Pod Insights Equity Podcast The whole venture merry-go-round is decelerating About this episode This week, Mary Ann and Alex had the pleasure of having TC reporter extraordinaire Dominic Madori-Davis as a guest on the show.
Here’s what we got into:
A quick update on the SBF trial, which quite frankly, has us all riveted.
An Atlanta-based fintech startup called Rainforest’s $8.25M equity raise and how it is hoping to take market share away from the likes of Stripe.
A bunch of new fund raises this week, including At One’s $375M climate-focused raise; Section 32’s $525M fund close and Greylock’s $1 billion haul.
With so much capital flowing to VCs, it is more than a little mind-boggling that venture funding declined for yet another quarter in the three-month period ending September 30. But it did.
Dom came on to talk about Fearless Fund’s being barred from awarding grants to Black women founders and how how data can help improve social impact investing.
Equity is back next week bright and early on Monday. And we have a lot of really cool interviews coming up. So make sure that you are tuned in and caught up!
For episode transcripts and more, head to Equity’s Simplecast website.
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Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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Transcript 0:11 Speaker 00 Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. My name is Alex and I am joined, as I always am, by my dear friend. It's Mary Ann Azevedo. Mary Ann, hi, how are you?
0:25 Speaker 01 Hi, Alex, I'm great. How are you?
0:28 Speaker 00 I'm surprisingly good for how little sleep I got last night. There was a spouse who was on call and his pager was going off all night. There was a baby, he was crying. There was a dog that was vomiting. It was the full circus.
0:41 Speaker 01 Wow. And you look chipper.
0:44 Speaker 00 I feel okay. I have drank a lot of coffee, so I'm going to crash really hard about 4:30, but we're going to get through it and we're going to rock and roll. It's going to be great.
0:52 Speaker 01 Let's go.
0:53 Speaker 00 All right. So today on Equity, we have deals of the week. We're talking about Rainforest, At1 Ventures and Section 32. So if you have wanted venture capital news, we have that for you in spades. And then we're going to take a first look at Q3 venture capital data from around the world, where things are going well, where they're not, and why there is still no exits. And then we're going to wrap up with social impact investing and an update on the fearless fund saga that we had discussed on the show. And we're going to bring Dominic Madora Davis on for that at the end. Phew. But Mary Ann, to start, just a quick note, the SPF trial is still going on. We had an episode with Chain Reactions, Jackie Melanick earlier. And I have to say, I am riveted by what I guess is kind of like tech trial of the century.
1:36 Speaker 01 Yeah, for sure. I mean, I'm a little envious of Jackie being there in person. I mean, what an experience that must be to see all this unfold live. I know that this is going to be fodder for years to come for probably movies and all sorts of things. I can't wait to see how it all just turns out.
1:55 Speaker 00 Yeah, the only thing I'll say is I'm also jealous that she's there in person because it's always fun to witness, you know, big moments in like, history sounds too grand, but you know what I mean, things that are happening.
2:04 Speaker 01 Right.
2:04 Speaker 00 But given that she has to give up her laptop and phone all day, I mean, When is the last time you were offline for a day?
2:12 Speaker 01 I didn't realize that. How can she take notes?
2:15 Speaker 00 So there's this, this green technology called trees. And what we've done is we've cut them down and then we've smushed them into little sheets. Right. But that's not very good because then you can only carry kind of one at a time. So the innovation, and this is new, is we've bound the sheets together into what we're calling notebooks as in a book of notes. I like the name. I think it works. And then if you, if you, if you take rocks and grind them, you can turn that into a paste. And then if you, you can make a small, like, plastic tube and put the paste in there. And then if you put a ball at the end of that, it'll actually let the paste out onto the dead tree. And then you can take physical notes without needing an internet connection. It's a little bit busy, but it does work.
2:54 Speaker 01 I completely like forgot since I started my career taking notes this way, right? With a little notepad and actual pen and paper. And it just, here I was thinking, well, how on earth could she do?
3:06 Speaker 00 Well, no, it's funny because, you know, when we were in like, you know, second and third grade, they were like, you have to learn cursive or you're going to die. And then they were wrong. But if you're a courtroom reporter, apparently they were right. All those teachers, all those years ago.
3:19 Speaker 01 Wow, her hands must be tired.
3:21 Speaker 00 Yeah. But impressions of the trial that you've read about so far? What are you, what are you thinking?
3:25 Speaker 01 I mean, obviously it's fascinating. She gave a really colorful look into the jurors themselves, their backgrounds and the gender makeup and just the different professions and just all of it's really fascinating. Like I wonder what's going on in their minds, a lot of them. I think there was like a high school teacher. There were, yeah, just, just a very down to earth bunch, it seems.
3:47 Speaker 00 Yeah, I'm just, we're in week one, and so I feel like we're still learning. So we'll have a lot more to come, but I'll just say it's shaping up to be fascinating, given the number of people whose names we know who are expecting to testify. So more to come on that, of course, you know, chain reaction, if you want more and more and more of that. But we'll have the highlights on equity as they come up. But Mary Ann, let's talk about some venture capital deals. Let's get back to our roots and let's talk about what's going on with Rainforest. And why, and you got to convince me of this, why I need to be interested in yet another embedded fintech company.
4:18 Speaker 01 I know, right?
4:19 Speaker 00 Convince me here.
4:20 Speaker 01 I know. It's kind of tough since there are so many of them. But Rainforest did stand out to me, I have to admit. For one, I like that they're based out of Atlanta, right? Atlanta, which I know, I think Dom did a feature earlier this year on how. It really has this hidden gem of a tech hub or is a hidden gem of a tech hub. But they're based out of Atlanta. I talked to Joshua Silver, its CEO. And what they're doing is specifically working to help software companies embed financial services and payments in their offering. And Joshua's just very, I liked him. He's smart. He's just seemed very authentic. And I love how he kind of countered with nothing but respect.
5:00 Speaker 01 Andreessen's general partner, Angela Strange's famous declaration in late 2019 that every company will be a fintech company. And by that, she meant that, you know, every company would derive a significant portion of its revenue from financial services at some point. And, you know, that's played out to a certain extent, but he argues, you know what? No, not every company really wants to be a fintech. There's a lot of headache. You have to be regulated. There's risk management. There's compliance. So he says, no, most of these software companies really just want to add payments. And that's what Rainforest is there to do.
5:31 Speaker 00 So here's where I, I'm going to go ahead and just say that I think that Angela Strange was right. And that he's almost arguing a nuance that isn't. Okay, so Andreessen says, the venture capital firm says, majority of companies are going to be fintech companies. They're going to drive a lot of the revenue from fintech. Reasonable, I agree. And I think the verticals as boom of 2020, 2021 made that case. A lot of companies got into payments as a way to drive extra revenue from their customers. Fair enough. And then the Rainforest quibble is that companies don't actually want to build that tech themselves. They just want to have fintech services. So Rainforest will help them embed them. But what's the difference? You know, I don't know. It feels, it feels like we're trying to find a hair if they do the fintech stuff in-house or they hire someone else to kind of offer the tech to them, right?
6:16 Speaker 00 That's my vibe. Am I being, am I?
6:18 Speaker 01 No, you're right. Hundred percent right. Yeah, no, you're right. But for him, it means, okay, well, then we get to be that, that provider that helps them do all this and make all the money off of it. You know, so you're right. I don't think she was wrong, but I also don't think he's wrong. That's the diplomat.
6:35 Speaker 00 Maybe what we're trying to say is they both have a point. Angela was making a more general point that was directionally correct. And here Rainforest is trying to almost like implement the spirit of the idea without letting the technical difficulty of doing fintech spread out too far. And this is a good use of technology. If you can offer this service and it works really well. The thing that I'm just curious about is, you know, they just raised eight and a half million in the seed round. Is that enough capital to really go out there and make a dent, given how much money fintech companies have raised that are also in the pretty competitive, I would say, embedded fintech area?
7:07 Speaker 01 Yeah, I mean, it's a good point. They raised like another 3.25 million or secured 3.25 million in a debt facility as well. But still, in the grand scheme of things, it's not a huge amount of capital, especially when you look at Stripe, which is essentially a competitor here because what Rainforest is doing is competing with Stripe Connect. And we're talking about a massively funded company valued at like $50 billion. But, but I really like that Rainforest doesn't seem to be intimidated by that, right? They're just like, look, we're doing this, we're doing it well. In just a short amount of time, they had secured client commitments representing more than $500 million in processing with much of that volume guaranteed. They're just heads down. They're like, they're not too worried about it. Like, I don't think they're
7:49 Speaker 01 trying to be the next Stripe. They just want to take some market share from Stripe. And it's a big enough market. So, you know.
7:55 Speaker 00 That's what I was about to say. They don't even really have to take market share from Stripe. They can just grab market share, period. And that's why I was probably a little bit too bold in my prior statement about competition, because I keep forgetting how much volume there is here to go after. It's a bit like how there's so many startups that are trying to solve B2B payments. And like this year's YC, I think, had a couple of these. And I'm like, oh, my God, again. But then I realized there's so much money that moves between corporations. If you can grab a couple of bips of market share, you're a big company, you're doing great.
8:26 Speaker 01 Exactly. Yeah, exactly. And so, you know, it's not just the other startups, but they're going after like the legacy players like Fiserv, FIS. So I think it's a company to watch. I'm going to be paying attention. I also thought it was interesting that their revenue model is entirely consumption based. So they earn a small percentage of each transaction processed. You know, again, a little bit different. This one was just. I can't articulate it specifically, but it was just different talking to this company.
8:53 Speaker 00 Well, I mean, you're talking about the founder X factor, which I think is what VCs are always hunting for. And I think the difficulty in articulating it is because it feels different, but in a way it's a little bit ineffable. And some people, just when you talk to them, that's how they make you feel. I want to do a quick aside before we talk about section 32 and At1 Ventures, because when you were talking about competitors, you brought up Stripe, and I was thinking about Phoenix.
9:16 Speaker 01 Yeah, I did too. I did too. But it turns out that in digging a little deeper into this, I think it would be more analogous to Stripe connects offering.
9:25 Speaker 00 But if I was correct to think about Phoenix or not, I just Googled Rainforest Phoenix, expecting it to bring up one of those like, you know, Rainforest or Phoenix, which one's the right one for you? So I could kind of compare and contrast. Google decided that I must have meant Rainforest Phoenix, which is a place in Arizona, did not give me the option to say, no, I meant Rainforest Phoenix, and then began to offer me plumber and H back contractors in that area, and then also information about Mumbai. This is what I mean when we say Google has gone to shit. Because 10 years ago, they would just like, oh, Rainforest Phoenix, they shared a founder, here's a blog post they wrote back in 2002. All right, back to venture capital.
10:03 Speaker 01 Yeah, but first I do have to tell you, we were both on the same wavelength there, because I too immediately thought of Phoenix, because they do cater toward vertical SaaS companies as well. So yeah, agreed. I don't know, we're gonna, we're gonna have to see how this all plays out. I think that, again, there's enough room for all these players, but
10:19 Speaker 00 I figured it out.
10:20 Speaker 01 You figured it out? What?
10:22 Speaker 00 I figured it out. So Richie, who runs Phoenix, recently came to disrupt, he's a nice enough guy. He buys Rainforest and then uses it as a cudgel to beat on Stripe. And then we get ourselves a good corporate rivalry. Because I miss the days of Lyft and Uber, you know, when they were really going at it. Everyone's all like, oh, we don't really have competitors, blah, blah, blah, blah, blah.
10:42 Speaker 01 Right. Just say it.
10:45 Speaker 00 Yeah, I was a spicy CEOs.
10:47 Speaker 01 Richie, to his credit, is not shy about about his attempts to take on Stripe. So Richie, if you're listening, check out Rainforest.
10:55 Speaker 00 Yeah. And if you do buy them, well, don't blame us if it doesn't work out. All right, we've got a couple of new venture capital stories this week on the fund side. So if you are out there building something, this is for you. Mary Ann, the one that I picked is At One Ventures, A T space O N E, which Tim on my team pointed out might actually be a way to just break up the word atone, because At One Ventures does invest quite a lot into what I call, generally speaking, the climate and sustainability space. They have put together a $375 million new fund, which compares very favorably to their last fund, which was $150 million. And Mary Ann, a couple of years ago, we saw venture capital funds getting much larger very quickly. That has changed.
11:37 Speaker 00 And also, I feel like climate and sustainability were still bad words in venture a couple of years ago. So to see this fund in this sector, raise this kind of capital, to me, really stood out like a very positive sore thumb.
11:50 Speaker 01 Yeah, for sure. Agreed. I mean, we're talking more than more than double the last fund. They were shooting for 300 million, so they got way over. And that's great. And Tim did a great job with this piece, you know, kind of taking us into the mindset of the firm and Tom Chi, who is, let's see, is he the founder? He's the founder of About One, right?
12:09 Speaker 00 Yeah, I believe so. If my if my notes are holding up here.
12:12 Speaker 01 Yeah.
12:13 Speaker 00 Tim, by the way, who did write this, Tim Deschamps, he's one of our climate reporters, also just a very solid writer. And so whenever he turns something in, I just, he always has at least one turn of phrase that I really appreciate. But the whole, like, a couple of paragraphs that opened this story about timelines and the perspective of adventure and thinking about long-term issues, very interesting and just.
12:33 Speaker 01 Well done.
12:33 Speaker 00 You ever read something and think, shit, I should have written that?
12:36 Speaker 01 Or, yeah.
12:36 Speaker 00 Tim makes me feel like that a lot.
12:38 Speaker 01 Yeah, like, I wish I could write like that. He's, yeah, he's really, he's really good. He's good at, like, bringing visuals in. And, um, yeah, he did. He did a great job with this piece. And I liked it. And I liked that he wasn't just talking about philosophical things. He said that At One. Judges startups on three fronts, what they call the triad. And I thought this was important, right? That do the startups, does it work on deep tech that's sufficiently disruptive? Are the unit economics radically better than the incumbents? And does it make a significant dent in an environmental problem? Now, all of that seems basic and obvious, right? But I don't know if it is to all firms. So I like how they laid that out.
13:16 Speaker 00 So there's so much to like about that. And I know we need to compress a little bit because we do want to save room to talk about section 32, which is also very interesting. But on that triad point, is the deep tech sufficiently disruptive? That is essentially saying we're going to go after things that are risky, which I appreciate in a venture capital firm. This is not a bank loan, right? And then are the unit economics radically better than incumbents? That, to me, is the actual definition of technology. It is a new method of doing something that is much better, more efficient, or cheaper. And I've tried to like, explain this in some of my writing before, and I haven't done as good of a job as saying, are the unit economics radically better? That's a very clear and concise way of saying, we want to back things that are not incremental changes, but are step function differentials.
14:00 Speaker 00 And then the last bit here, significant dent in environmental impact or fixing problems. I was talking to some climate VCs the other week for an SOSV event. Ned, who used to run TC, is now over there. So he taps us to do some climate panels once a year, which is a good use of time. And I was talking to some of these VCs and they were like, we want to invest in things that are going to remove like gigatons of carbon.
14:22 Speaker 01 Right.
14:22 Speaker 00 That's one of the metrics that we're looking for. It's not just the business model, but it's also the impact. And so to see them say this really makes me appreciate what climate VCs are doing because they are adding, I would say, another filter to their investments, and one that helps everybody, whether they know about it or not.
14:37 Speaker 01 Yeah, no, I agree. It really stood out to me as well. Yeah, so as we mentioned, it's not the only, only firm that closed on a pretty large fund this week. I wrote about section 32, which closed on a $525 million fund. It's fifth. And for the unfamiliar, section 32 is a venture firm founded by ex-Google Ventures CEO, Bill Maris. He founded it 2017 and since then it has backed about 100 startups.
15:02 Speaker 00 Wow.
15:02 Speaker 01 It has about $2.3 billion in assets under management. And I feel like it's one of those firms that's just been quietly working because it's backed a lot of pretty big names, but I hadn't really heard much about Section 32 prior to this week.
15:17 Speaker 00 Well, not only venture capital firm invests as much of their fees into PR and content generation.
15:23 Speaker 01 Right.
15:23 Speaker 00 And treason made that kind of the norm, going back to that firm for a second. But some funds are pretty quiet, like if I like to bring this up a lot, but go look at the benchmark website, right? Kind of old school, quiet VC. So, you know, we talked to Section 32, but we probably won't talk to them again until they raise the next fund because they just don't, they're just not very loud.
15:44 Speaker 01 They're not.
15:44 Speaker 00 I don't mind.
15:45 Speaker 01 Yeah, they're not loud at all. I talked to the CEO and managing partner, Andy Harrison, who's also a former Googler. Isn't that what they're called? Former Google employees?
15:53 Speaker 00 No, former Googlers are Zooglers because they're ex-Google.
15:56 Speaker 01 Okay, Zoogler. He's, yeah, he was also at Google, let's say that.
15:59 Speaker 00 Also at Google, yes.
16:02 Speaker 01 But anyway, yeah, he was telling me how the firm is focused is to invest in software driven businesses and tech and healthcare that quote, improve the human condition. But some of the companies they've backed include Coher, Scale AI, Gusto among, they've even invested in the ARC, the electric vehicle, the electric boat startup that Kirsten wrote about and we talked about last week.
16:24 Speaker 00 The boat startup that we all decided meant that we were in the wrong profession because the boats cost as much as our houses?
16:29 Speaker 01 Yeah. Yeah, so they've backed a lot of different companies. They really lean into the lineage, the Google lineage. They have a lot of relationships still with people who used to work at Google. So a lot of their deal flow comes from people who used to work at Google, things like that. And so like some of their investments are sourced from or can be traced back to Alphabet, Google's parent company, including Coher and Inceptive and a couple of other like bioscience companies. So I also thought their perspective on AI was interesting. Andy said that they're very, very careful about how they invest in the sector. They are trying to be disciplined about it. And this quote stood out to me. He said, "We believe that there's a zone of commoditization that you have to avoid while investing in AI. The big companies like Google and Microsoft are going to give these capabilities away
17:14 Speaker 01 to customers." So they're really focused more on the application side of AI.
17:19 Speaker 00 I think as, as open source generative AI models get better and they become Good enough. That's going to definitely lead to a market in which certain things are commoditized. They won't be inexpensive to actually run the processing on, but that's going to come down in cost as well as compute itself gets more powerful and cheaper as time goes along. So I can kind of see what they're talking about, but I do think it raises a very interesting point. Everyone wants to invest in AI. No one wants to invest in something that's going to become table stakes for big companies later on because you can't compete with that.
17:50 Speaker 01 Right, exactly.
17:51 Speaker 00 Yeah. All right. After this break, we're going to talk about the global VC market and then also what's going on with fearless fund. But first, my dear friends, a very short break.
18:04 Speaker 00 All right, Mary Ann, that is new fund news behind us. It's venture capital funding runs behind us. Now let's talk about the overall picture that we're seeing about Q3 venture. And I have to ask, are you shocked that the numbers are not amazing?
18:18 Speaker 01 I'm not at all shocked because it is very, very much in line with what my inbox looked like over the third quarter. It was slow. It was a slow funding quarter. There were not a lot of deals and the ones that I did see were pretty small. So I'm not shocked, but I do, I do think it's interesting that we're writing about so many new funds, yet VC funding itself just continues to decline quarter over quarter.
18:45 Speaker 00 So that's what I really wanted to highlight here because what we're talking about is the preliminary Q3 data from PitchBook. We're going to get a lot more from CB Insights and Crunchbase and, you know, Deal Room and everyone else, but we're looking at this first kind of data set. And there's a couple of things that stood out that Mary Ann just aptly brought us to. So first of all, the Q3 global number from PitchBook is that we saw $73 billion worth of investment in the quarter, which is a lot of money, Mary Ann. It's, you know, three quarters of 100 billion. It's nothing small, but it was 81.4 billion in Q2. It was 92.7 billion in Q1. And then basically it's been declining since Q4 2021. So I think this is like the seventh
19:25 Speaker 00 quarter of sequential decline, not just year over year. And I think that backs up what you're saying. Things are slower.
19:32 Speaker 01 Things are a lot slower. And if I recall correctly, in the fourth quarter of 2021, it was over 200 billion, right? In funding?
19:41 Speaker 00 It was 213.4, according to PitchBook, which is
19:46 Speaker 01 Crazy.
19:46 Speaker 00 That's, that's nearly a quarter trillion dollars.
19:49 Speaker 01 That's almost triple.
19:50 Speaker 00 Nearly a quarter. I can do math.
19:52 Speaker 01 Yeah, well, almost a quarter of a trillion and almost triple of what we saw in this last quarter, which is insane.
19:59 Speaker 00 Yeah, it really goes to show just the massive change we've seen. But what blows my mind is that it was steep at the beginning and the declines have slowed down since, but it just keeps happening. And so now I'm kind of curious when we will reach the bottom point, the nadir, if you will, of venture capital dispersment. But you talked about Mary Ann, about new funds versus venture capital fundraising on their side. And just to put some numbers around that, in 2021, VCs raised themselves 338.7 billion. Again, according to PitchBook, last year, not as much of a decline as you would think, 291.8 billion through Q3 of this year, 110.
20:36 Speaker 01 Wow.
20:36 Speaker 00 That is.
20:37 Speaker 01 Massive draw.
20:38 Speaker 00 Massive. And so the money flowing into VC has slowed, but funds have a multi-year timeframe. So some of the capital is still flowing, but it does mean that in a couple of years, there's going to be a lot less money flowing around unless that changes. So sure, Atwin Ventures, sure, the other fund, but like, they almost look like outliers, you know, versus like indicative.
20:56 Speaker 01 And Greylock also closed in big fund this week, but I saw anecdotally Keith, is it Raboy? Am I pronouncing his name?
21:02 Speaker 00 Yeah, yeah, Keith Raboy. Yeah, yeah.
21:04 Speaker 01 Oh, from Founder's Fund. He tweeted, and gosh, I wish I had the tweet in front of me, but he tweeted that how much he had invested in 2021 and 2022 compared to this year. And it was, it was a dramatic difference. And I thought that was also just kind of a prime example of what we're seeing in general, right, in the venture world. And now I'm like determined to find this somehow before we, before we stop recording. But I think it was only like $6 million, he said. He'd only invested like $6 million this year. Something just shocking almost.
21:39 Speaker 00 I mean, seeing people talk about how much money they're actually putting into work is almost anathema in venture, because no matter what VCs want to say that they're investing, they're always looking for new deals because they don't want to miss out on deal flow. So to see someone actually talk about their capital dispersment is notable and does kind of mark the times. The last thing I want to bring up about this particular topic with the preliminary data, though, is that we're just seeing a similar kind of decline in exits. So it feels like the music is slowing across every possible element of venture, money into venture capitalists, money out of venture capitalists, and the money back to venture capitalists and their own investors. The whole merry-go-round is decelerating. And a couple of IPOs in Q3 were not enough to really change the dynamics there, even though, you know, I'll take another Instacart, I'll take another claw here.
22:23 Speaker 00 Don't get me wrong, but drops in bucket versus, you know, change in the water table, if you will.
22:28 Speaker 01 Yeah, you know, everyone was predicting a lot of M and A this year, and it started out kind of strong in that, in the world of like acquisitions or mergers. But then, wow, like after I think, I'd say maybe after the second quarter, it really started just tapering off. I mean, I've seen a bunch of like little consolidations, but not nearly as much as I think everybody was predicting.
22:50 Speaker 00 Oh, no. And like we're, we're at roughly through Q3 of this year, I think at like 12 or 13% of the numbers we saw in 2021.
22:57 Speaker 01 Wow.
22:58 Speaker 00 Just to show you how much, yeah, I mean, 2021.
23:00 Speaker 01 That's all?
23:00 Speaker 00 Was nuts. Yeah, it's not. Global VC exit activity, to use PitchBook's terms, is down a lot. And I don't think Q4 is going to save it, given that we're already into Q4. We haven't actually heard, I'm not hearing rumblings, Mary Ann, of mega deals or mega acquisitions or upcoming IPOs. So things here is kind of cooked.
23:18 Speaker 01 I think it's kind of surprising though, because we have less venture dollars flowing into startups. We have hardly any companies going public. So it just seemed like it would be logical that more companies would be joining forces and, and like, okay, we don't want to die. So let's just team up and, and try to be a stronger one company instead of two meh companies. But it's not, I guess it's not happening as much as we really would have thought.
23:42 Speaker 00 Are you familiar with the phrase, the market can stay irrational longer than you can stay solvent?
23:47 Speaker 01 Well, no, I was not, but yeah, it makes, it's very true.
23:51 Speaker 00 Well, I mean, slightly, slightly by analogy, but like the gist of that phrase, if you're not familiar with it, is that you can be right about something, but be way too early and the market can just keep being strange for a long time. Housing bubbles always last longer than people expect. For example, people will be banging the drum like, oh my gosh, this is crazy. It'll take like four more years. And so in this case, I feel like what we're describing, Mary Ann, is we're like, okay. The oxygen's out of the room. Everyone's got to share a tank here, but not so much. But I do think that's why we're hearing about more startup deaths because if you can't combine, you can't exit and you can't raise and you don't make money. Eventually you hit the zero cash date and you you shutter. So that's the vibe that I'm expecting to see more of.
24:29 Speaker 01 Okay. And before we conclude here, I finally found that tweet that I was talking about. I have to clarify. Okay. It was not, it was not something that he tweeted. It was something that someone else tweeted quoting him talking to someone else. And supposedly he said, Keith Rabois said that on average, he invested $110 million a year in new companies over the last 10 years while at COSLA Ventures and Founders Fund, but only $6 million in 2022 and similar in 2023. I mean, to go from 110 million a year to six?
25:04 Speaker 00 That's, I mean, that's nearly to zero in comparative terms.
25:07 Speaker 01 Wow.
25:08 Speaker 00 You know?
25:09 Speaker 01 Right.
25:09 Speaker 00 So that I think shows the the mood of the moment. He's not alone in that. We'll do breakdowns on a regional basis probably next week. But I want to narrow our focus down to something going on inside the American venture capital landscape. And to help us understand this, we have brought back Dominic Madori Davis, one of TechCrunch's finest, co-host of the Found podcast on the TC Pod Network. Dom, hi. Thank you for coming back.
25:32 Speaker 02 Hi. Thanks for having me back.
25:34 Speaker 00 Absolutely. And we're having you on because, well, a couple of things. But the first one is there's some news from the Fearless Fund saga that we've been talking about for some time now. So can you catch us up on the latest?
25:44 Speaker 02 Yes. Okay. So this weekend was a mess. All right. So basically what happened is on Saturday, the courts or panel of judges ruled that Fearless Fund cannot give out its $20,000 Striver grant to black women businesses until another panel of judges can give a final decision to see if they should be allowed to give out this grant while this lawsuit is happening. And you have to know that this is really dramatic because on Tuesday of like last week, initially a judge said that they can give out the grant. And then Edward Blum, who is from the A A R, which is suing Fearless Fund, asked for an emergency hearing. Which led to the emergency panel of judges, which led to Saturday's decision reversing
26:27 Speaker 02 the original judge's motion. And so it was so insane because Fearless Fund, like everyone was coming out saying like, you know, we won this first round, we got it. And then like just a few days later, it was like all taken away. And it's basically, the grant is now in like a limbo state because the new panel of judges, which is supposed to make the final decision, no date for when they're supposed to come together has been announced. So basically, it's kind of like this grant is indefinitely suspended.
26:53 Speaker 01 I mean, this actually, it's so surreal that it almost feels like it should be an onion headline.
27:00 Speaker 02 It's pretty wild, but you know, Fearless Fund is not the only one. The Small Business Administration is, has also been sued, the Minority Development Business, something, it's a lot of M D B D initials.
27:11 Speaker 00 I tried to Google that. Yeah, that's quite the acronym.
27:14 Speaker 02 They're being sued. Yesterday, a company called Hello Alice came out saying that they were also being sued for giving out grants for black women. Like, this is just, this is a trend. Like every, like if you have a grant for black women, it seems like you were going to get sued.
27:29 Speaker 01 Wow.
27:29 Speaker 00 So, but the goal here, Dom, is not to stop Founders Fund from giving out, let's be just brutal about this, relatively small checks in a venture context. It's about stopping anyone from trying to give out targeted grants to underrepresented peoples, right?
27:47 Speaker 02 Well, and see, that's the bigger picture. I had someone slip into my DMs saying like, oh my gosh, it's just a $20,000 grant. But it's not just a $20,000 grant. This is a lawsuit, meaning that this is trying to attempt to shape like legislative policy. Like, this is one grant, but this lawsuit is going after all of the grants. Because what happens to even, this could, you could even open this up to scholarships or anything that targets a minority group. All of that is going to be at risk and it creates policy around this issue, rather than just, you know.
28:16 Speaker 00 Precedent, yeah.
28:17 Speaker 01 Yeah, I mean, yeah, totally. The, the dollar amount is almost irrelevant, I would say, just because, well, first of all, $20,000 is relative, right? To some people, that's a huge amount of money. So to diminish it by saying, oh, it's just $20,000 is actually just kind of, I don't know, elitist, I guess, or just.
28:35 Speaker 00 Rude?
28:35 Speaker 01 Yeah, just, and ridiculous. But to your point, Dom, it's really more of what all of this symbolizes. And I think one of your stories ended with a quote that really stuck in my mind. And it was by, it was from someone in the UK saying, while nobody will explicitly utter the words, "We're no longer investing in black initiatives because the majority of the US no longer cares," that sentiment seems to be lurking beneath the surface. "We built our own tables and now it seems like everyone is cutting off the legs."
29:03 Speaker 02 And you know, I thought that was so poignant because I didn't even, at first I was like, this, maybe it's not impacting the UK, right? This is a very US issue, maybe it's not. And her and I, we were just having a conversation and she was like, "Oh yeah, by the way, we're all following this." And so I was like, it's so interesting because this is such a universal feeling with like black people throughout the Western world, that people are kind of trying to take away things that they've built. And the fact that, you know, she can say those things and that can apply to almost any black founder in any Western nation, I think is, it's really something.
29:36 Speaker 00 Yeah. It's also amazing to me how petty this all sounds because, yes, this is about a broader issue. Yes, it is about changing the legal landscape for the worse, in my view. But also like, Mr. Blum had to file an emergency injunction to prevent this, this group of women from having the space to give out their grants. It's just, I just, again, I try to imagine the mindset you have to be to wake up and go, "Oh no, my lawsuit against the small grant for black women founders may be allowed to happen, so I'm going to file an emergency injunction because that's the best way to make sure that it does." It's just, there's so many injustices in the world that you could spend your time on.
30:15 Speaker 02 Well, you know, important context to have about Mr. Blum is that he's been doing this since at least the 1990s. And he's made it his career and his life mission to target anything that has racial qualifications behind it. So, you know, he's also suing like a bunch of law firms right now for like a very similar thing, offering schemes for, you know, trying to diversify their pipelines. So he's like a career sewer in doing stuff like this. And it's, you know, a lot of people are nervous, but yeah, we're just to see what happens.
30:45 Speaker 00 Yeah. And then you also spoke to Erin Harkless-Moore for your VC Office Hours series, and she had a couple of notes about this as well.
30:52 Speaker 02 Yes. And she had thoughts that a lot of people had in the very beginning, were thinking that this is a distraction from the, you know, bigger picture of things and progress. And yeah, I mean, there's a lot of people like her and the Pivotal Ventures, and they're moving on regardless. I mean, you kind of have to. You can't just kind of wait around and see. And so, you know, she's staying really focused on her work. Pivotal Ventures looks to, I mean, it's basically social impact investing. They're looking to see where progress has stalled in a lot of social sectors, and they're looking to fund innovation. And you can't let stuff like this stop you when you're, you know, trying to fund stuff like that.
31:29 Speaker 01 I'm curious, when they talk about data-driven investing, or how it can help improve social impact investing, what do they mean specifically? They mean by delving into the diversity statistics, or what?
31:41 Speaker 02 Oh, I took that as, like, based on our conversation, I got from it that they were helping fund research in different sectors and different categories to kind of prove the size of markets and why it's important to back it. Like, I think they did a research on the care economy to show that that's a massive market, and we should be backing innovation, and this is why, and kind of pointing to data and more so like the numbers and the figures to say why we should do something, rather than just the feeling.
32:08 Speaker 01 So evidence-based. Okay.
32:11 Speaker 00 Yeah. Evidence-based investing, which ironically would lead to more investments in underrepresented founders, because they often have better outcomes. The thing that kind of, I'm just sitting here trying to digest this again. I just, every time we talk about this, it just makes me a little bit mad that we have to keep talking about it. But maybe in the future, what we'll have is just people who invest in one particular group of folks and just don't have it stated out loud. And then if people begin to complain that this fund only invests in black women founders, well, then we can go pull data on the groups that only invest in white dudes. And we can say, well, if you're going to sue me for discrimination, you know, as Mitt Romney once said, sauce for the goose, sauce for the gander, turnbouts, fair play. So. Yeah.
32:51 Speaker 01 Right?
32:52 Speaker 02 Yeah, if that happened, that would be, that would be messy. Cause then everyone would be liable. Everyone would be liable.
32:58 Speaker 01 Right.
32:58 Speaker 00 All right, well, Dom, we have to, we have to wrap up there. But I'm, for folks who want to hear more about your reporting and so forth, where can they find you on the great wide internet?
33:06 Speaker 02 Oh, my goodness, follow me on Twitter. Follow me on LinkedIn, actually. Let's all, let's all go to LinkedIn, guys.
33:12 Speaker 00 No, no, let's not go to LinkedIn.
33:14 Speaker 02 Let's go to LinkedIn. Let's go to, I love LinkedIn. Connect with me there. Follow me on Instagram, trying to get my followers up. We have to find other ways. We gotta get off of X, but also follow me on Twitter because I would love to hit 10K.
33:29 Speaker 02 Listen, you can't, come on Twitter, listen.
33:31 Speaker 00 I'm not, I'm not judging. I've celebrated all my Twitter milestones.
33:36 Speaker 02 Yeah, just follow me everywhere.
33:38 Speaker 00 Yeah, and of course also found the podcast comes out, which day of the week?
33:41 Speaker 02 Tuesdays, yes.
33:42 Speaker 00 Tuesdays. Make sure to find that in your podcast apps everywhere. All right, Mary Ann, we also have to wrap up, but we are back on Monday and we have a really busy slate of interviews coming up for the Wednesday episodes. I'm very excited about it, but where can folks find you online?
33:55 Speaker 01 Well, you know, I'm still on X, pretty active there. Twitter handle is at Bay Area Writer, also on LinkedIn. I have yet to devote the time and energy to boost my presence on all the other social media sites, Blue Sky, Mastodon, Threads. Who has time for that?
34:13 Speaker 00 That's why I don't want to use LinkedIn because who reads their LinkedIn messages? You know? I guess I should, but life is, Dom's giving me the eyes. All right, anyways, that's Equity for this, for this Friday. We're back next week. We come out three times a week, Mondays, Wednesdays, Fridays. We appreciate you, talk to you then, have a good weekend. Goodbye.
34:31 Speaker 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 Kel. Bryce Durbin is our illustrator and a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening and we'll talk to you next time.
Previous SBF's trial has started, and here's what you missed (Equity x Chain Reaction crossover) Next Equity Monday: The AI race, crypto doldrums, and the future of fake fish Page updated October 26, 2026 · transcript and summary are machine-generated
