Pod Insights Equity Podcast It's always earnings season if you look hard enough About this episode We had our friend and colleague Kirsten Korosec on the podcast this week, meaning that Mary Ann and Alex got to stretch their legs a bit and talk things that move and beep and boop. Here's what we got into:
Deals of the Week: AngelList bought Nova, taking the well-known venture service into the more traditional private equity realm; Waymo is focusing on self-driving cars instead of trucks, which has Mary Ann worried; and Alex wanted to talk about interest rates.
On the subject of Earnings: Guess what? AI costs are here, AI revenues are coming as the ad market recovers. For big tech earnings thus far have generally gone well, though not perfectly.
Do not miss GM news from the transit desk, of course!
And we wrapped with some interesting analysis from the TechCrunch+ team on how funds of funds might be one way to get more LP capital into diverse venture funds.
Whew, what a week y'all. It's hot and we are tired, but we had a blast recording this for you. Talk more Monday!
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
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:10 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. My name is Alex and I am joined as always by Senior TechCrunch Reporter on the Fintech Beat. It's Maryann Esaveto. Hi, Maryann. How was your week? How are you holding up? Hi, Alex. I'm doing great. How are you? Oh, I'm a cadaver on two pegs. I don't know. I'm so tired. Look, I know talking about the weather to kick off the podcast is cliche at this point, but it's too hot. I'm tired and I'm tired of being sweaty. Maryann, I just want like some rain, you know? Oh, yeah, rain. Yeah, it's a concept. It's a concept that one of our friends also doesn't know because of where she lives. And that's why we are so happy that we have Kirsten Korosec back on the podcast. Kirsten, hey, how are you?
0:51 Kirsten Korosec? I am great, fresh from vacation. So I'm the opposite of you, feeling very refreshed, very perky and ready to pod. But I will note that we do have rain now because in the southwest, we're in the middle of monsoon season. So we're just loving it here in the heat slash rain situation.
1:10 Speaker 00 Well, we have flash flood warnings. So woo-hoo, good times. It doesn't rain and then it just dumps for an hour and then it just stops. Anyways, climate change, turns out it's a whole thing. And that's actually a foretaste of a podcast episode that will come out in a couple of weeks here on Equity. So hang tight for that. In the meantime, today on the pod, deals of the week are Angel List and Nova, Waymo and Robotoxies. And then what's going on with interest rates? Then we're going to talk about the earnings season that we have seen thus far, talking about AI, revenue and the ad market. And then backing diverse fund managers using different means to try to shake up what is the venture capital game as we know it. Maryann, though, we're doing a deal this week that is actually a deal. It's an acquisition. It's an actual trade of equity for presumably money. What's going on?
1:53 Speaker 02 Yeah, yeah. So Angel List has picked up a startup called Nova. And this is an interesting deal for a number of reasons. For one, Angel List, as you all likely know, has historically been focused on the venture capital industry, right? It started out as trying to connect founders with angel investors, or high-quality angel investors. Has broadened its scope over time with numerous products, but still very much focused on the venture community, and angel investor community. Now it's entering the private equity space. So that's really interesting. And I think it just speaks to the organization just really trying to move up market.
2:34 Speaker 00 Okay, so I have a lot of questions about this. First of all, what can you tell us about Nova? How big of a company was it? How big is this deal?
2:41 Speaker 02 Yeah, so we don't know the financial terms, unfortunately. Nova was not a huge company, but it appeared to be pretty fast-growing. 26-year-old Pradhu Menvig started it a few years ago after selling another startup called Asuna. And basically, it was designed to help replace subscription paperwork with digital workflows to make it easier to close deals and work up contracts. I mean, really, to their credit, they signed up a lot of very big names, including VanEck, Pantera, Broad Street Global. VanEck has about $78 billion in assets under management. So Nova currently has over 10,000 investors who've invested billions of dollars throughout its system over the last year. And I was told that revenue tripled in 2022,
3:26 Speaker 02 was on target to grow by 2X this year.
3:30 Speaker 00 Okay, so Kirsten, I'm very curious. We have a company that I think of angels. And then when I think about private equity, I think about the biggest possible capital pools. So this is going up, up, up, up market. What's your take?
3:41 Speaker 02 I'm so torn between is this this very smart strategic move that is adding to the lifestyle of products? Or is it?
3:52 Kirsten Korosec? Let's throw a bunch of stuff against the wall and see what sticks. Which one is it? I'm not sure.
3:58 Speaker 00 The only difference between those two is just the success, right? Like it's if it goes well, it's genius. If it goes poorly, it's spaghetti against the wall. So, Mary Ann, help us understand here. You are our local fintech genius, so smarter dumb.
4:10 Speaker 02 Genius might be a stretch, but you know, it's really tough to say. I do think it's interesting that Angel List raised its own venture capital in 2022. A hundred million dollar Series B out of $4 billion valuation. This was March of 2022. So it feels like, I wonder how much of that is influencing this decision? Is there pressure to grow in different ways? Tiger Global co-led that round. So that's kind of interesting. Although Angel List claims they've been growing quite a lot, they sent me a bunch of numbers, including the fact that, and this was a pretty big deal, I think, assets supported for investors on Angel List increased by 50% to $15 billion year over year in 2022. That's quite a lot.
4:54 Kirsten Korosec? Alex, I have a question for you. Do you think that this is reflective of just the general economic environment? And that people are thinking more about private equity now? Or is this just a very niche? We're not like, are we going to see more of this?
5:09 Speaker 00 So I think the fact that Tiger led that Series B is the most important data point of what Mary Ann said, because the beginning of 2022 wasn't the end of 2022 in terms of where the venture market was. The fact that Tiger was leading a hundred million dollar Series B indicates that this round was probably started late 2021 when things were pretty crazy. So I presume the valuation's wrong, right? So if you're Angel List, you have a bunch of money, you're growing, but you need to have a higher revenue base to defend that valuation in the future. What do you do? Well, you go out and you buy, as Mary Ann pointed out, a big chunk of revenue and quote, quote, "go up market." Everyone loves that, because it's a growth story. Every SaaS company does this. They sell to Billy and Bob, and then they sell to Boeing and another company starts with a B, because I didn't have another example to make my alliteration work there.
5:54 Speaker 00 Anyways, I think this sounds like a revenue buy, which I don't dislike. I just wonder if Angel List is going to work up into the private equities, you know, higher echelon where there's, what, $15 billion is not? That much money to have kind of under management, if you will, if you'll allow the analogy.
6:13 Speaker 02 Yeah, I mean, the CEO of Angelus told me that as startups mature, the scope of capital providers they can tap into expands into private equity. And so they feel like, you know, this way Angelus can serve startups throughout their journey. But I agree with you, Alex. I feel like, you know, there, there may have been some pressure to keep growing revenue. Hence, this deal, the startup seems to be, you know, fast growing and obviously private equity, they manage a lot of assets.
6:40 Speaker 00 A lot of assets. Speaking about a lot of money, though, I hear Kirsten, that if you put all your bets onto one basket, it's a poor choice. And yet we know Waymo is taking all of its capital and putting it towards one part of the autonomous vehicle game. What's going on?
6:52 Kirsten Korosec? It's putting all of its AV eggs into one basket. This is really interesting. The company has decided to, I'm not going to say shutter its self-driving trucks program, because there is minor activity still going to be happening. But essentially, what they're doing is shifting all their capital resources and talent, including from departments focused on self-driving trucks, and putting it all into ride hailing. And this is interesting for a number of reasons. One, it wasn't that long ago, two years ago, maybe, right in the middle of COVID, when many AV developers suddenly pivoted to logistics and delivery, because that was the business model. The issue
7:34 Kirsten Korosec? with autonomous vehicle technology is the technical part. And then the business model, how are we going to make money off of this? And while ride hailing or robotaxis was the dream, many pivoted to delivery and logistics, because it seemed like a clearer, faster way to make money. And now Waymo is sort of shifting back its focus to ride hailing. And I think in part because it's, it has accelerated its ride hailing program, expanded quite a bit, doubled in size in the Phoenix area, is expanding in San Francisco, but still cannot charge there because they're waiting for a final permit. But this is big news, and it really kind of
8:14 Kirsten Korosec? leaves only one player, or a couple of players, one publicly traded player in the AV trucking space, and that's Aurora.
8:24 Speaker 00 Okay. I want to talk about Aurora in a second, but you mentioned there's two kinds of things that you have to do to get autonomous vehicles correct. The technical side and then the financial side. Certainly on the trucking side of things, it's easier to kind of draw a line between work and revenue because we know trucking is a massive business. Humans are a major cost center. So sure, that makes sense. But isn't also the technical challenge of doing autonomous freight a little bit easier than autonomous robot taxis inside of cities where there's more chaos?
8:50 Kirsten Korosec? Sure. I mean, there are other problems, higher speeds, for instance, incredibly heavy vehicles, trucks, class eight trucks, traveling at fast speeds and the ability to stop. Those all matter. But yes, highways are considered a easier geofence or environment. And there is a couple of little challenges, which is, do you want the truck to go hub to hub, which some companies are doing? Or do you want them to be able to get off the exit and weave their way through maybe a couple of city streets to get to their destination? And so there is that little technical problem. But yes, widely considered robot taxis to be a more difficult problem because the urban streets, pedestrians, bikes, all the things.
9:32 Speaker 02 Kirsten, to be clear, are you referring to like 18 wheelers when we talk about self-driving trucks?
9:38 Kirsten Korosec? Yeah, in your state.
9:39 Speaker 02 Oh my gosh, that's terrifying. Like, I'm already scared of like little cars driving around that are autonomous. But my God, if I'm on the freeway and I see an 18 wheeler with no driver next to me, I would, I would freak out. Like, that just scares the crap out of me.
9:56 Kirsten Korosec? So my advice is to stay off the highways in Texas, particularly around the Dallas area. We're not yet, we're not yet, the industry is not yet a driverless, meaning there's still one or two human safety operators with the specific truck driver license behind the wheel. But they're getting close and the major players, it used to be a pretty crowded field. Two simple publicly traded company, Aurora publicly traded via a SPAC merger. And then a smaller startup, but still hanging in there, still raising money, Kodiak Robotics. Those are the three major players. We've seen a lot of consolidation and exits already happening. And Two Simple has been having its own problems, lots of internal drama, all sorts of issues, and is shifting more to China now.
10:40 Kirsten Korosec? So that kind of leaves Aurora. Now that Waymo is exiting is very interesting in the industry to me.
10:47 Speaker 00 And then I know we need to move on to talk about my favorite thing in the world, which is interest rates, but Aurora also recently raised a bunch of money and there might be an interesting investor in that mix. So recapitalized and with some good friends.
10:58 Kirsten Korosec? Yeah, so they raised $820 million in a, a public, and this is the important part, concurrent private offering. And it wasn't really publicly advertised who that private offering was from, but it appears that it was indeed with Uber. And for those who follow Aurora, they know that a couple of years ago Aurora merged with Uber ATG. It was kind of an acquisition. It was a very complicated deal. And so Uber had maintained a stake in the company. So this seems to be a, an additional investment into the company, which is interesting to see that Uber still has its hand in autonomous trucking.
11:35 Speaker 00 Well, Uber still has a freight revenue item in its earnings, if I recall its Q1 results. So certainly still has a bet or two on that particular crap stable. One thing I'm curious about though, is what will turn out to be a zero interest rate phenomena in the technology space, like will autonomous vehicles and all the money that went into that end up being kind of a boomlet that we could only see when money was so cheap? I don't know, but one thing that is happening is perhaps the end of the kind of rapid ascent of interest rates. So this week we saw the American Central Bank, the Federal Reserve, raise a domestic rate by 25 basis points or 0.25%. And you know, Kirsten, the good news here is that there is possible indication that we're done with this rate raising cycle.
12:18 Speaker 00 If data kind of shakes out the way people are hoping, stocks like it and there seems to be a general bit of ebullience out there. So I'm curious how much attention you guys paid to the Fed this week, or if it's just me and I should riff longer, or I should make space for other commentary. Mary Ann, you're in fintech. Did you watch this?
12:33 Speaker 02 I've been paying attention, of course. I think it's, it's really interesting how much we've seen certain stocks climb this year so far. We've got like Google and Microsoft up. What is it? Google's like 40% this year?
12:45 Speaker 00 They're both up more than 40% year to date. Yeah, it's quite impressive.
12:48 Speaker 02 It is, it is. So I feel like we may have touched on this last week, but like the fear of this so-called recession just, you know, was maybe just that a fear. I feel like things are finally, like we're all starting to kind of exhale, like, okay, maybe, maybe really the worst is over. Maybe things are starting to look up because if things are starting to improve in the public markets, then one would expect they're going to start to improve in the private markets as well.
13:10 Speaker 00 Yeah, absolutely. And we've even seen that in publicly traded companies, especially software companies, which provide the most direct comps to startups. So if rates do slow in their ascent or stop altogether, I can't read it as anything but bullish for tech companies. The thing that I'm unsure of is do rates need to go down for things to get spicy again? Or is merely a halt in the the rise of rates enough to kind of like change the chapter for tech companies today? I just miss deals like the Aurora ATG deal when there's so much money bouncing around and Cruz was raising like a billion dollars and they're just, money was more in motion, you know, and today it feels much more constricted and therefore boring. So I'm just kind of waiting for the good
13:53 Speaker 00 times to come back so I can, I don't know, just have more fun.
13:56 Kirsten Korosec? I think the word you were looking for was that money was more available, right? And it has been a little bit locked up. You know, the interesting thing to me about this is I have looked at tech stocks, of course, and been following that. And you're right, there is certainly rosier, a rosier outlook. But I kind of wonder if that is across all sectors. I think of things like prop tech. I think of areas like construction, areas where interest rates have a massive effect and put downward pressure and then can ripple through other industries and sectors.
14:31 Speaker 00 Yeah.
14:32 Kirsten Korosec? Right? So Google stops might be doing great, but how is it affecting other startups? And actually, just large corporations in terms of like getting loans and things like that? And how is that affecting the rest of the economy?
14:46 Speaker 00 Well, we can kind of look at that frankly, through the lens of the value of Open Door. And if you recall, Open Door was a company, Mary Ann, it was an eye buyer, right?
14:55 Speaker 02 Yes, yes, that's right. Trying to buy up homes and then like buy them up, fix them up and resell them, flipping.
15:02 Speaker 00 Yeah.
15:02 Speaker 02 Essentially.
15:03 Speaker 00 And that's cheaper to do when borrowing capital to purchase the homes, invest in them and so forth, and resell them doesn't cost much. The value of Open Door fell from, you know, upwards of $35 a share, all the way down to like about a buck 50 a share. It's since.
15:18 Speaker 02 Ouch.
15:18 Speaker 00 Yes, but it has since then reflected all the Way to about 450. It's up year to date 300%. So I think Kirsten's point about interest rates rippling through different sectors of the economy impacting companies, even tech companies is super real. But if open doors, partial recovery is anything to indicate where we're going. Maybe this is going to be good for not just software companies, which is what I stare at, but really a broader basket of tech more generally. I don't know if it'll save prop tech, but you know.
15:44 Kirsten Korosec? What can save prop tech, though?
15:47 Speaker 02 Yeah, that's gonna, that's probably gonna take a while until like, until mortgage rates drop considerably.
15:52 Speaker 00 Yeah, I saw this horrible stat. It was like, if you bought a house that was like $800,000 when rates were zero, you paid X per month and now that same monthly payment at a higher rate will buy you like one third the amount of house?
16:05 Speaker 02 Right. It's insane.
16:06 Speaker 00 I mean, I knew it was extreme. I didn't realize it was that painful. Like I, with, with house prices where they are, how is anyone buying anything? Just seems prohibitively expensive, which is, you know, not good for open door. Now, after the break, we do have quite a lot to talk about. We have Ford and GM earnings. We have what's going on with AI and big tech, but first a short break.
16:30 Kirsten Korosec? So tis the season of earnings. I've been thinking about that one for a while. It's a little bit, you know, Christmasy, but forgive me, but it is earnings season and there is quite a bit of activity. Alex, what's caught your eye?
16:43 Speaker 00 Well, I mean, oh my gosh, it's my favorite time of the year, comes four times a year. Earnings season lasts most of the quarter. Pretty much it's always earnings season if you look hard enough. So I'm having a blast. I have been looking mostly thus far at two things. One is AI and how it's impacting big tech spend and revenue growth. And then also the advertising market as it relates to a lot of other tech companies as well. But Kirsten, because you are on the show, we can also expand our remit a little bit and talk about some other companies. And one earnings report that I was very impressed by and very curious about was GM. How'd they do?
17:13 Kirsten Korosec? Yeah, GM, it was really interesting. There was some important news tucked in there, which I will talk about. But the big headline is they're really putting profits at the center of their mission. They've decided to increase cost cutting by another $1 billion, meaning $3 billion total. And that is going to help boost profits. They still have other issues going on to do with production, but this is their mission. And I think in part it's because they're really trying to drive those profit margins and get up to. Something closer to what Tesla has. But the other news that was tucked inside there that I think that you're going to love is that the Chevy Bolt EV, which was supposed
17:56 Kirsten Korosec? to die at the end of this year, is actually not dying at all. It's back.
18:00 Speaker 02 I was surprised at that.
18:01 Kirsten Korosec? Yeah. And this was their highest volume selling vehicle. It wasn't outpacing, let's say, Tesla Model 3 or anything like that, but it was their largest volume sales vehicle. And it was also their most affordable. This is going to be a next gen version, meaning it's going to have all of the newer battery tech. It's called the Ultium battery design and underlying architecture and software. But it is coming back. And that should bode well for consumers looking for a more affordable EV, which, right now, the average price of a new EV is somewhere around $55,000. This is considerably lower than that.
18:36 Speaker 02 I'm surprised at how quickly this came out. I mean, three months ago, hey, no more, no more Bolt. And now a next gen. I mean, do you think they were planning to do this all along? Or was it just this sudden decision?
18:48 Kirsten Korosec? It would be a very odd strategic decision to make this backpedal publicly. I think that either they got a lot of feedback from consumers, from the public, that there is a, you know, a sector that is open for them, or some other factor that could have been on simply like the engineering design side, like, hey, we can do this. One thing that I'm very interested in is where it's going to be built. Because right now, the Chevy Bolt is built in the Orion Assembly Facility in Michigan. And they said at the time that this was going to be repurposed for electric truck production. Trucks generally, or their highest margin vehicles, are generally made in the United States because they can maintain
19:31 Kirsten Korosec? profit margins while still paying union jobs, while their cheapest vehicles are typically made in other markets, usually Mexico. So what does this mean? Is Chevy Bolt going to stay in Orion and electric truck production going somewhere else? Or will they shift this vehicle down to Mexico? And that's a total wild speculation, but I'm very curious to see what happens on that front.
19:55 Speaker 00 Yeah, and I just pulled up some sales numbers for the Bolt, or as it's called in other markets, the Opel Empira E, turns out. And if you look at sales in the US, started off about 24,000 units back in 2017 and fell all the way to about 16,4 in 2019, and then re-picked up steam. And then last year, they sold 38,000 of them in the US, which tracks because there are several in my neighborhood here in Providence. So I literally see these walking down the street with the dog or the baby. And Canadian sales went from 2017 to over 6,022. So certainly, it looks like momentum was there. So I get why they're gonna keep doing it. But the choice to publicly kill off what was seemingly a success and also have a flag in the ground for consumers will buy
20:39 Speaker 00 these. Gosh, that's gotta be a weird branding moment for them. Like JK, trust us. Yeah, yeah, I agree.
20:45 Kirsten Korosec? Well, the one little interesting note there is that where you saw that dip and then it reboot, that was a model refresh. And so that helped, of course, boost sales and some improvements in the vehicle. But also, they managed to get those higher sales in spite of a production stoppage and a recall. So around their flaw in the battery, which they discovered and they have since taken care of. So the hope from GM's perspective is, of course, that all the work they put into this new battery design improves the range, avoids future recalls, and then they can really take those sales volumes and push them, you know, by a much larger factor.
21:26 Speaker 00 Yeah, well, I mean, here's hoping because whenever I see an electric car, I'm like, oh, God, progress. Look at that. And then I turn around and I see like four F250s that are like at the size of my house. And I'm like, anti-progress, you know, fits and starts. Four where you are, 50 where I am. Well, you do happen to live in like the truck capital of the world.
21:45 Speaker 00 Elsewhere in the world of earnings, we've had Microsoft, we have had Alphabet, we have had Meta, we have had Snap, quite a lot going on. I want to hit on a couple of quick points here. The first thing is that to succeed in AI at the cloud infrastructure level requires a lot of money upfront. We're seeing both Alphabet, which owns Google and Microsoft. Spend quite a lot of money to build out data centers and to kind of get the the right chips and servers in place to power all this stuff. So, you know, Nvidia shareholders, shout out, you're doing great. But it does seem that the real revenue growth that investors are kind of hoping these products are going to bring out, that's incremental, it's what we've seen in the past from these companies, is going to be, you know, two to four quarters out. And so I was
22:28 Speaker 00 just kind of curious if you guys are surprised by how long that ramp is going to take, because on one hand, it's longer than people want. On the other hand, you know, generative AI is kind of brand new. So I don't know whether if I should be more impatient or less impatient.
22:39 Speaker 02 I think we need to be less impatient. This is not technology we want to rush. There's could be a lot of, a lot of harm done, in my humble opinion, if so.
22:49 Speaker 00 Okay, Kirsten, what's your take?
22:51 Kirsten Korosec? I 100% agree. This is one of those things where I cannot do a counterpoint. I think that patience is a virtue in this case. And as someone who has watched the hype cycle occur with autonomous vehicles, and now the carnage that has resulted in that, I think that the industry would be wise to, you know, take a slower pace.
23:12 Speaker 00 All right, to play devil's advocate, as we're doing this show this week, autonomous cars could kill my dog, could kill me, pretty big deal. Baking generative AI into Outlook seems lower stakes. So why do we have to have a kind of like, you know, AV level of caution for something that is text generation on a blinking screen?
23:34 Kirsten Korosec? Well, first of all, AVs have been in some level of development for more than a decade now, and we are just now seeing that. And a lot of the hype and flurry of activity really started 2016 to about, you know, 2020, and then things kind of dropped out. And you're right, the stakes are high, but I would argue that there's still very high stakes, even in low level applications, because we haven't totally foreseen how this will be applied in other things. So while you might look at it in a very narrow view, like, oh, when it's applied in this very narrow view, it's fine, in Outlook, for example.
24:16 Kirsten Korosec? But say, let's apply it to something much higher stakes, then the outcome could be much different.
24:22 Speaker 00 Okay.
24:22 Kirsten Korosec? Are you convinced?
24:23 Speaker 00 No.
24:24 Kirsten Korosec? You don't seem convinced.
24:24 Speaker 00 I'm not convinced at all. I think what I did was I made a poor argument, which you then correctly rebutted, and I need to kind of go back and take it with my initial point. Here's my view. Generative AI has a lot of societal level questions attached to it. Like, what's the value of people learning how to write if down the road, most folks are going to lean on this sort of thing? The other part of that is people hate writing mostly, so they're going to use it. All right, fair enough. There's big questions there and we should work on it. But I mean, like, I don't know, building generative AI stuff into enterprise software to me, I mean, it's already happening, guys. Like, you know, Marfil, our analytics software we use here at TC, like, it has that generative AI headline idea thing that just does for you based on your story, which we don't use, but it's there, I see it.
25:07 Speaker 00 So this stuff's already kind of percolating in. It's just, I don't know why we have to be slow on this stuff. It doesn't seem, I just, I don't see as much danger in it.
25:14 Speaker 02 But why do we have to be so fast, too? I mean, why, like, racing and racing is like, I don't know. I think for the sake, oh, I gotta be first, gotta be first, but then what if what you put out there sucks and it's just not good? I mean, then what's the point? Like, don't you want to take your time and do something right, then rush and like, put out crap?
25:33 Speaker 00 I mean, look, as someone who's been told their entire life to slow down, I still don't agree with that advice. And the flip side is, Mary Ann, the planet is dying. We only have, like, what, 20 years left before we're all cooked? So we might as well make some money now. That shareholder return's not going to work when the planet's 1,000 degrees and everyone's underwater.
25:50 Speaker 02 So uplifting, we are today.
25:54 Kirsten Korosec? That was the most convincing argument. You have me sold. I'm completely changing my entire position, Alex.
25:59 Speaker 00 All right. Well, elsewhere in earnings season, if you're not into AI, or you think that we should absolutely slow down the rollout of gen AI products, the ad market, which has existed for even longer than the autonomous vehicle market, is recovering. So if you take a look at stuff from Meta and Snap and especially Google, we are seeing a recovery in, I would say, ad spend, some bumps in the road. But I put this under the same kind of umbrella, Kirsten, of the overall GDP and labor market stuff that we've seen, which is, things are a little bit better than perhaps the more pessimistic among us expected. And so I think the results we're seeing are indicative of, you know, a recovery of sorts, and that is encouraging.
26:35 Kirsten Korosec? Yeah, that is encouraging. And advertising is one of those, I hate to use this overused cliche, but sort of the canary in the coal mine usually for. Recessionary fears because it's one of the first things where people cut back. And when it starts to return, it is a very easy thing to return back to. And it is an early indicator of, I wouldn't say a recovery, but maybe a lessening of fears.
27:00 Speaker 02 Definitely.
27:01 Speaker 00 There's a quote from Snap that I'm trying to pull up from a story that I wrote the other year. And they essentially said, yeah, look, ad spend can, you can turn it on, turn it off pretty quickly. If you know what you're doing. So it can be highly variable, not just quarter to quarter, but even kind of month to month inside of a particular three month period. But I'm encouraged. I think that if we are seeing greater spend on ads, it implies economic confidence, which implies, you know, a more stable labor market. People are more willing to buy tech stuff, probably. So, you know, this earnings season is not amazing, but it does seem to be a different tone and tenor than what we saw in Q1. And even like, even the GM stuff, Kirsten, like their profitability expectations for the year were greater than I expected, at least. Like it, it seems to be pretty medium. Okay. Everywhere, which is great compared to what people thought we were going to have by this time in 2023.
27:46 Kirsten Korosec? Right. Less fire and brimstone and a little, little glimmers of hope on the horizon.
27:50 Speaker 00 Yeah, yeah, I'll take it. I mean, I own index funds, so whatever. But I think most of my index funds are just made up of the companies we're talking about. All right. Moving on to our final theme of the day, fund of funds and diverse managers. Mary Ann, can you just tell the people what a fund of fund is?
28:07 Speaker 02 I can try, Alex. I keep going over this in my head to try to simplify it. But basically, you know, you have funds that back VC firms as LPs. And then some of these VC firms that are actually backing other funds, like smaller ones as a way to get into deals more indirectly. Does that make sense?
28:28 Speaker 00 Yeah, no, absolutely. Let me, let me pick that up and I'm going to just shape it ever so slightly. But I love where you're going with that. A fund of funds is a capital vehicle that investors put money into. These could be family offices, pension funds, whatever. And then it takes that capital and doesn't deploy directly itself, but instead puts it into other funds that do. So let's say you're, you know, you're the Mary Ann Esaveto family generational trust and you have $100 billion under management. You might not want to go out there and pick all the VC funds that you want to, but you might put capital into a fund of funds or F of F that has a venture capital focus. And then they will put that money to work for you inside those funds. So it's kind of like the middle management layer of investing.
29:07 Speaker 02 That was far better, far, far better than I described it. So thank you, Alex.
29:11 Kirsten Korosec? So Alex, why should we care about fund of funds?
29:15 Speaker 00 Oh, I care because I have capital jealousy because no one's invited me to invest in their funds of funds. They're like, take your $25 and go home, sir. Get out of here. No.
29:24 Kirsten Korosec? All right. Maybe, maybe a better, maybe a better question is, you know, why should our massive audience care about this? And what does this mean in the, in the startup world? And what does this mean for startups?
29:35 Speaker 00 Yes. And we are gently circling the story written by Dominic Midori Davis, which we'll link to in the show notes. And the, the argument that she makes is that fund of funds, because they put capital into a number of venture capital funds, could be a neat and perhaps even uniquely suited way to invest in more diverse fund managers and more diverse investors more generally. So, you know, if you, if you are going to go out there and find one fund to put money into, you're probably thinking, you know, I want to put in Union Square and Sequoia or whatever. But a fund of fund could probably have more relationships and therefore move capital and deploy it more equitably into more funds. And so the, the hope is that given that VC remains, pretty much people who look like me, but better dressed,
30:17 Speaker 00 maybe FOFs can diversify the ranks of investors and prevent some of the smaller funds that we saw kind of bubble up in the 2020, 2021 cycle survive. So I think it's cool. The question is, is there enough institutional demand for this sort of fund of fund investing strategy? And I don't think we know yet, but it could marry and prevent the collapse of smaller funds and more diverse fund managers who are on fund one, fund two.
30:43 Speaker 02 I mean, I really, really would, would hope so. I think the numbers unfortunately have still been very bleak when it comes to the funding of diverse founders. And I know Dominic also did another story recently looking at all women founding teams having only just raised $1.4 billion in the first half of this year. So one would hope. It's unfortunate that it still feels like we have such a long way to go and more diverse fund managers and founders in general getting capital.
31:10 Speaker 00 Yeah. The same data set from Don points out that, you know, all female teams raised $1.4 billion in H1 of this year, which actually was down in Q2 compared to Q1, but that was the lowest amount since the first half of 2017. I mean, it's, there's so many times I pull up a new funding story on techcrunch.com and it's two dudes. Sometimes it's one dude and a woman. Very infrequently is it, is it two women?
31:34 Speaker 02 Mm hmm. And unfortunately, I mean, I have talked to female founders who say that part of the reason they do have a male co-founders is just for that, that they recognize that it's easier to raise money when you've got a male co-founder. And it's, it's really sad, but it's unfortunately just reality.
31:50 Kirsten Korosec? So one question for you, Alex and Mary Ann, actually, what, I hear a lot of words like hope, and hopefully this could be used for this, but is there anything structurally that would help guarantee that it would promote more diverse investing? Or is it really just up to the powers that be? And what prevents the inverse from happening? Meaning going out of their way to not invest in diverse startups?
32:19 Speaker 00 Well, I don't know if you've heard of a state called Florida, but it's this bit of the US that juts off into the ocean and it's very, very hot there. And I think it's gotten to some people's heads because we've seen some interesting stuff on the ESG front out of Florida. ESG stands for environment, social and governance. And so if you want to think about finding a way to have more capital flow into more diverse fund managers, you could put that under the E or G in an ESG investing strategy. But we have seen a pretty robust political pushback in the US over that sort of investing, usually put forward by a bunch of white dudes. So I would say there was a moment like 18 months ago, 24 months ago,
33:02 Speaker 00 when it felt like we were moving in that direction for a kind of a societal or institutional level. And now, to the contrary, I am not shocked by the numbers we're seeing. In fact, it kind of seems to meet the, the moments that we're seeing politically in the US, which is a disappointment. I will never not have hope because it's, it's free to do so, but I don't see a lot of political tailwinds, Mary Ann, that are gonna push stuff in that direction.
33:24 Speaker 02 No, sadly, I agree. It feels like in some ways we've progressed in that regard.
33:29 Speaker 00 It's, it's depressing how you can kind of make a little bit of progress towards a more equitable society, and then you get kind of dragged back by the collar.
33:36 Speaker 02 Yeah. And I think part of it too is, I mean, just in general, we, obviously we've seen this general slowdown. So when you have an overall big general slowdown, I think the, the people that are most impacted are those that were already not receiving a lot of capital to begin with. So that's just sort of the natural evolution of things. It's just if there's less money being deployed. Then of course, the people who are already not getting enough are going to get less.
34:00 Speaker 00 Yeah. All right. Well, listen, my friends, we have to go away. Before we go quickly, Mary Anne and Kirsten, where can people find you on social media?
34:07 Speaker 02 At Bay Area Writer on, I was about to say Twitter, but X, which is so weird to say.
34:13 Speaker 00 Is that your only social home?
34:14 Speaker 02 The only one I'm going to talk about at the moment.
34:17 Speaker 00 Mary Anne is a devotee of all things Musk. It's the only place she will put her thoughts out on the internet. Kirsten, where can people find you?
34:23 Kirsten Korosec? Well, I'm also on the social media website formerly called Twitter and not spending as much time on there, but I do still go there and post stories and commentary. But I'm also on Blue Sky, at Kirsten Korsak, same as it is on that other one.
34:40 Speaker 00 And I'm going to make a fan account for Mary Anne on Blue Sky and put it under the handle not actually in the Bay Area Writer. So you can follow that if you would like. You can also follow Equity on both Twitter and Threads. We are under the handle Equity Pod and we skeet on Blue Sky under the handle Equity. And if you are coming to disrupt and do not have a ticket yet, don't forget you can use the code EQUITY, all one word, to save a couple of dollars there. And I think that's it, guys. We're back on Monday, but anything else before we go?
35:05 Speaker 02 No, have a great weekend.
35:06 Speaker 00 Yes, have a great weekend, avoid the storms, and we'll talk to you guys Monday morning. Bye.
35:11 Speaker 02 Bye.
35:13 Speaker 00 Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Anne 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 Picavet, who manages TechCrunch Audio Products. Thank you so much for listening and we'll talk to you next time.
Previous What’s next for social media from someone who’s Extremely Online Next Equity Monday: Twitter's rebrand is a go, and we're Blazing Our Collective Glory Page updated October 26, 2026 · transcript and summary are machine-generated
