The new Equity crew on a proposed AI 'kill switch' and why it's rough out there for VCs

Say hi to the new Equity crew! To kick off today's show, Mary Ann invited her new co-hosts - Becca Szkutak, Rebecca Bellan, and Haje Kamps - to introduce themselves and shared a bit more about what they do here at TC. The team then jumped right into the news, starting with Techstars CEO Maëlle Gavet announcing she is leaving the company, just weeks after TechCrunch reporter Dominic Madori-Davis published an in-depth investigative article on what’s been going on behind the scenes at the accelerator in recent years. (You can listen to Dom talk more about it here). As always, there was plenty more to uncover in the world of startups and venture. Mary Ann, Rebecca and Haje dug into two funding deals, one straddling the lines of crypto and social media and the other in the fintech space. Rebecca wanted to talk about Farcaster, a blockchain-based social protocol that ​​invites developers to build other apps on top of it. The startup raised a $150 million round, news that had the Equity team asking, “Is crypto back?” Mary Ann dug into immigrant banking platform Majority securing $20M in funding after notching an impressive $40 million in ARR as of April. Last but not least, our trio riffed on the fact that a bunch of tech majors made commitments to the safe development of their AI models, including a potential “kill switch.” While we felt the news was mostly positive, we are also skeptical, too. The team also discussed the challenging environment for emerging fund managers, and our surprise at just how many of them there are. That’s it for this week, but we’ll be back bright and early Tuesday morning (thanks to a U. S. holiday on Monday) with more tech and startup news, along with another round of Pitch Deck Teardown. Talk soon! Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. 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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:10Speaker 00

  Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. Today is Friday, May 24th, 2024. I'm Maryann Azaveto and joining me today is Senior TC Reporter, Haya Kamps. How's it going, Haya?

• 0:26Speaker 01

  You know what? I'm doing really well. I had so much fun working with an accelerator this morning and working on a bunch of fundraising stuff. So it's a really good way to wake up. Keeps me on my toes.

• 0:36Speaker 00

  Well, Haya, you and I are not alone today. We have not one, but two co-hosts joining us as well. Senior TC Reporter Becca Scootak is on. What's new with you?

• 0:45Speaker 02

  Hey, huh, not much is new, which is not necessarily a bad thing, but I will say, dear listeners, I am only here for a good time today, not a long time, but you can catch me in a longer format next Tuesday and next Friday on Equity and you can always find me over on Found, where we interview the founders behind the startups about why they built them. But thanks as always for having me on.

• 1:09Speaker 00

  We'll take what we can get, Becca. We also have Rebecca Bellan, a Senior Reporter at the TC Transportation Desk. Rebecca, we're so excited you're here. How are you today?

• 1:18Rebecca Bellan?

  Thanks. I'm so excited to be here. Yeah, I'm doing great. I'm in the middle. Sorry, no, I'm nearly finished with a deep investigative scoop that I've been working on for a couple of months. I'm so excited to be done with it. So yeah, feeling pretty good.

• 1:32Speaker 00

  Can't wait to read it. For those of you listening, you've likely heard each of these voices popping up in the Equity feed over the past few weeks and we realized we hadn't really formally introduced my new co-host to the world, or as we like to call them now, the new Equity Crew. So I want to give everybody a chance to kind of just say hi and tell you a little bit more about themselves. So Rebecca, share with our listeners, what exactly do you do here at TechCrunch? And how long have you been here?

• 1:59Rebecca Bellan?

  Yeah, so I'm on the Transportation Desk. I've been on the Transpo Desk for about three years. So I've been covering everything from autonomous vehicles to ride hail to batteries. A lot of the companies I cover are Uber, Lyft, Waymo, Cruise, and of course, all things Tesla. I also have a lot of coverage of micro mobility companies due to personal interests. And yeah, recently I've taken over being one of the co-hosts of Equity Monday. And then I also have taken over doing TechCrunch's morning newsletter. So that's been a really great way to kind of span across all the cool work that my colleagues are doing.

• 2:35Speaker 00

  You're doing an awesome job.

• 2:36Speaker 01

  Oh, Rebecca, I have to ask the question, what do you drive?

• 2:39Rebecca Bellan?

  Oh, I drive an analog bicycle.

• 2:42Speaker 01

  Yes, that's the only right way to be on the transportation desk. I love it.

• 2:46Speaker 00

  That's awesome.

• 2:47Rebecca Bellan?

  I actually don't love driving. You'll, you'll notice I didn't say EVs. That's Sean O'Kane is our EV guy. I mean, I, I get what's going on in the business, but I prefer smaller vehicles myself.

• 2:59Speaker 01

  Love it.

• 3:00Speaker 00

  Yeah, love it, love it, love it. Becca, can you share a little bit more about what you do here besides record found every week?

• 3:06Rebecca Bellan?

  Hmm. So I'm on the venture desk. So that means you can find me covering anything within the venture umbrella, whether that's startup news, whether that's a trend about what venture investors are up to, or some fun little scoop details about companies or venture funds. Doing a lot of work with emerging managers and things with climate companies as well.

• 3:26Speaker 00

  It's a little bit of everything.

• 3:28Rebecca Bellan?

  That's the way I like it, a PR nightmare, but fun for me.

• 3:31Speaker 00

  Yeah. Well, hi, and you, you wear many hats here at TC. Can you share with our listeners the many things you do?

• 3:38Speaker 01

  Yeah, I've been at TechCrunch since 2016 or so, disappeared for a while to work in VC and start a startup. Because clearly that was a good idea. It wasn't, dear listeners, it really wasn't. But yeah, so I've been kind of around the ecosystem for a while. And this time around, I'm doing a bunch of fundraising advice and the pitch tech teardown series that I'm working on. And I'm attached to the hardware desk. My first startup was a hardware startup. I used to work at a hardware VC. And so I've got a pretty good view of what's happening in that world and what it takes to build physical products, which famously hardware is hard and. It's really interesting to be able to talk to a bunch of hardware founders again.

• 4:17Speaker 00

  Oh, this is great. I love how you all have like unique and interesting backgrounds that will bring very different and cool perspectives to the show. By the way, Kirsten Korosec will be back as a guest host, but she has a ton of travel coming up, so it won't be as often as we might like, but we'll still have her on the show. So Haya, can you take us through the show today?

• 4:36Speaker 01

  Yeah, we've got a hell of a show. There's been a lot of interesting things happening in the world of startups. Techstars CEO Maile Gavett, she just announced that she's leaving the accelerator and the old boss is back in charge. So that's pretty exciting. We're covering two deals. We're looking at Farcaster and Majority. And we've got a couple of fun themes we're going to be talking about in some more detail. We're talking about a proposed AI kill switch, which I have had a lot of opinions about. And we're also looking at the reckoning coming for emerging venture funds. The Series A crunch is real and I think it's going to get dark. So I'm super psyched to dive into all this stuff.

• 5:10Speaker 00

  Yeah, I know. Me too. Super excited as well. So Techstars CEO stepping down. Were we shocked by this? Not really.

• 5:19Speaker 01

  Yeah, not really. Great summary. Let's move on. Just kidding. I mean, it's been grim in Techstars world for a while, right? They shut down a whole bunch of the accelerators. There's been a bunch of infighting. I've spoken to a whole bunch of startups who are like, oh, Techstars is great and/or Techstars is great, but. So there's always something that gets added to the end and I'm not that surprised.

• 5:43Speaker 00

  Yeah, Dominic Midori Davis, for those of you who didn't catch it, did a very in-depth investigative look at what was going on behind the scenes at Techstars over the past couple of years that published a couple of weeks ago. Maile had posted on LinkedIn that she was leaving mainly due to health reasons. And of course, we wish her well and hope that she will be okay health-wise. What's next for Techstars? The co-founder and board chairman, David Cohen, is taking over. We'll have to see what happens. There's been a lot of upheaval there. So I'm very curious to see the direction the accelerator goes in from here.

• 6:20Speaker 01

  Yeah, there seems to have been a lot of that kind of thing going around, like lots of accelerators shutting down or shifting or changing. And there's something in the air.

• 6:28Speaker 00

  Yeah, something is definitely in the air. But let's move on to our deals of the week. We have a couple of really interesting ones. Rebecca, tell us about Farcaster.

• 6:37Rebecca Bellan?

  Sure, so Farcaster, this is a crypto-based social network founded by two Coinbase alums. They have raised $150 million, which you might be thinking that's actually a lot of money for a social media company to raise that only has 80,000 daily active users and 350 signups. As a reference, Blue Sky has raised, I think, like 21 million per Crunchbase data and has had about 5.6 million signups. But you know, from what I can tell, Farcaster isn't just any social network. I guess you could say it's technically called a social protocol that's built partly on Ethereum's blockchain. And its whole thing is that it invites developers to build other apps on top of it. So you might have heard of its most popular app called Warp Cast,

• 7:21Rebecca Bellan?

  which is sort of like Twitter slash X. You can like add text, images and video. And earlier this year, Farcaster added Frames, which I think is really cool. Have you guys heard of Frames?

• 7:31Speaker 00

  No.

• 7:32Rebecca Bellan?

  It's this ability to like add a mini app as an interactive post onto a user's Warp Cast feed. So users can like interact with this other app right in the post rather than going, you know, exiting and going to another app. And they say that this makes it easier for developers to find users and get natural distribution through recasts, which are essentially retweets.

• 7:55Speaker 00

  I have to say, I was really kind of stunned to see this number. $150 million round these days is not something we see very often, but especially not in the crypto space. I mean, venture funding in crypto last year was down 68% last year. So I'm wondering if this $150 million round, like what percentage of last year's total raised this would be? Because this is just such a large number. It makes me wonder, is crypto like?

• 8:25Rebecca Bellan?

  Is it back? I mean, we've seen Bitcoin go up. We've got this raise. Paradigm led this round along with A16Z Crypto, Han Ventures, some big names. So I don't know, y'all, is crypto back?

• 8:38Speaker 01

  So I suspect that, I mean, I'll be super honest. Whenever I hear crypto, I glaze over and I just, I lose my will to live. But I'm curious if there is something here where we're seeing a maturing of the crypto market, right? So yes, this is blockchain based, but we're actually seeing more applied blockchain rather than infrastructure blockchain. And so this means that they found use cases for where the blockchain makes sense, where it actually has a better use case than databases does. And in that case, I'm like, okay, if you squint, it kind of starts making sense. I need to do a lot more reading about this before I'm fully bought in. But this is actually one of the more interesting platforms, but I'm getting a little bit curious.

• 9:17Rebecca Bellan?

  Yeah, I mean, it's interesting that you say this like applied blockchain thing, because we say it's partly based in Ethereum. What does that actually mean? Barcaster is taking a hybrid approach and one of our reporters, Amanda Silverling, broke down what that means exactly. So it's essentially user identities are stored on the blockchain. And then data like public posts, follows, reactions are stored off chain. So it's very much like a mullet, right? Web two business in the front, web three party in the back. So this makes it slightly more user friendly because not everyone has a crypto wallet. And having to go get one would create unnecessary friction. So I actually signed up for Warpcaster today.

• 9:57Rebecca Bellan?

  And it seems like it created a crypto wallet for me as part of the signup. It cost me $5. You know, I paid with Apple Wallet, whatever, which it said it was an annual fee to cover the web two side of things. So

• 10:10Speaker 00

  That's interesting.

• 10:11Rebecca Bellan?

  It's an interesting type of business model.

• 10:14Speaker 01

  I think you're getting to something really important, right? So the fact that all the posts and follows and reactions and stuff are off chain, I think that's a good thing because if you think about some of the stuff that get posted on things like Twitter, you don't want that to be immutable. Occasionally you want to be able to make stuff go away. There's a lot of horrible stuff. And the other interesting thing is I think Twitter's kind of evolution into X and what Elon Musk is trying to do, it seems like he's basically going back to his old PayPal days, right? He wants to build a banking system and Twitter happens to have an incredible user base, right? So if you can create Twitter accounts that match to real human beings and then

• 10:52Speaker 01

  Implement some sort of a blockchain type solution underneath, then actually you have a really expansive banking system. What Farcaster seems to be doing is kind of a similar thing, just from the other angle. And if Farcaster's pitch was like, hey, we're actually doing what Elon Musk is trying to do with X, except the way it should have been done in the first place, that's a really compelling pitch. And I'm saying that without having any inside information, so maybe I'm horribly wrong. But seeing it through that lens, the 150 million actually sort of makes sense.

• 11:20Speaker 00

  Yeah, this isn't the only social media network that's made headlines this week. There's also Maven. Rebecca, can you tell us more about that?

• 11:27Rebecca Bellan?

  Yeah, I'm actually working on a piece about Maven. I spoke to one of the co-founders, Ken Stanley, who's a former OpenAI researcher. And Maven is backed by Sam Altman. It's backed by F. Williams, who was a Twitter co-founder. And it's very interesting. It wants to do away with the likes of followers, clout chasing, things like that, in favor of more serendipitous internet exploration. So you go on the platform, it's like, what kind of interests do you have? Consciousness, gardening, parenting, computers, whatever. And you can follow these topics. And then you just kind of leave comments. And then the novelty-seeking algorithm that's running it connects you with not only other comments or posts or whatever that are within

• 12:10Rebecca Bellan?

  that topic realm, but also with things that are related, right? So you might be looking at a post on San Francisco, and then it'll be talking about architecture, and then you can learn about architecture, right? So yeah, it's really interesting. Not sure how they're going to monetize that.

• 12:22Speaker 00

  But you're going to be writing more about that, right?

• 12:24Rebecca Bellan?

  Yes. So yeah, keep an eye out.

• 12:26Speaker 00

  Yeah, stay tuned for her deeper dive on Maven. We're going to move on to the fintech space, because there's always fintech news. This week, Christine wrote about an immigrant banking platform called Majority, securing $20 million in funding following 3X revenue growth. Okay, so I have thoughts. First of all, There are so many immigrant banking platforms, to be honest with you. I was a little bit surprised that Majority was able to raise more money in this environment because I feel like there's just so many startups in this space. And no offense, no shade to Majority, but it's getting harder and harder to tell them apart. But anyway, Majority describes itself as a mobile banking service for migrants to the US. Like many of these others, they don't require

• 13:09Speaker 00

  a social security number or US documentation, just an international government issued ID and proof of US residence. To sign up, members pay $5.99 a month to open a bank account and get a debit card. They get fee-free international money transfers, discounted international calling. I love, of course, the premise behind these sort of platforms. I don't know exactly how or why it's different, to be honest with you, but Majority seems to be doing something right because they told Christine they reached $40 million in annual recurring revenue as of April. So I was impressed, first of all, that they shared the numbers with us because that so rarely happens. But that's, that's a pretty good amount of ARR for a company in this space.

• 13:52Rebecca Bellan?

  Yeah, I'm curious about that. It sounds like a really cool platform, speaking as someone whose partner has just immigrated here. And now I'm like, oh, maybe I should look into this. But how familiar are you with the platform? Do you know if they have, I know it's called an immigrant banking platform, but I'm curious if there's almost a B2B aspect of it, like, like foreign businesses able to use it to grow?

• 14:15Speaker 00

  I don't know. I think it's, for now, it's focused strictly on individuals, immigrants or migrants to the US, not so much businesses. But yeah, I mean, I think they really want to just help people, to your point, help people who have moved to this country, get established financially, be able to hopefully build credit. They have access to what they call an advisor program, what they, they describe as a network of trained support staff nationwide who are also immigrants. So the founder himself was an immigrant and he, I think he was from Sweden, Magnus Larsen. He's an immigrant from Sweden. And he said that's, that's why he started the company because he, you know, he went through these problems himself. So some of the others in this space are Maza, Alza, Welcome Technologies.

• 14:59Speaker 00

  Like I said, there, there are a number of them, but Majority is one of the few, I have to admit, that really is showing significant And like substantial traction here. So kudos to the company. Oh, I would like to mention of the 20 million in capital that they secured 12 and a half million of that was equity. And the round was led by a bunch of founders, including Klarna's co-founder, Victor Jacobson, Valar Ventures participated, Avid Ventures also put money in.

• 15:26Rebecca Bellan?

  What are they using the money for? Do we know?

• 15:28Speaker 00

  They said they want to continue developing new products and including helping users establish a credit score and gain access to credit products, which can be very challenging when you're new to this country. It's also building products for redundancies to better manage risk, it said. And they claim that the recent funding is the final step toward profitability. So while I could talk about fintech all day long, I am going to have to move on from this one because we're running a little bit long. But before we stop talking about fintech altogether, I do want to mention that I also wrote this week about another fintech that's not doing quite as well, and that's Copper. It was a team-focused digital bank that had to abruptly discontinue its banking and debit products last week. And that was largely due to the implosion of Synapse, a banking as a service startup, which we've

• 16:13Speaker 00

  written quite extensively about. Copper claims that this move to discontinue banking and debit products has been planned for about a year, but was accelerated in a big way when Synapse imploded. It's not shutting down altogether. It's going to remain operational and focus on its earned product and try to shift to white labeling its banking products to larger established banks, which is interesting in and of itself. So anyway, just kind of wanted to put that out there as well, because that's an ongoing story. So, so stay tuned for more on the fallout from Synapse. So for now, we're going to have to take a break. But after the break, we'll be talking about a few things, including, of course, AI and our reckoning is coming for emerging venture funds.

• 17:01Speaker 01

  All right, welcome back. So we're going to do some talking about AI. I know it's a shock. We rarely talk about AI on the show. But yeah, there's been some interesting movements here around AI safety. So it seems like a whole bunch of companies have grouped together to try and put a little bit of a safety net around some of this AI stuff. So Microsoft, Amazon, OpenAI and other tech giants, they made a whole bunch of commitments to the safe development of their AI models, including a potential kill switch. As a sci fi nerd, it's been really interesting to see how this conversation is continuing. When in parallel also, you know, there's been a bunch of conversations in AI about how do you develop this kind of thing ethically? And how do you keep an eye on AI potentially getting out of hand?

• 17:43Speaker 00

  Yeah, I thought this was great. It's really important because while AI can be, you know, is obviously seen as being a revolutionary technology with a lot of awesome applications. There are also, you know, some scary things that could happen through the use of artificial intelligence. So I was happy to see this. This is being described as a landmark international agreement because these are companies from all over the world pledging to do this. So yeah, I was happy to see it.

• 18:09Rebecca Bellan?

  I'm happy to see it. I'm also a little skeptical because often you see, I mean, it's not, it's not uncommon for companies to come together in a little coalition when they're, you know, launching this kind of pioneer tech and say, we are really thinking about safety. And here are all of the guidelines that we've set up. So government doesn't have to necessarily, right? Like government's really slow to regulate this kind of tech. So I think people are often like, oh, thank God, they're, at least the companies are thinking about it. And they might be, but to what extent? Like, what are the, the risks that would enable this kill switch? I mean, per the CNBC article, risks include, but aren't limited to automated cyber attacks and the threat of bioweapons. But you know, there are other less really intense, but still pretty intense threats

• 18:54Rebecca Bellan?

  that come from AI. I mean, look no further than, for example, India's recent election and all of the deep fakes that were kind of pumped on social media platforms. And that, you know, we're coming into an election year. We're going to experience the same thing. So yeah.

• 19:09Speaker 00

  Great point, Rebecca. So are you kind of saying this is like the kids making their own rules sort of thing?

• 19:15Rebecca Bellan?

  I am not saying it's not that.

• 19:19Speaker 00

  Yeah, I mean, it's always it's always smart to remain skeptical. Ohio, what do you think?

• 19:24Speaker 01

  So I I think it's hard to regulate things when it's unclear what we're actually regulating, right? It feels like we're in this world where nobody really knows the extent of what AI can do. And the regulation only works on the things that you can regulate, right? In a world where you actually get general artificial intelligence that is to some degree self-aware. Like, the nightmare scenario is what happens if this thing starts to defend itself? Like, to make itself unturn offable, right? And I think that's the whole point of a kill switch. Like, is there is there a way where something is centralized enough? That if everything goes to hell, you cut a cable or you you turn it off. And so, like, okay, pause, let's figure out where we're going to go with this.

• 20:09Speaker 01

  But I would also like to think that if if this is the world where we end up in, where where an AI actually is smart enough and powerful enough to defend itself, it would also be smart enough to hide its tracks, I think, right? So in theory, it's great that this exists. In practice, if we ever have to use a kill switch, I have zero faith that we'll be able to pull the plug early enough.

• 20:29Speaker 00

  Interesting.

• 20:30Rebecca Bellan?

  And given the fact that so much is being run by this type of AI, what so let's say you do have a kill switch. What else does that turn off, right? Does it turn off, you know, functions that are that are being run by AI that are necessary? And not just this potentially existential threat? Look, it's good to see that, you know, the companies are thinking about this and talking about this. But I think we also just have to continue to do our job as as reporters and and hold them accountable to the things that they promise.

• 20:58Speaker 00

  Yeah, absolutely. There was, of course, other news in the AI world this week. Meta's AI Advisory Council was announced. And unsurprisingly, or surprisingly, depends on who you ask, it was made up, excuse me, of five white men, no women, no people of color. There was also the ChatGPT controversy where Scarlett Johansson got really pissed off because she felt like the OpenAI's Sky Voice sounded a whole lot like her. And she claims that that she was asked if they could use her voice, and she said no. So hmm. If that's really true, if OpenAI went ahead with that knowingly, that's just not cool.

• 21:37Rebecca Bellan?

  Yeah, I actually, just a quick note on that. I read a really interesting piece in The Atlantic about this, and it was very much kind of looking at AI and consent. And clearly, there was a paper trail here, like, OpenAI asked Scarlett Johansson, can we use your voice? She said no. And then they were like, eh, we're just gonna do it anyway. So

• 21:55Speaker 00

  And pretend we didn't.

• 21:56Rebecca Bellan?

  Yeah, and pretend we didn't, and act like we didn't. And so he said, she said, it's very icky. And that's just, you know, it's like a little microcosm of how this will continue to play out as all of the data that OpenAI and other companies are using is, you know, scraped, consensually or not, mostly not, from creators all over the world from all of time.

• 22:17Speaker 01

  Yeah, and that kind of goes with a bunch of other stuff, too. Like, one of the previous OpenAI data sets that was used to train a massive model, the Writers Guild was like, hey, where did this data set come from? You had a massive set called books.zip or whatever. And it's like, okay, what was that data set? Where did all of this stuff come from? And they say they deleted the data set. It's like, wow, it's not like you don't have enough storage on your servers, guys. Clearly, my personal opinion is that somebody did something dumb. And then the researchers that build a data set are no longer with the company. And I think this is where a lot of this stuff gets a little bit icky, right? The whole move fast and break stuff ethos that Facebook and Meta are famous for is one thing. But guys, haven't we learned anything?

• 22:58Speaker 00

  No, the answer is no. And speaking of not always learning anything, we're going to start talking about venture capitalists. So Christine also did this deep dive, which was really interesting, looking at emerging venture funds, which I was surprised by a stat she uncovered. PitchBook is tracking over 10,000 funds currently trying to raise money, and 45% of them are actually emerging fund managers. And for those of you who are not familiar, emerging fund managers are defined as firms with less than three funds, so much smaller. I was surprised that there were that many of them. And I know we've talked about this on the show recently, that despite this environment, there are a lot of new emerging

• 23:40Speaker 00

  funds trying to raise money right now. So this is kind of fascinating to me. It's it's very ambitious. It's a very ambitious time to be trying to raise an emerging fund. And I think only a very small percentage are going to be very successful. What do you think?

• 23:55Speaker 01

  Totally. I think there's a couple of really interesting things at play. In kind of the major heydays of 2021, when everybody was like throwing as much money as they could at VC. If you are a talented operator and you're able to spin some yarn around you having differentiated deal flow and having access to deals that nobody else did, some of the LPs got excited and they started deploying cash. And the truth is VC is hard. Like, it's not just about finding the right companies and deploying money. It's also about doing board work that is fiduciary responsible, right? And so I feel like a lot of the emerging fund managers, they were like, hey, we can get access to deals that nobody else can. And they raised the first round of funding. But then they realized, wait a minute, the sheer amount of admin.

• 24:39Speaker 01

  And this is fintech, right? And people forget that this isn't just throwing money at startups. This is actually building financially responsible models and doing all the work that goes with it. And I think a lot of that skill set is missing among the emerging fund managers. And so when the money dries up, I am unsurprised that people say, oh, actually, maybe this wasn't the best idea. My personal opinion, but I'm seeing some chatter about that happening out in the ecosystem.

• 25:08Speaker 00

  Yeah, and it feels like a lot of these new managers are trying to differentiate themselves by specializing and targeting very certain or specific industries where their general partners might have expertise to give. I mean, that makes sense too, because otherwise, if you're just broadly raising and investing broadly, it's harder and harder to differentiate yourself, right? Especially if you're trying to raise money. So I think that it's probably just as hard or even harder to try to raise money as an emerging fund manager than as a startup founder right now. I mean, last year, according to research from Raze, only 20% of emerging managers were raising $100 million or more funds last year. 2022, that was 29%.

• 25:52Speaker 00

  So definitely, most of the action is taking place in the between 0 and $49 million range.

• 25:59Rebecca Bellan?

  I wanted to touch on something you just said about specializing and needing to specialize because we had another story on TC this week. Andreessen Horowitz's American Dynamism Fund, they established a new fellowship program aimed at introducing top engineers and technologists into venture funding. So I guess the goal there is to maybe have fewer finance bros getting into VC and more people with actual technical experience because maybe they'll be able to pick out better startups to invest in.

• 26:27Speaker 00

  Yeah, I was actually really interested in that. I thought it was a pretty good strategy. I mean, the technologists really understand, obviously, the technology in a way that a finance expert might not. So I thought, well, this makes sense and why hasn't this not been a bigger deal before?

• 26:43Speaker 01

  Yeah, and I think to build on that, the American Dynamism Fund in particular is investing in the mercurial side of the world, right? It's national security, it's defense, it's space tech, and this is somewhere where VCs traditionally haven't really played as much, right? And so I think if you're going to build that kind of fund, you do need people who really deeply understand how national defense, national security, law enforcement, justice reform, all those kinds of things. My personal opinion is that the world would be better off if they weren't deploying this cash. But if you're going to, then make sure that you have the people who can do the due diligence to actually deploy this cash in ways that make sense.

• 27:21Rebecca Bellan?

  Yeah, and as we see VCs when they're looking at founders and founding teams, they want people who've maybe done the job before, who have expertise in the subject matter. And the same should be true, I think, for a lot of VCs. And you can really tell the difference. As a reporter, when we reach out to VCs to ask for their advice or information about an industry, you can tell the difference between someone who really understands the subject versus someone who it has more of like a bird's eye view of the funding landscape for that subject, right? And that makes all the difference for knowing whether or not a company is going to be successful.

• 27:56Speaker 00

  Yeah, one other point, just as an example of how challenging or difficult the current venture capital fundraising environment is. Even Peter Thiel founded Vilar Ventures raised a much smaller fund this year compared to previous ones. Specifically, they raised $300 million, which was half the size of their last fund. And even Peter himself said that he feels bad for funds going out this year. On that note, we do have to wrap up the show, but hey, we'll be back on Tuesday next week due to a holiday weekend here in the US. Until then, you can still find Equity under the handle equitypod on X and Threads. And don't forget to check out our sister show Found, which dives deep into the stories behind startups with the founders who built

• 28:41Speaker 00

  them. Thanks for listening and talk to you soon. Equity is produced by Teresa Loconsolo with editing by Kell. Bryce Durbin is our illustrator. And we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening and we'll talk to you next time.