OpenAI fires back at Musk, and Monzo raises a megaround

This is our Wednesday show, focused on startup and venture capital news that matters. If you are a founder or an investor, this one is for you! Here’s the day’s rundown: OpenAI fires back at Musk: In the wake of a lawsuit from former backer Elon Musk, OpenAI is bringing receipts and an argument that Musk wanted to run the company’s for-profit arm. Hard to argue against something that you wanted to run, yeah? Monzo raises megaround: Monzo’s latest round is proof that the worst of the fintech slump is behind us. All eyes on Ema: With $25 million and a launch from stealth, Ema’s work to bring AI to the enterprise is notable. But in such a crowded market, are many startups aiming too high on the stack? Accenture buys Udacity: The former unicorn’s final resting place is not what it had dreamed of before, but this deal does bring welcome liquidity to at least one venture-backed startup. A climate boost? An upcoming regulatory choice could unlock a massive wave of demand for carbon-tracking startups. And the latest from OpenView: The Information reports that OpenView is returning most of its latest fund to backers. A weird and slightly sad final chapter for the firm. 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 today is March 6, 2024. This is our Wednesday show where we dig into the critical startup and venture capital stories from the week thus far. On the show today, we have OpenAI's latest legal drama, Monzo's new mega round, an AI startup that we have our eye on that you haven't heard of, Accenture buying Udacity, a regulatory ruling coming later today that could have a big startup impact, and in the venture corner, we'll close with the latest news on OpenView Partners unwinding. Let's go.

• 0:55Speaker 00

  We're going to start with OpenAI, the most valuable AI startup in the world today because it intends to try to dismiss all claims made by Elon Musk's recent lawsuit. And OpenAI argued that the billionaire entrepreneur who was involved in the company's co-founding didn't have that much impact on its development or success. In a blog post that included copies of several partially redacted emails, OpenAI said that Musk only provided about $45 million to it despite higher initial commits, and that once the company realized it was going to need billions and billions and billions of dollars and thus would require a for-profit

• 1:37Speaker 00

  arm, Musk tried to become the for-profit arm's CEO and variously hold the majority of equity and "initial board control." OpenAI "couldn't agree to terms on a for-profit with Elon because we felt it was against the mission for any individual to have absolute control over OpenAI."

• 1:58Speaker 00

  Now Musk's view, TechCrunch notes, is that the ChatGPT maker had breached its original contractual agreements by pursuing profits instead of the nonprofit's founding mission.

• 2:10Speaker 00

  To develop AI that benefits humanity. Now, this is a startup story several times over. First, despite its weird structure, fame and value, OpenAI is a private market tech company that is looking to grow quickly on the back of external capital. And that's just what startups do. It's also a startup story because so very many tech companies, both big and small, use its technology today. So who owns OpenAI and how it is controlled is of massive importance for startups and more mature tech companies alike. Now, I don't know how all this legal maneuvering that we are seeing at the moment will shake out. Maybe you do, but I don't.

• 2:55Speaker 00

  But it is clear to me that OpenAI is so valuably prized today that everyone wants a bite of its fruits, even if they have launched competing services on their own, like Grok. Now, a name you haven't heard us talk about as much on the show in the last couple of years is Monzo, but they're back today because they just put together a $430 million round. Yes, a mega round in fintech in 2024. Crazy, right? Well, the London-based company's new round does give it a valuation of £4 billion, or about $5 billion, and it was led by Google's capital G.

• 3:40Speaker 00

  I think that for Monzo, the new capital is both a coup and a return to form. Recall that the neo-bank previously pulled back from the US back in 2020, the same year it had to take a down round. But with some executive changes, it later raised at about a $4.5 billion valuation in 2022. I went ahead and looked up its latest financial reporting, and the company said that it reached profitability since the end of its fiscal 2023. And that from its fiscal 2022 to its fiscal 23, revenue scaled at the company from about £154 million to just under $350

• 4:20Speaker 00

  Six million pounds. That's a lot of growth profitability is in there. Not a shock that the company was able to raise, though I will say 430 post money of about five billion, 4.5 billion valuation before kind of a flat round, I think, which does go to show how much fintech companies have been repriced in the last couple of years. Anyways, challenger banks went through the wringer lately, but an environment of higher interest rates appears to be doing them a solid. So good job, Monzo. Chime. Go public.

• 4:54Speaker 00

  Enough about the big companies, though. Let's talk about a much smaller startup. And there's one out there with a kind of novel approach to AI. It's called Emma. I think it's spelled E M A. It could be EMA, but Emma just sounds more likely. Anyways, it's based out of San Francisco and CEO and co-founder, Surjit Chatterjee says that their company's goal is to quote, "build a universal AI employee and quote, "to automate the mundane tasks that employees do on a day-to-day basis in every enterprise." So we're talking about AI in the enterprise. Woo, how novel, right? Well, the company just came out of stealth with a $25 million round,

• 5:38Speaker 00

  and we think it was able to raise capital in this very, very busy space because the startup's founders backgrounds include Coinbase, Google and Okta, and that's going to help it stand out from the masses of other companies also working to bring generative AI tech to large companies. I'm curious whether we're seeing too many AI companies build essentially apps and services instead of something lower down on the stack, like a new OS that is AI first, instead of AI imbued after the fact, or AI assisted, if you will, like right now, Windows 11 feels like Windows with some AI kind of like slapped on to it. That's what a lot of these other companies feel like to me. Are they too high? Should they go lower?

• 6:23Speaker 00

  I don't know. But Emma, 25 million. Very cool.

• 6:27Speaker 00

  Two more quick things before we move on to venture capital news. Number one, Accenture is buying Udacity. Udacity, if you don't know, it's an ed tech company that reached a $1 billion valuation back in 2015. However, given that it was previously rumored to be on sale for about $80 million, I really doubt that the Accenture deal was worth much more, and they did not disclose a price tag, which is a great way of saying that they don't want to tell you how little they paid. Now Accenture wants to build an AI trading service, partially with Udacity's assets and $1 billion of its own money. Accenture, of course, is a big services company, so AI upscaling fits kind of neatly under its larger umbrella.

• 7:11Speaker 00

  Notably, this is technically a unicorn liquidity event, even if the final price was clearly not what anyone hoped for eight years ago. And I think it's cool because it does go to show that larger companies are willing to shell out for startup assets as long as they have an AI flavor to them or a way to slot into an AI theme internally. Udacity, good job. At the top of the show, I promised you a regulatory ruling coming later today that might have a big impact on startups. And who am I to leave you in the lurch? So let's talk about it. Today, the US's Securities and Exchange Commission is going to vote on its much debated climate disclosure rule.

• 7:55Speaker 00

  Now, TechCrunch's 10 to Shop reports that if adopted, the rule would require companies to disclose greenhouse gas emissions, already a requirement in other economies, including the EU and China. So why do we care about that? It's because the ruling could spur companies to bolster their current reporting processes, pushing many to seek outside help. And that means startups in the business of carbon accounting could see a big boost. And that's not a small list of companies. I'm thinking about names like Arcadia, Watershed, Carbon Chain, Planet Forward, Bend, and others. So essentially, if the SEC says, hey, you guys need to tell us more about your emissions,

• 8:40Speaker 00

  a bunch of startups are going to say, and we'll help you do it.

• 8:46Speaker 00

  Put startups down and pick up venture capital. I have one story for you here. Regular equity listeners will recall that we discussed OpenView Venture Partners demise at the end of 2023. Now, venture capital firms do come and go. Quite often, we'll see an older firm not raise a next fund and slowly fade away. But it was a surprise to see OpenView Venture Partners say, that's it, we're done. And now we know what they're going to do with all that money because they had put together a large $571 million fund. And according to the information, Natasha Moskarenas, a former co-host of this show, they're going to return the majority of that capital to their LPs.

• 9:29Speaker 00

  Not all of it unreturned capital will be used to back the 30 portfolio companies they currently have that are active, she reports. But this is still big news and kind of the final chapter in the particular saga we have been discussing. Recall, of course, that OpenView's choice to stop making new investments and lay off staff was probably the kind of shock of December 2023. It turned out that the exit of several key employees effectively put a cap on the company's future, but it's still a surprise and a blow to the Boston ecosystem. That's all the time we have today, but I have some good news before you go, which is that this Saturday, we will have an interview coming out with Roger Lee.

• 10:12Speaker 00

  You may recall him as the man behind layoffs.fyi and an investor in a startup that helps other startups shut down. So look for that in your feeds this Saturday, Mary Ann Crushed it, and I cannot wait to bring that to you. But of course, first on Friday, we will have our news roundup roundtable. So we'll talk to you then. In the meantime, if you need even more from us, we are Equity Pod over on X and Threads, and we are TechCrunch Pods on TikTok. I'll talk to you soon. Bye. Equity is hosted by myself, Alex Wilhelm, and TechCrunch Senior Reporter, Mary Ann Azvedo. We are produced by Teresa Loconsolo with editing by Kel.

• 10:54Speaker 00

  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.