SVB, SBF and (more) OpenAI: The 2023 chronicles, pt. 2

This is the second of a two-part series looking back at 2023. Mary Ann and Alex called on two colleagues to help us chat through some of the year’s biggest events. Here’s what we got into! The decline, fall of SVB: It’s a bit hard to believe, but the chaos at Silicon Valley Bank happened earlier this year. Yes, much has happened since, but the sudden, and shocking collapse of what was effectively the family bank of tech sent waves throughout the global technology landscape. Venture was impacted. Public companies were impacted, and some startups actually got a boost! Chaos at OpenAI: Another weekend-powered period of high-drama in tech this year was the defenstration of Sam Altman from his role at OpenAI, only for the tide to entirely flip in short order, Altman back the co, and most of the folks who wanted him out gone themselves. This one is still developing, so we had Devin Coldewey on to help us understand what is coming next. SBF’s trial: It was long. It was tedious. It was occasionally very interesting. But in the end, former FTX CEO Sam Bankman-Fried was found super-duper guilty for various financial crimes relating to his now-failed crypto exchange. We invited Jacquie Melinek back on the show to tell us more. You can find part one of our year-end roundup here if you need even more! And don’t forget, Equity has even more great stuff coming your way, so stick close to your favorite podcast app. Connect with Equity on X and Threads @EquityPods, and keep up with all of TechCrunch's podcasts @TechCrunchPods on TikTok. 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, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. My name is Alex and I'm joined today by Senior Tech Watch Reporter on the FinTech Beat. It's Mary Anne Esveto. Mary Anne, hi. How excited are you about our second tranche of Look Back Equity content?

• 0:28Speaker 01

  I'm really excited. It's, we've got some interesting things we're going to talk about and it just blows my mind still that we're at the end of 2023.

• 0:37Speaker 00

  Yes, a very, very long year that also went by very, very quickly. But it won't just be Mary Anne and myself. We are going to bring in two guests from the Tech Watch team to walk us through the particulars of some major news stories. So on the pod today, looking back at the year, we're talking about the SVB crash and the ensuing aftermath. Then crypto goes to court. What's happened with the SBF trial? What's up with CZ and where is crypto now? And then, of course, we'll wrap up with the unavoidable OpenAI saga, digging into the chaos at the leadership level of that particular concern and where we are again as the year comes to a close. But Mary Anne, let's spin the clock backwards to early in the year. Silicon Valley Bank decided to make a number of financial moves that I read about and I thought, hey, this is pretty interesting, but not a big deal.

• 1:22Speaker 00

  The rest of the world disagreed and over the ensuing weekend, Silicon Valley Bank cracked and fell apart. So here is a clip from Equity at the time, featuring our friend Natasha Moscherinis. Give it a listen.

• 1:35Speaker 00

  Shall we pick up Friday in which everyone is losing their collective minds and then the government steps in? So pick us up there and give us a little bit of a into the weekend teaser.

• 1:47Speaker 01

  Yes, perfect. Yeah, to give you a sense, after that recording, we very much went head down, trying to better understand how venture capitalists were advising portfolio companies on handling one of their biggest banking partners, SVB banks, you know, over half of US banked venture startups. What are they doing next? And I feel like by Friday, we got some answers. One was, the biggest news was that regulators officially stepped into SVB. Down the bank and are taking over, which was Alex, I mean, that was insane to read and write.

• 2:15Speaker 00

  I mean, earthquake. I mean, it's just so crazy. This time last week, Silicon Valley Bank was on paper, fully capitalized, operating, no signs of issue. And then, you know, they make this financial announcement and then everyone realizes how much like issue there might be with their overall asset base.

• 2:32Speaker 01

  Yes.

• 2:32Speaker 00

  And then everyone panics, VCs yank. I think it was like a total of 42 billion flowed out of Silicon Valley Bank in a short period of time.

• 2:39Speaker 01

  Yeah, exactly. We started to see a lot of those big numbers flow around, which I think definitely added to the panic, even though those were the the facts we could go to, which was more than 85% of SVB's deposits were not insured. And the bank, as of its last disclosure, was handling some 175 billion in customer accounts. So there was so much at stake. And then, you know, now we see startups heading into the weekend, thinking about two things payroll on Monday, and then contagion is going to happen with other banks. And I feel like that's still the topic.

• 3:09Speaker 00

  Yeah. And so the contagion part, we'll get to in a second. But the payroll thing, everyone was very scared that startups essentially would not be able to pay their employees this week, that they wouldn't be able to pay their cloud bills, and that they would essentially just just die on the fine if they couldn't get access to their deposits. And everyone kind of expected that up to the $250,000 normal limit for FDIC deposit insurance would be covered. But past that, it wasn't clear. It turns out that the FDIC deposit insurance fund had plenty of capital, which I think everyone in the banking world is paid into. And so that's going to be used to solve the near term issues. And the government announced on Sunday evening, if memory serves, it has been a crazy couple of days, that depositors would be made whole and would also

• 3:52Speaker 00

  be liquid as of Monday morning, which I think Natasha dampened some of the chaos on Twitter. It lowered the cortisol and blood pressures of Silicon Valley in general. But that was hardly the end of things, because we're still hearing about SVB subsidiaries being taken over in certain areas. And there's still a lot of fear. But it does seem, I'm going to just stick my nose out a little bit here, that the immediate crisis has been contained. And now the question is, is there a second crisis?

• 4:21Speaker 00

  So Mary Ann, that does set the tone for where we were back in the day. Lots of time has passed, many other things have happened, but I'm very curious from a fintech perspective, what stands out to you in the aftermath and kind of where are we today?

• 4:33Speaker 02

  Yeah, so when all this went down in March, a number of fintech startups saw an opportunity, of course, right, to come in and, and help all these Silicon Valley bank customers that were panicking, not sure what to do with their money and trying to figure everything out. And the three that stood out, the three startups that stood out were Brex, Mercury, and Arc. And so, right after, right after everything happened, I think all three of them saw a big bump in business. And, you know, naturally, like, that makes sense. It's logical. Everyone's freaking out. They're moving their money. We have data from, from all three. I can reference some of that really quickly. Arc had told us like that first weekend that it saw its backlog of deposits more than double to the tune of hundreds of

• 5:17Speaker 02

  millions of dollars. Brex said that in the first week after the shutdown alone, it opened 4,000 new accounts and received $2 billion in deposits, which is quite a lot. Mercury too, told us that the first, first five days were nuts and that, let's see, in the first few days, they saw more than $2 billion in deposits. And in all of March, nearly 8,700 new customers depositing funds into its accounts. Well, that was just in all of March. I talked to Mercury in July and they said that the collapse drove 26,000 customers to its services platform in four months. So that's a whole lot. But, one thing that we're always wondering

• 6:00Speaker 02

  about is, okay, naturally, we see a big bump, but were these companies able to sustain that kind of momentum?

• 6:07Speaker 00

  Mary Ann, before we get to that, I want to give people an analogy of what you just described. Imagine a house party of teenagers who are drinking and they don't want to get in trouble. The Silicon Valley bank crisis was like the police showing up, the people partying with the startups, and then everyone said scramble, and everyone ran and went somewhere else. The other companies, AKA Brex and Arc. And also, as a small other note, Brex is, I think, the sponsor of this particular episode that has no bearing whatsoever on our editorial content. It just is an odd coincidence that we're talking about Brex during the show and during the ad. Okay, Mary Ann, back to you.

• 6:42Speaker 02

  Yeah. So thank you for that, Alex. And great analogy. As always, your analogies are the best. Anyway, so I don't, I don't unfortunately have updated figures from all three of those companies as to how they're doing now. But I did get some data from Brex, also coincidentally this morning, that said that more than 80% of the 4,000 accounts they opened since Silicon Valley Bank started teetering in early March are still active. And then they're saying to date, the company now oversees around $7 billion in customer deposits. That's up from $4 billion before SVB's failure.

• 7:15Speaker 00

  And I did a little bit of math on that because I was thinking, holy crap, $7 billion in today's interest rate environment is a lot of money. At 5% per year, if Brex was collecting all the interest from $7 billion in deposits, it would be worth $350 million. Then I did some research and I went to the Brex website and I took a look. And it turns out if you put your money into their higher yield account, they pay out 4.94%. So I don't actually know the net interest margin that Brex might be wringing out of some of that cash. But I do expect that there's some margin there. So probably a nice chunk of revenue in Brex's pocket, similar to we've seen at other fintech companies benefiting from the change in interest rates.

• 7:52Speaker 02

  Indeed. I would say that, you know, all of this is still playing out though. I think that it feels like such a long time ago that Silicon Valley Bank kind of melted down. But the ramifications of its collapse are still playing out, I think. And, and actually it's not, it's not a bad idea to check in maybe early next year with some of these other companies and say, how are things going?

• 8:13Speaker 00

  Yeah, I have one question though. So clearly a big diaspora of customers from SVB landed on mini shores and drove some impressive growth for these companies. My question is, is do we think that the Brexes and the Arcs and the Mercuries are seeing the same sort of effect that we saw in e-commerce during the pandemic? When demand was pulled forward, but then as time passed, kind of growth returned to the prior rate? Or do we think that this actually changed the landscape for growth at these companies? And they're going to have better secular rates down the road?

• 8:48Speaker 02

  Yeah, that's a good question. It remains to be seen. I would say the difference between the e-commerce analogy and this is that, you know, people went back to more in-person shopping after pandemic restrictions lifted. In this case, we're not getting Silicon Valley back per se in the way. You know, the form or that it was in the past. So I think that they could still kind of capitalize on this if they play their cards right. But I don't think that the kind of growth, obviously, they saw in the very early days, in the aftermath of all of that, of course, it's not sustainable. It's gonna, and we saw that with Brex already. I think there was a report in the information that third quarter was nearly flat in growth

• 9:30Speaker 02

  or something like that revenue growth. So, I mean, there's a surge, there's a bump, and then there's kind of like a leveling out.

• 9:37Speaker 00

  A plateau, if you will.

• 9:38Speaker 02

  Right.

• 9:39Speaker 00

  Well, I just realized a very important fact. There's no way Brex goes public one year after the Silicon Valley Bank crisis because their year-over-year comps would look like shit in terms of growth. So they probably have to wait for the next quarter. So Q3, I think. Okay. Q3 2024 Brex IPO. You heard the wrong news here first.

• 10:01Speaker 00

  All right. Now, when we come back, we are going to dig into the SBF trial, one of the most important events of the year, not just for crypto, but for technology in general. But first, my dear friends, a short break.

• 10:15Speaker 00

  All right, Mary Ann, I want to bring in Jacqueline Melanick from the TechCrunch Plus team, also the host of our Crypto Focus podcast and writer of our Crypto Focus newsletter, and currently the woman of the hour, not only because of her excellent coverage of the SBF trial, in which she went every morning at something like 3 a.m. to a courthouse in New York, but also crypto is back. And so we're very glad that Jackie is still in the saddle. Jackie, hi, welcome back to the show.

• 10:38Speaker 03

  Hey, thank you. What a nice introduction. I wish I could come on every week.

• 10:42Speaker 00

  If you'll come on every week, I'll say something similar each time you show up. No, we want to have you on because we want to talk about one of the biggest events of 2023, something that you lived through very, very seriously, and I got to enjoy vicariously through your text messages, which was the SBF trial. So if you don't mind, can you remind us where this began, how the trial went, and then the end of it in about 60 seconds?

• 11:02Speaker 03

  Oh, God, where it began would probably be in 2022, when FTX collapsed initially. And it kind of was a result of faulty balance sheets being released to the public, which we found out during the trial weren't even accurate balance sheets. They were basically modifying them for investors and other parties involved because it was all kind of inaccurate, is the simplest way to put it.

• 11:27Speaker 00

  So essentially, FTX was not the burgeoning leader of digital commerce that we were told it was. It was in fact, a house of cards mixed with fraud and then set on fire.

• 11:37Speaker 03

  Yeah, I think that's a fair representation of it all. I think, you know, they did have real users. There was real traction. People did love using the platform, but they overestimated their actual funds they had opposed to what they genuinely had from trading revenues and things like that. And they used basically people who put their money onto the platform. They then kind of funneled that money into Alameda, which was their crypto sister trading firm that Sam Bankman Fried also started. And it was kind of just like a self fulfilling prophecy.

• 12:11Speaker 00

  Mary Ann, what's your take there on the word's kind of funneled? I feel like, I feel like there's a lot of euphemisms going on here.

• 12:17Speaker 03

  Now, it's actually, it's been proven that it has been. So I shouldn't even be saying kind of, yeah.

• 12:22Speaker 02

  Well, we had to hedge for so long. So I get it.

• 12:24Speaker 03

  Yes, I am cautious.

• 12:27Speaker 02

  Right, right. Well, first off, you did an incredible job of reporting and covering that trial. You took us there with all those details and it was super impressive. Yeah, I mean, I would say that none of us were shocked by the, the results of the outcome of the trial. And Sam Bankman Fried was found guilty on all seven counts. I think it was, it was one of those situations where there couldn't have been any other outcome, really, right? I don't think anybody was expecting that he wouldn't be found guilty. Or am I just, maybe I was just being overly, I don't know if optimistic is the word. Would you agree with that? Or was there doubt while you were there in the, in the courtroom and like talking to other reporters? Did you guys actually think that there was a chance he'd get away with all this?

• 13:10Speaker 03

  I think there was a slight chance that maybe not get away, but some of the charges he wouldn't be found guilty on solely because perhaps the jurors didn't understand the technicalities of the case. But the prosecutors did make a good argument that basically Sam Bankman Fried made false promises and was responsible for the loss of billions of dollars for thousands of FTX investors. And that's just something that they made understandable, even though it was a confusing topic. And not everyone understands crypto, sure, but. I think at the end of the day, it was just about making sure jurors understood the baseline important facts. And the only reason we thought the chatters of, you know,

• 13:53Speaker 03

  the reporters or public viewers that maybe he would get away with this is that maybe they didn't fully believe that the prosecutors did their job of proving this burden.

• 14:04Speaker 00

  Well, turns out all that speculation was for naught because the boys go into jail. Now, Jackie, we all kind of recall the chaos and the brouhaha of what happened. And Sam clearly got the entire law book thrown in his face and we'll figure out sentencing later on. But what I'm curious about is in the wake of the trial and with the later legal action against CZ over at Binance from the DOJ, where does crypto stand now at the end of the year? I don't want to talk about the future. I'm just curious, where do we stand today?

• 14:35Speaker 03

  It's actually kind of crazy and it's so indicative of like the crypto world that I cover 24/7, but the crypto market and the overall ecosystem is like showing signs of positivity after this extremely long bear market and after a year of so many crackdowns on the industry. Like we saw this with SBF, we saw it with CZ, we've seen it with other major exchanges or just crypto companies in general. They're getting served notices or lawsuits by US government agencies. And yet, everyone is still optimistic. Bitcoin is up 10% on the month, Ethereum is up 6% on the month, and the overall crypto market cap increased 10% on the month. So where we are today is honestly kind of a positive stance, even with everything going on.

• 15:19Speaker 00

  So summarizing this in kind of internet friendly terms here, Gary Gensler is responsible for the crypto bump.

• 15:26Speaker 03

  Uh, declined to comment. I don't think everyone in the crypto industry would agree with that. And, and you know, I think Gary Gensler and any other US agency that has crackdown on the industry has gotten like hot and cold love and hate from crypto people because they're so thankful that they come in and, you know, get the quote unquote bad actors out of the space. But then there are people who are like, you guys are being too harsh. So perhaps you could credit him to some of it. And then other people might say, no, they're making it too hard for crypto companies to operate in the US.

• 15:56Speaker 00

  I was being slightly facetious, but more to the point, and seriously, like it does seem like there has been a cleaning out of the crypto closet. You know, we've done the spring and fall cleaning here. And is the crypto world now on firmer footing with, you know, certain exchanges having their house cleaned or, you know, taken off the market? Like, is it healthier today? Or are we just seeing another crypto price increase and all that that entails disconnected from all the stuff we're talking about?

• 16:24Speaker 03

  I think it is healthier and we'll continue to see more of these bad actors shaken out. And even with SBF, he has a second trial scheduled for March. Whether or not that will go through is TBD, but last I heard it's supposed to. And I think even though these bad actors are getting these lawsuits and it seems like, oh, we're on a better footing. Whenever there's opportunity in any industry, whether it's crypto, fintech, traditional finance, people see it as an opportunity to do bad things and get ahead. So even if these people are kind of shaken out, I don't think this is ever going to be the end.

• 16:58Speaker 00

  Right. So essentially, we may have gone after a couple of the, the bosses at the top of a theoretical crime pyramid.

• 17:05Speaker 03

  But new ones will emerge. Right.

• 17:06Speaker 00

  New ones will emerge. Okay. So it's kind of like whack a mole, but with crypto fraud.

• 17:10Speaker 03

  I love that analogy. Yes.

• 17:11Speaker 02

  That's another good analogy, Alex.

• 17:13Speaker 00

  All right. That's not as encouraging as I hoped, frankly. I was, I was hoping that this was going to be more fundamental. But okay, but okay. Binance, right? Enormous. Now has new leadership and is going through a settlement with the US government. FTX, which was fraudulent to a material degree, is out. And we've seen so much detritus in the crypto space taken out in the wake of the Terra Luna collapse and all that ensued after that. I mean, like, it feels like a lot of the major fraud that we either suspected or knew about has been cleaned. So the crypto segment, even though you're saying like more people will come up, it does feel like at least it's been washed behind the ears and scrubbed some.

• 17:57Speaker 03

  Yeah, I think that's fair. I also think that's a result of this current cycle. Every cycle brings about new actors, new initiatives, new quote unquote innovations. Like Terra Luna was considered an innovation when it happened and everyone praised it for the most part. And look what happened. It caused the downfall of a massive domino effect. And so I think when we enter a bull market, the next one, wherever that may be, some people are predicting next year. Who knows? I think that will also result in a similar thing where we'll see new projects, companies, et cetera, pop up. It'll get extreme hype and then we might see the downfall again in a similar tune.

• 18:35Speaker 02

  I will say, it was kind of interesting to watch the whole Binance, CZ downfall play out because he seemed so, I don't know, kind of self righteous when everything was going down with FTX, you know, like, oh, you know, you could tell he was being very smug, but trying not to be. And then boom, all that hit later in the year. And that, you know, he was trying to pull one over on authorities all came out. So I thought that was interesting. And then also there was Celsius. Wasn't that this year too, that it was accused of fraud? Or am I mixing up? I'm getting my years confused already.

• 19:08Speaker 03

  Celsius was last year when they filed for bankruptcy and their founder, Alex Shmetschinsky is like, going through federal court proceedings as well, but that has not fully been fledged out yet, for sure.

• 19:19Speaker 00

  Right. That's still alleged fraud.

• 19:21Speaker 03

  Alleged, yes. Thank you, Alex. But on the note of CZ, it's like, I completely agree with you, Mary Ann, that like, he did have this like, higher morality that he was presenting to the public. And he constantly dismissed anything that came their way. Like earlier in the year, the CFTC and the SEC filed lawsuits against Binance and CZ and a few other parties. And they just kind of dismissed it as like, oh, this is just like fear and uncertainty, like none of it's true. And they were just trying to like, claim it as what they call FUD, fear, uncertainty and doubt. It's just like a way of dismissing anything bad that is presented in the crypto world. But honestly, CZ said in internal memos that they shared in the filing that they rather asked for forgiveness than permission.

• 20:06Speaker 03

  And they knew that they were profiting from the US market without following US laws.

• 20:10Speaker 00

  Yes, and they and they're not asking for forgiveness and ha, ha, ha. Also, I just want to say that if Mary Anne hadn't jumped in there, I had a really, really horribly tortured joke about algorithmic stablecoins, good ideas, poor results, and then the cyber truck trying to go up a hill and failing. And it was going to work. It was coming together in my head. It was crystallizing. And then Mary Anne had a reasonable on topic point and ruined my horrible joke. It's like a Mad Lib. It is kind of like, well, that's tech in 2023. It's a wonky Mad Lib that makes you feel like you're on edibles. All right, Jackie, thank you so much. We appreciate you. We'll have you back on the show quite a lot next year. And of course, as I said, check out Chain Reaction, both the podcast and the newsletter.

• 20:50Speaker 00

  Now, turning to OpenAI, as promised, we are going to discuss the aftermath of all the craziness that went on. If you want to kind of go back to the blow by blow, we have tons of coverage of that, Mary Anne. But to help us understand where we are today and what we should think about that fiasco now that it's behind us. Well, we have brought along Devon Coldaway from TechCrunch. He's been associated with the TechCrunch brand since 2007 and has also written for a lot of places. MSNBC, NBC, The Economist, lots of places. Devon, hi. First of all, how are you?

• 21:19Speaker 04

  Hey, not bad. It's a it's a beautiful, bad winter day here. Very nasty in Seattle.

• 21:24Speaker 00

  Well, when is it a nice day in Seattle? I mean, I've never seen one.

• 21:27Speaker 04

  Oh, all the time. Get out of here.

• 21:29Speaker 00

  So I don't want to go back through all the chaos. What I want to do is pick up from the end of the the chaotic saga. So Devon, from your perspective, where did OpenAI end up once everything kind of settled down?

• 21:44Speaker 04

  Well, it's ended up with Sam Altman back in charge, obviously. And basically, he got what he wants. It's a very chaotic process. But if you look at what is now the sort of leadership there, arguably, this all started with him trying to oust Helen Tonner, who was on the board, and he tried and it didn't work out. And it led to some other stuff, which, you know, arguably caused this whole fracas. But now Helen is pretty much the only one who's out. Ilya Sutskever is still there. He's had a minimized role. He's no longer on the board. But Helen's out and Sam is resurgent. So I think that we're going to see a much more Altman focused approach to leading the company.

• 22:26Speaker 02

  Yeah, I think that we talk about this as kind of the key person syndrome. I think, you know, he's been the face of OpenAI, especially since ChatGPT took off. So was it a surprise to you that this was the end result of all that drama?

• 22:42Speaker 04

  You know, I don't think anybody knew what was going on. We all considered it kind of, well, I mean, it was all, we were all very surprised, obviously, when they tried to kick him out. But the way that they phrased it, we were all like, yeah, maybe he was trying to pull something. I mean, Sam is an operator. And if he was, you know, trying to organize something behind the scenes, or raising another fund, or maybe investing in ways that he shouldn't have, you know, nobody was like, oh, he would never do that. Everybody was like, I don't know, maybe. So what surprised us, I think, was how strongly he got the backup sort of structurally from Microsoft, Salesforce, other investors. It wasn't just that the employees got behind him. And they did, you know, and whether they did that because they love him so much, or because

• 23:27Speaker 04

  they stood to lose hundreds of thousands of dollars in stock options as part of that tender offer, you know, it's like, which, which, which was it? One or the other? It could be both. Little call in A, little call in B. But everybody got behind him, including Microsoft, which now, although they still only have an observational board seat, they so strongly backed Sam that I think they will be backing him up in all his plays, all his strategic plays, more than ever. And I think he's not just newly back in power. He is empowered beyond where he was before.

• 24:00Speaker 02

  What does this mean for other AI startups, though? I mean, are they seeing opportunity?

• 24:06Speaker 04

  That's really hard to say. I think that they may be seeing death with the GPT store, for instance, like, that's going to kill a lot of startups, because if you can get sort of a good enough version of like, oh, I trained it on this data, it's fine tuned it like this, and it's a useful little tool. Like, a lot of startups were building based on small ideas where they fine tuned models and use the APIs. If OpenAI is doing that internally, and you can buy it for a buck in the GPT store, that I think is, it's a very dangerous prospect for a lot of small companies.

• 24:37Speaker 00

  Is that because what OpenAI announced with the GPT store might get a lot of things like an 85% solution? And so it's probably a lot harder to sell a 90% solution for a lot more money?

• 24:47Speaker 04

  100%. Yeah, I probably shouldn't have said 100%, but yes, 85%. I think you're 90% true there, 90% correct. I think that that is the case. And I don't think it'll kill too many startups, but a lot of people are going to have to change their strategy because you simply can't come out here and say like, hey, we've got a great idea. We're going to use OpenAI's API. And that's not a solution that's going to make you a billion dollars.

• 25:09Speaker 00

  You know what we should do, though? We should have a company called Open API that offers AI. And then we could have both.

• 25:15Speaker 04

  And it can't, it won't be open either. It'll be, it'll cost a ton of money to use.

• 25:19Speaker 00

  Oh, man. Okay. Um, in operational terms, though, OpenAI did push back a couple of key launches in the wake of the fiasco. Do you think that there's going to be any long-term product hit to the company, given that it had to go through this intense breakup and get back together moment?

• 25:35Speaker 04

  No, I think that, I think that they, they delayed GPT store because they, they had a really aggressive timeline for that. It was going to launch, you know, it was announced in November, it's going to launch in December, and they had this whole leadership, you know, destructive, chaotic moments that I think they need to recover from. And December was no longer a possibility. So, you know, January, February, but other stuff, I think we're probably actually going to see an acceleration and a moving up of timelines as Sam says, you know what? Ship it. Let's put it out. Right. Let's get, let's take this moment and really like squeeze the squeeze the lime, get the juice out.

• 26:09Speaker 02

  Get stuff out the door.

• 26:11Speaker 04

  Squeeze that lime.

• 26:12Speaker 00

  Yeah, what the lime do? Lime's just hanging out.

• 26:15Speaker 04

  You got all that juice in it.

• 26:16Speaker 00

  I'm curious what you think is the new landscape for leading AI model companies, foundation model companies, because certainly OpenAI's models are well-known, well-liked, people use them. We've also seen Meta do a lot of work in the open source generative AI model space. Of course, there's Alphabet in the mix. There is Anthropic. And over in France, there's Mistral AI. And so, you know, Devin, are those companies empowered to compete more strongly with OpenAI now that they've had this crisis? Or am I trying to read too much into what worked out to be about a week of chaos and maybe won't change the actual trajectory of the market itself?

• 26:54Speaker 04

  Well, I think what we'll see is in 2024, there will be competition between the concepts of competing on the merits and competing with the market. And OpenAI is going to have the market strength. It's going to be the brand. It's going to have access via the GPT store to a lot of consumers and a lot of developers. And that kind of access, even if, for example, Mistral, its models were 10, 20, 30% better than OpenAI is, like, can they access consumers? Can they access capital? That's going to be the question to me. It's not about just can open models compete? Yeah, they can compete on whether they're effective as, you know, GPT-4, you know, oh, it's 95% as good and it's cheaper to run. Let's use that. Is that actually going to happen, though? Because, you know,

• 27:37Speaker 04

  you don't just use open source software all the time because it's cheaper. It's it has implementation costs and other things. So it'll it'll become a different kind of competition. And that that remains to be seen in 2024. But that is going to evolve with the ship it movement under Altman.

• 27:52Speaker 00

  Okay, one last question before we move on from from all of this. If OpenAI had imploded, right? Let's just say it had dissolved into nothing but its component parts and the Microsoft deal didn't work out and blah, blah, blah, blah, blah. How much more money would Alphabet be worth today?

• 28:09Speaker 04

  Man, it's a it's such a funny question because they would, I think, if anything, they probably would have delayed their launch of whatever it was that we just saw Bard and Gemini, because it clearly it wasn't ready. It still isn't ready. But with if OpenAI were to just sort of dissolve completely, they would be like, oh, my God, a breather. Anthropic, too. They would be like, let's just relax and get it right for once. And all that talent from OpenAI would have filtered over to the other companies at, you know, and gotten their big their big salaries. And it would have turned out, it would have been a very interesting timeline, I would say.

• 28:47Speaker 00

  Yeah, Mary Ann, one thing that I've noticed is whenever another company stands up and says, "Hey, we have all this cool AI stuff. Pay attention to us." Alphabet had the fiasco with the Gemini video that was essentially faked and then everyone found out afterwards and we're like, "Well, it turns out not as cool as we thought." And then there was the Amazon generative AI Q bot that was not doing a good job even discussing internal AWS things. And it seems like a lot of people are trying to show off that they have reached OpenAI's level of sophistication, only to fall kind of tragically short and embarrassingly so.

• 29:19Speaker 02

  Yeah.

• 29:20Speaker 04

  Yeah, they haven't, and it's sad.

• 29:22Speaker 02

  Yeah, I think it's just clearly they're trying to keep up in this race, this competition, and really need to be careful because that can backfire and actually make you look far worse than if you had just waited.

• 29:33Speaker 00

  Yeah, day late and a dollar short is better than on time and $10 short.

• 29:39Speaker 04

  Yeah, it's a nice paraphrase.

• 29:42Speaker 00

  This is why I shouldn't try to make up new business sayings on the go. Anyways, Devin, thank you so much for your time. We have to call it a show there. Of course, we are EquityPod on X and Threads, and we are back next week. So stay tuned for Equity's annual predictions episode and what one VC expects to see in 2024 and more to close out the year. Mary Ann, Devin, Jackie, thank you all so much. We're back soon. Bye.

• 30:04Speaker 02

  Bye.

• 30:07Speaker 00

  Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azevedo. We are produced by Teresa Locan Solo with editing by Kell. 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.