series C round of funding. And that was co-led by StepStone Group and PayPal Ventures, participation from existing backers, including Andreessen, Excel, and Basis Ventures. So what I was gonna say, they said their valuations up. Of course, I don't know that what it is because they wouldn't say and PitchBook didn't say. But it was PayPal Ventures' first AI investment. I thought that Notable, I was surprised that it was its first. I would have thought that they had invested in something else that was AI related prior. And another thing that's totally unrelated to AI, I really love the story of the CEO, who was a former pole vaulter who used Title IX to compete with men before women could compete in the sport. I just love that.
6:48 Speaker 00 Well, that's awesome. Also, pole vaulting is terrifying because you take a large stick and then you fling your body into the air and then you go, whee, gravity. Like, how is that a game? Or sport?
6:57 Speaker 01 Yeah.
6:58 Speaker 00 It's cool. It's awesome. I can't do it. I'm not knocking it at all. It just, it feels kind of like a sport that we invented before we had like cameras and like balls to kick around. Like, hey, I've got a stick. I'm going to go over that tree. Whee. Skilled but scary, says Teresa, our producer. I agree with that.
7:12 Speaker 01 Right. Anyway, so there's a lot of different things related to this company. Part of the problem, I think, though, is we're seeing so many startups, you know, using AI, claiming their AI power, building AI stuff. It is getting harder and harder to differentiate them and tell them apart. So I can understand where you, where you would have those kinds of questions.
7:31 Speaker 00 Well, we need better definitions for AI agents versus conversational AI bots. And I wonder if there's kind of these distinctions without major differences, or if there are big differences and we're simply missing the point. I think probably in six months' time, we'll all know the answer to that. But right now, it still feels a bit nascent. Not a fad, though, I don't think this AI business. Everyone wants to save money on customer support costs, so expect more of this. But a place where there might be a fad, Corinne, is apparently the world of AI and crypto.
7:57 Speaker 02 Yeah. So just this week, there was a company called Altiverse. It's based in Singapore, and they raised $4 million at $150 million valuation, led by IDG Capital, which has invested in other Chinese brands, gaming brands like Tencent and Xiaomi, as well as crypto upstarts like Coinbase and Circle. And what Altiverse does is it blends AI and crypto gaming, or blockchain gaming. And so I think the fad is the crypto gaming component, but maybe also the AI component. So what it is, it's an AI-powered platform for crypto game production.
8:37 Speaker 02 So they publish their own games, but then you like they can have other companies build games on their platform. And so they're using L L Ms that already exist, like G P T four, Lama and Stable Diffusion, to train in-game, non-playable characters, which I think is maybe the best use case for A I that I have heard of within the gaming community yet. And I will say that I'm a gamer, but not these types of games. So I'm not quite sure about blockchain gaming as a whole. Yeah, but you know, a bunch of people are playing this. They have a mobile cricket game that has about 200,000 unique active wallet addresses
9:21 Speaker 02 across all of their games right now. The monthly active users are about 830,000 people. Most of the people who are playing the cricket game are non-crypto users. So the game uses something called account abstraction, which means that even people who aren't spun up on crypto-related things can play and then get paid out. But I think the main component here is the A I features that they're trying to help introduce and trying to get others to use on their platform.
9:53 Speaker 02 Tell me more.
9:56 Speaker 00 I'm a little skeptical of parts of this.
9:58 Speaker 02 Yeah.
9:59 Speaker 00 And that's, that's not to be rude, because I do think that trying to bridge different nascent technologies or rapidly emerging technologies is a cool thing that could yield at the intersection of them, in this case, A I and crypto, something special. I also agree that the use of modern A I tools like L L Ms inside of video games is super awesome, because then you could have more than three dialogue options. Of course, there's voice acting stuff to be considered there, but it's possible to do cool things, especially with text. Huge fan. And crypto gaming, to me, people like to speculate, they like to trade, they like to invest. Okay, cool. It's just when you schmush them together, I get a little, a little weird. So I was on the Ultiverse website and I was poking through their material on Terminus,
10:42 Speaker 00 which is a quote decentralized virtual metaverse platform that's built on both the B and B chain. Binance's chain and Unreal Engine 5. And it just feels like a kind of like MMORPG-ish thing with some crypto crap slugged onto it. I just, I don't want NFT gallery in my game. I want to be left alone.
11:00 Speaker 01 Yeah.
11:00 Speaker 00 And so that's when I just, I kind of struggle. And maybe I'm just an old man shouting at a cloud, but that's my vibe.
11:05 Speaker 01 Yeah, I mean, I'll be honest, I'm not super well versed on gaming or even crypto, to be honest, even though I'm a fintech reporter. So, you know, it's hard for me to kind of visualize all of this and try to understand it. But my first thought is it feels kind of gimmicky. And, you know, that could just be me talking out of my, you know, what? But like the whole crypto angle, I mean, but in the company's, I guess, defense is that they use account obstruction. So that even if you're not like well versed in crypto or have crypto knowledge, you can still play and it could still be fun. But I, I just, I don't know how many other games out there might be like this. I mean, are there other AI powered games or, you know, is this just the beginning of a trend or what?
11:50 Speaker 01 I don't know. Are we going to see more of this?
11:52 Speaker 00 People hope it's a trend.
11:53 Speaker 01 Yeah.
11:53 Speaker 00 People want it to be a trend because they think crypto is the future. And so like, to me, there's a religious viewpoint here that like, if you believe blockchains are the future, then you need to bring AI to them or vice versa, because they're both the future. So the future has to come together.
12:06 Speaker 02 Yeah, I think, you know, one of the most famous, maybe infamous examples of a blockchain game and a crypto game gone wrong was the Axie Infinity debacle where people were just scammed out of money and had to like, you know, farm for coins or whatever was going on there. And so, you know, the, I guess, implication of when you think of blockchain game, you're like, oh, great, it's a scam. I think this is based on, I think, an article that was written last month by one of Ethereum's co-founders that is called AI plus crypto. And I think that his points were that AI could really be used in crypto gaming in four different ways. With like non-playable characters, you could use AI to like judge the results of a game
12:51 Speaker 02 or, you know, there are various other applications. And so I think like here is one way that they're doing it. And in this case, they're using AI to really speed up the production of the gaming. And then it just happens to be a blockchain game on top of it.
13:05 Speaker 00 There are so many ways to approach gaming as a model. There are companies that produce free to play games that have in-app monetization. Even some new games like Stormgate and RTS is approaching it that way. Very cool. There's MMORPGs that have subscription-based economics. There's indie publishers that sell games for a discreet price and then also upsell you on like the soundtrack. Then there's the paradox model in which you make a game and then add DLCs to expand the content over time. All of these models work for different types of titles and I can see a place where AI fits into essentially all of them in time. Crypto gaming seems to always have an NFT gallery and some speculative currency and people trying to grind out extra money.
13:44 Speaker 01 Yes.
13:45 Speaker 00 And until blockchain brings something that isn't that, I don't care about it. When blockchain makes my games that exist already better, when it makes a better grand strategy game, a better city management game, a better RPG, then I'm here for it. But I don't want fucking NFTs.
14:01 Speaker 01 Yeah, I'm with you.
14:02 Speaker 02 Same.
14:04 Speaker 00 Sorry.
14:06 Speaker 01 I'm having flashbacks to like two years ago because, you know, you know how I feel about NFTs.
14:12 Speaker 00 Yeah. Okay, fine. Since we're here now, I'm going to talk more about this. So on the Ultiverse website, there's this little thing about, are you ready to meet your Meta GF or Meta BFF? And it was this two-week-long Moonlight NFT mint. So I went on OpenSea and I looked it up and it's just like one woman's head with like different characteristics attached to her and like some of them are rarer. And it just, I don't know. Is this what we've managed to accomplish in all these years of crypto? It just feels a little bit modest compared to the progress we've seen elsewhere in the world of technology. And that brings me to robots and lettuce. Everyone's favorite segue. My deal of the week is Hippo Harvest. They just raised a $21 million Series B. Tim Duchesne had this for us as a TechCrunch exclusive, raised the money from Standard
14:55 Speaker 00 Investments, Congrat Ventures, Amazon Climate Pledge Fund, Hawthorne Food Ventures and Energy Impact Partners. The company is now worth $145 million and it's going to use small robots to run indoor farms and thinks it can do this much more efficiently, cut back on water usage, fertilizer usage. And, you know, I think we've all become accustomed to the idea of warehouses using cute little bots to zip around and move things. Why not use those same now commoditized robots to grow lettuce and other goods? So I think this is awesome, but Mary Ann, you are our skeptic in chief. So I want to know, what did you think?
15:29 Speaker 01 I agree. I think it's cool, really, really cool, actually. They said that they can grow the greens using up to 92% less water. That's huge.
15:39 Speaker 00 Huge.
15:39 Speaker 01 55% less fertilizer and no pesticides. So if it works, why not? This is great. So they want to stick with greenhouses rather than vertical farms. And it's really more, I guess, the angle of this is more of a robot startup, really, than just indoor farming. This sector has struggled. We've seen a few players in this space, like Tu filed for bankruptcy at Harvest for the season. Iron Ox had some layoffs, Bowery Farming even, which was booming a few years ago, also had some layoffs and valuation cuts. But this feels, this feels like it's a little different. It has real potential from, you know, my humble perspective.
16:16 Speaker 02 I have a question, though. Is this going to drive up the costs of, let's say, lettuce? Because aren't robots expensive to use?
16:25 Speaker 00 Well, commoditized robots, less so. So if you're Amazon and you're going to have, I'm going to make up a number here. A thousand warehouses across the United States. That's not the right number. You're going to have a bunch of robots inside those warehouses. And when you start thinking about robots in the hundreds of thousands or millions of units, the costs are going to come down quite a lot. You're going to figure out a way to build them. And so the idea here is take that commoditized tech and then apply it to the struggling area of indoor or vertical farming. And so the question, I think, to your point, Corinne, is not only can those units be cheap enough to make this work when you purchase them, but also then to run and maintain them. And that's going to be the gambit. But on the price point, here's my pitch to you. Corinne, you're at the store and you're going to make your beautiful child a lovely salad for dinner because he's a growing boy and needs to eat his greens.
17:10 Speaker 00 And you're staring down three lettuce options. The cheap version, which is no marks about where it was grown, how it was grown, et cetera. Then there's a organic-ish version, you know, the lettuce was patted on the head and songsongs and so forth. And then there's a third option. This was grown indoors. It saved water. If you buy this lettuce, you're helping the planet. How much more would you pay for option three than option two?
17:32 Speaker 01 Well, I'm from the Bay Area, so you know I'm going to go for the most woo-woo lettuce that exists on the shelf. So I will.
17:39 Speaker 02 Go for the one that did and being in California where we're one drought away from from being, I don't know, cut off from the rest of the country. I get it. I get it. And that makes sense. And I would, you know, pay a little bit more for that, I suppose. But with food scarcity and urban farming, you know, is trying to become a thing like I'm, you know, I'm here for it.
18:03 Speaker 00 I mean, what one thing I'd argue is that when we talk about food scarcity and people being priced out of the kind of like standard goods of life, one thing you could also say, and this is not a positive, but maybe food is actually too cheap in terms of its impact on the planet. And we're just pushing some costs to the future and not dealing with them now because it's just economically more easy to do it this way. Hippo Harvest, I hope it does really well. I love this. I've always thought that urban farming makes a lot of sense versus shipping stuff across rail lines is pretty efficient. But if you put it into a truck, it's not. So I'm really into this. And also, I don't like farming. So let the robots do it. That's just hard. Not into it. Now, when we come back, my friends, we're talking about some big ventures, comings and goings. Mary Ann has all you need to know. We're right back after this short break.
18:47 Speaker 01 So this week I wrote about the Foundry Group. This is a venture capital firm that's been around for 18 years and done a lot of investing, apparently has a very impressive exit record. Some companies in their portfolio are Fitbit, Zynga, Avid Exchange. And the big news was they've decided to wind down operations and not raise any more funds. So this was a little unexpected to most of us because the firm just announced a $500 million fund last May. Now, after I published this story, I had a lot of people cry out on Twitter that this was not unexpected. Everybody knew that this was the plan all along. Maybe you knew it if you were
19:28 Speaker 01 another venture capitalist and had talked to Seth Levine, for example, one of the co-founder and partners, and heard him tell you, because apparently he had talked about his plans, which started to brew in his mind sometime in 2023, that he may decide not to invest anymore. And that turned into the fund deciding to wind down. But anyway, most of us did not know about this. So it was. It was generally unexpected and they wouldn't talk to me directly about the decision, but I did get pointed to some blogs and apparently they said that yes, this is unusual. VC firms rarely make decisions like this, but it's something that they planned to do. When they started back in 2006, they decided not to build a legacy or generational firm. They wanted to focus just on the work of investing and then they decided that, you
20:12 Speaker 01 know, they kept saying, well, is this going to be our last fund? Is this going to be our last fund? And they decided not to raise another one. So that's basically it. But to be clear, when we say they're shutting down or winding down, that doesn't mean their doors are closed. They're not doing anything. That's not the case at all here, unlike OpenView, which in, I think it was in December, January, I lose track now, did actually shut down on layoff partners. Foundry still has 33% to 40% left out of its $500 million fund to invest. So it's planning to still continue to lead series A and B financings out of that fund. And the company says it will also continue to work with businesses in which it has investments for years to come.
20:51 Speaker 00 And that's the critical thing. There's two ways to shutter a business. One is to just close your doors, lock it and run away. And the other is to wind down new operations and then support what you have already in the market. And for VCs, the product is investment. So they're shutting down kind of in slow motion. This will slowly degrade in terms of total activity until it reaches a zero point down the road. But here's my thing, Mary Ann, I watched you get dragged on Twitter for this. And two things pissed me off. One, part of our job is to go into the weeds and pull things up so people can see them who didn't already know that they were there. So simply because you, an insider in the VC world, whose friends are VCs and friends are founders, knew this does not mean that the TechCrunch audience did. A lot of people read TechCrunch and there's not that many VCs
21:35 Speaker 00 out there. And then also, like, you didn't get it wrong. I didn't like it.
21:39 Speaker 01 Well, thank you for defending me, Alex. I was pretty shocked by the number of people who got really upset by the wording of the story, I guess, and that they actually, I feel like misinterpreted the intentions in my reporting. It was a very fact-based article. I had no malicious intentions, no, no hidden agenda. But I will say, Was touched and impressed by the number of people who rushed to defend Foundry. The firm clearly has a lot of supporters and fans in portfolio companies, other VCs, or general observers. And to me, that says a lot about the firm and the character of the partners. So I was very impressed by that.
22:17 Speaker 00 Yes.
22:17 Speaker 01 I was actually pretty touched by that, to be honest with you.
22:21 Speaker 00 There is a way, though, to show respect without crapping on someone else. I'm just saying.
22:25 Speaker 01 Yeah, I appreciate that. Thank you. Yeah, you know, you have to have a thick skin as a reporter. I know my intentions. I know what I set out to do when I wrote the piece, so I can take comfort in that. I will also say that while there was a number of people kind of declaring this to be a negative piece, I didn't hear any negative feedback at all from the firm itself. I would like to point that out.
22:43 Speaker 02 That's what I was gonna say. If the firm was happy with the reporting, then who cares about the haters? That's, you know, if you got it correct and they're okay with it, then I think that that's, you know, that means it's a really good, solid story.
22:55 Speaker 00 Take it one step further. If the firm's happy with the reporting, we should have been meaner.
23:00 Speaker 01 Well, you know, I don't know if happy would be the word, but they didn't refute any of it, and they seemed, you know, comfortable with the language used. But anyway, overall, it was a big deal in the venture world. This is a firm that'd been around for a long time, almost two decades, had made over 200 investments, had a really great reputation, it seems like, again, from what I can tell. And also, you know, like I said, a lot of exits. So they were prolific investors and well-regarded ones. So it is a loss for the venture world. So that is news.
23:31 Speaker 00 But think about how long a venture fund lasts, right? I mean, we used to think of these as 10-year instruments. Now they're more like 12. And so, you know, you have a pile of money and you're doing a big fund and, you know, maybe you're looking around, you're thinking to yourself, what if I opened my long-hoped-for miniature golf course come personal bar slash indoor farm that I've always wanted to do on my property? I don't want to do 12 more years of work. I kind of get it. I mean, if I had 1/10th the money of these partners, I would not be working. So, I don't know. It's weird to see a firm. Shut down, but from a personal basis, I get it.
24:05 Speaker 01 I do too. I totally get it. So I think we just have to be careful to understand that this sounds like apparently a fought out decision. It isn't one where it feels like in the case of OpenView, they really kind of very abrupt shutting down and having to lay off people. There seem to be very two, two different cases, but what we are seeing overall and what I keep hearing from others is that the venture world is shrinking. And regardless for what the reasons are, there are a lot of firms that seem to be either scaling back, winding down, cutting staff. So it's an overall, and I hate to use the word trend, but this is something we're probably going to be seeing more of in different forms.
24:45 Speaker 00 Yeah. But there was some good news out there as well, Corinne, for both Early Bird Health and Homebrew. What's going on there?
24:50 Speaker 02 I mean, it looks like they were growing. So, you know, even within the shrinking of all the firms that we talked about, there are a few that are still growing up and down.
24:59 Speaker 00 Yeah. Early Bird Health is a European focused health tech fund, and they doubled essentially from Fund One to Fund Two. If memory serves, I think they had put together like 175 million euro for their new fund. And then Homebrew, which is mostly now working with Partner Capital, is putting together a $50 million fund that we don't quite understand yet, Mary Ann, I don't think. But the gist is from our, our guess is that it's probably an opportunity fund or something similar along those lines.
25:24 Speaker 01 Yeah, exactly. From what I understand, what I heard is that they didn't want to use SPVs anymore for follow on pro rata investments. So they are targeting this new fund.
25:34 Speaker 00 So let's, Mary Ann, I knew exactly what you just said, but not everybody has been so enmeshed in venture things. So SPV, special purpose vehicle, essentially it's like a micro venture capital fund you put together for a single deal. Let's say you have allocation, don't have enough capital, you can put together an SPV, raise some more money and put that in, it's a single check. Pro rata rights essentially allow a prior investor to defend their current percentage ownership in a company over time. They have to put in more capital for that, usually at higher prices. Pro rata rights are a big deal in venture land, both in terms of how people use them or abuse them. And I think, I think that should cover it. Yeah.
26:10 Speaker 01 Yeah, thank you, Alex. You're so good at like putting things in everyday language.
26:14 Speaker 00 Well, Mary Ann, isn't that what we do all day? You know?
26:18 Speaker 01 It is what we're supposed to do.
26:20 Speaker 00 Oh, right. Yeah. Well, wait till you see the post I wrote with Ron. It's full of complete jargon and I can't wait to get it down. All right, great. I want to talk about Y Combinator. Everyone's favorite or least favorite accelerator. Controversial certainly at times, very popular, very successful. And they have a new call for startups out there. Walk us through what they're looking for.
26:37 Speaker 02 Sure. So they are putting out a call for startups in the areas like AI, spatial computing, climate tech and health tech, among other things. I don't think that the AI and spatial computing aspects of their list are very surprising, considering that AI is hot, hot, hot. And Apple's Vision Pro just came out. And so they are expecting a lot of startups to be working on spatial computing type apps, I suppose. They haven't done a request like this since 2018. Of course, they updated the list a little bit during the pandemic when they were looking for COVID related startups. And, you know, healthcare startups is still on their list, but this time they're focusing on cancer treatment and other kinds of help in the
27:22 Speaker 02 healthcare industry, such as like eliminating the middleman when it comes to certain aspects of healthcare.
27:28 Speaker 00 Marian, I'm curious. The Vision Pro is out and some people have bought it, got some good reviews, some mixed reviews. Do you think that's going to be a big enough niche to launch startups on top of in the coming years?
27:39 Speaker 01 That's a good question. I don't know. Like, how about with Meta? Has did startups launch off of its comparable device? Because I don't know.
27:48 Speaker 02 Think in this way.
27:50 Speaker 00 Yeah, not, not like this. I mean, there are some games that have been made that are, you know, VR compatible that I presume work with Quest headsets. But no, I not, not like the similar broom we saw with the launch of the App Store for iOS, for example, which did lead to generations of new companies. I just think it's still too small of a space. Like Microsoft tried this with HoloLens. Name a company that built the killer HoloLens app. Silence.
28:12 Speaker 01 I would agree. I mean, I was a little surprised to see that as one of its main areas of focus. Of course, obviously, climate tech and applications of AI were not surprising. But yeah, I thought it was interesting, too, that this is the first time they've done this really since 2018, except as Karine mentioned, when COVID hit. So I'm just wondering what drove them to start this back up again?
28:35 Speaker 00 Well, I mean, gosh, I feel like we've almost gotten done digesting at last the excesses of 2021. And so maybe after you finally finish your heartburn and digestion, you begin to kind of look at the menu again. And in this analogy, startups are cheeseburgers.
28:48 Speaker 02 Yeah, maybe it wants to be more targeted now and hoping to entice startups in these areas. And I doubt it's not that it's trying to deter startups that aren't doing these things, but I guess it just wants to be more targeted in its approach and then who applies for its cohorts.
29:04 Speaker 00 Okay, I'm gonna throw in something else here because I think we should broaden some context. If Tim, our resident climate genius was here, he would mention things like the Inflation Reduction Act, changes to green energy financing, and I'm saying climate words, trees, things like that. Tim would talk about those. So I think there has been a top down national shift in focus towards more climate tech that could unlock spend from both governments and private corporations. So climate tech as a new theme for YC kind of fits in there for me. And then defense technology has certainly become much less disliked in venture circles. Making guns used to be kind of under a vice clause. Now people want to make really big guns and sell them to the government. Cool, fair enough. And then space. I really think that now the space costs have come down so much on a launch basis, especially with shared launches and larger rockets coming from SpaceX,
29:49 Speaker 00 that there's a lot more stuff you can do there. And this week, just because I wanted to bring it up somewhere, Varda Space, which makes drugs in space, because there's less gravity, so you can do cool stuff for crystals, got permission to bring them back. So we're soon going to have space drugs on the market. So I think this YC list makes a lot of sense. I mean, look, they're kind of dis crypto a little bit, but I'm not shocked.
30:10 Speaker 02 Yeah, maybe that's fine. And of course, you know, this is, I don't remember where I read this, but when they were creating this list, they're thinking of it as kind of like a conversation starter, like kind of a prompt for people who are working on something and don't know quite yet where it'll fit in the market. You know, this could be directionally helpful for them. Yeah, I'm really looking forward to Demo Day as well. When is Demo Day?
30:33 Speaker 00 I think it's April 3rd and April 4th, so coming up. And of course, we are going to have all things Demo Day on this show. Sometimes we even do an extra episode just to dig into the coolest companies that we saw. So Mary Ann, Karine, and I will be bringing you that very soon. But that's all the time we have for today. Equity comes out three times a week, on Mondays, on Wednesdays, and on Fridays. And if you're a social person, come socialize with us because we are Equity Pod on X and Threads, and we are TechCrunch Pods on TikTok. All right. Bye, everybody. Talk to you soon.
31:04 Speaker 00 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.
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