Equity Live: Bret Taylor’s $4.5 billion startup and Waymo’s $5.6 billion round | Equity Podcast

Mercury Sponsorship and Margot's Panels

• This episode is presented by Mercury, a fintech that simplifies how over 200,000 businesses operate (0s).
• Margot had two panels the previous day, one on finding product-market fit and another on banking as a service after the collapse of Synapse (57s).
• Margot learned that banking as a service is tough and will be a long road ahead (1m12s).
• Building cars is hard, and banking is already kind of a service, making it challenging to innovate in this space (1m22s).

Interview with Peter Beck of Rocket Lab

• Peter Beck, the founder of Rocket Lab, was interviewed, and he is a genuine and interesting person to talk to about the space industry (1m30s).
• Peter Beck is extremely smart and well-informed, having built a huge and dynamic company in the space industry (1m48s).
• Despite being friends with Peter Beck, an invitation to visit Rocket Lab's facilities in New Zealand is not feasible due to the distance (2m8s).
• Space travel may become more accessible in the future, with prices coming down, making it possible for people to go to space like an expensive vacation (2m51s).
• However, going to space will likely only be to the edge of space, not orbit, and experiencing microgravity will remain expensive (3m6s).

Sierra AI Funding and Chatbot Focus

• Sierra, an AI startup co-founded by Open AI chairman Bret Taylor, has raised $175 million in funding, valuing the company at $4.5 billion, with a total of $285 million in funding, and is focused on customer service chatbots for enterprise software (3m32s).
• The company has deals in place with big brands such as Weight Watchers and Sirius, likely due to Taylor's connections from his time at Salesforce and Open AI (4m41s).
• The startup's focus on customer service chatbots may not feel like a groundbreaking AI innovation, but rather an improvement on existing chatbot technology (4m53s).
• There are many other companies already working on AI-powered customer service chatbots, making it unclear what sets Sierra apart and whether it can rise above the competition (5m7s).
• Bret Taylor's experience in enterprise software, gained from over a decade at Salesforce, could be a key factor in Sierra's success (5m55s).
• Despite the prevalence of chatbots, many people still prefer to interact with humans, highlighting the challenges that Sierra and other chatbot companies face in making their technology appealing and effective (6m12s).
• The company's ability to provide a usable and desirable chatbot experience will be crucial in determining its success in the market (6m7s).
• The use of AI chatbots by companies is seen as a cost-saving measure, which may not always benefit customers, as it can be frustrating to interact with a chatbot instead of a human customer service agent (6m38s).
• The implementation of AI chatbots can be viewed as a way for companies to save money, but it does not necessarily follow that customers will also benefit from this change (7m29s).

AI Model Overseers and Hallucinations

• A notable aspect of a recent AI deal is the use of one model to do the heavy lifting, with the expectation that it won't be 100% reliable, and then using a second model as a backup to check its work (7m55s).
• This approach of using an overseer model to check the work of the primary model is not unique and is being used by other companies in the industry (8m10s).
• Having an overseer model is a smart approach, and it's likely that companies are either hiring someone else or creating their own overseer models to customize their AI chatbots (8m32s).
• The use of an overseer model can help reduce hallucinations, which is a common issue with AI chatbots, and can also help smooth out the interaction experience for users (8m53s).
• Reducing hallucinations is a significant goal for AI chatbot development, and it's an area where the technology is improving, but long-term memory issues can still be a problem (9m42s).

Waymo's Funding, Robo Taxi Costs, and Operations

• Weo, an Alphabet company, has raised $5.66 billion, which is an extension of the $5 billion they raised in July, providing insight into their spending and cash burn. (10m3s)
• Unlike companies like Zuk, owned by Amazon, Weo has brought on external investors, allowing for a glimpse into their financials. (10m18s)
• The company's cash burn is significant, with each of their self-driving cars, also known as "chicken buckets," costing as much as a regular car, likely in the range of $300,000 to $400,000. (11m22s)
• The cost of LiDAR, a crucial component of self-driving cars, has decreased over time due to the shutdown and pivot of many companies that were initially involved in the AV hype cycle. (11m56s)
• Weo developed their LiDAR in-house and had previously launched a pilot business to sell it to other industries, but this venture seems to have been discontinued. (12m2s)
• The business model of Robo taxis, such as Weo, is a significant challenge, with hardware costs falling but human costs remaining, including the cost of humans supporting the self-driving taxis. (12m43s)
• Waymo has an operations center with a call center where users can call for assistance if they encounter any problems, and the vehicles are also equipped with cameras for remote monitoring and guidance, also known as "telops" or "remote guidance," which allows human operators to send path planning or software codes to the vehicle if it gets stuck, providing a level of human support (13m28s).

Waymo vs. Tesla's Autonomous Driving Systems

• Tesla's Full Self-Driving (FSD) system is not fully autonomous, as the human driver is expected to take control and is technically not supposed to have their hands off the wheel, whereas Waymo's system allows for full autonomy with no liability to the human in the vehicle (14m14s).
• The main difference between Waymo and Tesla's systems is the level of autonomy and liability, with Waymo's system being fully autonomous and Tesla's system relying on human intervention (14m31s).
• Tesla's FSD system uses cameras as its primary sensor, whereas Waymo and other companies have a more comprehensive sensor suite with built-in redundancy, including redundant compute, braking, and steering (15m12s).
• Elon Musk recently stated that Tesla expects to have approval to operate a fleet of "Robo taxis" in California by next year, but this is seen as an ambitious timeline given the regulatory hurdles and technical challenges that need to be overcome (15m45s).

Regulatory Approval for Autonomous Vehicles

• The process of obtaining regulatory approval for autonomous vehicles is arduous, and companies like Waymo and Cruise have had to navigate a long and complex process to gain approval for their systems (16m6s).

General Catalyst's Global Expansion and Saudi Arabia's Investment

• General Catalyst raised $8 billion in new funds for early-stage startups, with $1.5 billion earmarked for repeat or proven founders, and plans to deploy the funds internationally, having made prominent moves to expand globally, including merging with firms in Berlin and India, and investing in a Saudi startup for the first time (17m39s).
• The investment firm's emphasis on international deployment and its recent moves suggest a significant focus on global expansion, including potential involvement in Saudi Arabia, where the country's Sovereign wealth fund has invested in various startups and encouraged them to set up operations there (18m0s).
• Saudi Arabia's Sovereign wealth fund has invested in several startups, including Lucid, which is majority-owned by the fund, and has encouraged companies to set up shop in the country, with many startups in the transportation and Frontier Tech realms, such as AVs and EVs, receiving funding (19m7s).
• The involvement of VC funds, including General Catalyst, with Saudi Arabia's Sovereign wealth fund raises questions about how the funds will be deployed and whether the firms will set up offices in the country (19m36s).
• The Sovereign wealth fund's investments in startups and its influence on the global tech scene are significant, with many investors and startups seeking funding from the fund, and drivers at major hotels in Saudi Arabia even memorizing the route to the fund's offices due to the high volume of visitors (19m50s).

Saudi Arabia's Growing Tech Hub and Startup Scene

• Many companies in the Middle East are setting up their headquarters in Saudi Arabia, as the country aims to become a hub for the region, similar to what the UAE has achieved (20m38s).
• Some entrepreneurs in Saudi Arabia may prefer to grow their companies locally, while others may want to move to Silicon Valley, reflecting a split seen in other parts of Europe (20m22s).
• A founder in Saudi Arabia received numerous term sheets from US-based firms, as they were trying to attract Saudi investment, highlighting the limited number of Saudi-based startups (20m55s).

General Catalyst's Fund Allocation Strategy

• An $8 billion fund has been raised, with $4.5 billion dedicated to a core VC fund and $1.5 billion earmarked for a "creation strategy," which focuses on investing in proven founders building new companies (21m15s).
• The decision to specifically allocate funds for proven founders seems unusual, as this is typically a consideration in the evaluation process for investments (21m38s).
• The allocation may be a result of a deal with limited partners (LPs), who are becoming increasingly cautious about investing in VC firms and may be seeking more control over how their money is used (22m5s).
• $2 billion of the fund has been set aside for separately managed accounts, which are typically special investment vehicles created for a single institutional investor, but in this case, are part of the main fund (22m24s).
• This approach is unusual, as special purpose vehicles are usually raised separately, and it may indicate a shift in the fundraising environment (22m39s).
• General Catalyst has raised a $4.5 billion fund, and it's possible they're looking at a deal that they've raised the money for, potentially for later-stage companies that will be raising big rounds (23m24s).

General Catalyst's Focus on AI and European Investments

• The head of General Catalyst's European business mentioned that they're looking to work with founders who want to embed AI and co-develop products, and they've already done this with Fever Energy, a Scandinavian climate tech company (23m49s).
• The fund's focus seems to be on companies with an AI focus, and it's possible that General Catalyst will use this fund to incubate more companies that they have a hand in from the start (24m12s).
• % of the fund will go to Europe, and it's possible that the focus will be on defense tech, as there has been a defense tech boom in Europe, and General Catalyst has invested in Hing AI, a European defense tech company (24m30s).
• Defense tech companies in Europe may have an advantage when it comes to getting defense deals, as European countries tend to prioritize Europe-based companies (25m12s).

Sovereign Space Assets and Dual-Use Startups

• There may also be a focus on sovereign space assets, as every country is likely to want its own privately organized or related space assets, and companies that provide this service could see huge growth over the next 10-15 years (25m29s).
• The UAE and Saudi Arabia have been investing in space companies and offering deals that involve setting up factories or headquarters in their countries in exchange for investment (26m12s).
• Dual-use startups in Europe may also focus on energy, including climate resilience and energy more broadly (26m32s).

Energy Independence and Investment Opportunities

• The topic of energy independence and reducing reliance on natural gas from Russia is discussed, with interest in whether investments will be made in this sector (26m40s).
• A huge transformation is taking place in the types of projects that investors are willing to commit hundreds of millions or billions of dollars to (26m54s).

Upcoming Conversations and Fintech Showcase

• An upcoming conversation with Arvin, the CEO of Perplexity, is mentioned, which is expected to be interesting due to differing views on various topics (27m12s).
• The pitch showcase for fintech is discussed, with one of the participants mentioning that they will be playing the role of the "bad cop" and asking tough questions (27m42s).
• The Showcase is described as a fun and fast-paced event where startups present their ideas, with a focus on making the world a better place (27m58s).

Interview with Mary Barra, GM's CEO

• An interview with Mary Barra, GM's CEO and chairman, is mentioned, which will be conducted by Matt Rosoff, the managing editor (28m18s).
• Mary Barra's legacy and her push for software, electric vehicles, and autonomous vehicles through the purchase of Cruise are discussed as topics of interest for the interview (28m31s).

Equity Podcast Production Team Credits

• The production team of the Equity podcast is credited, including Teresa Lo Consolo, Kell Bryce, Durban, and Henry Pick (29m14s).