2024: Founder Mode, AI, and the 'Rise of the Broligarchs' | Equity Podcast

Introduction and Year-End Review

• The episode is presented by Mercury, a fintech that simplifies how over 200,000 businesses operate (0s).
• The episode is a special year-end review, focusing on the most notable stories of 2024 (55s).
• Devin's favorite story to write was about a company called Max Space, which is developing a new type of inflatable or expandable space habitat (2m32s).
• Devin's favorite story to read was Sarah Perez's article about Sam Altman catapulting past founder mode into god mode with his latest AI post (2m17s).
• Other notable stories mentioned include an investigation into Fisker, the story of the demise of ebike startup Onyx, and a piece about AI advertising [90.52, 118.439, 214.08].
• Margo mentions a piece by Maxwell's F about AI advertising, which she found infuriating because she wanted to write it first (3m34s).
• Anthony recommends an essay by Ted Chiang in The New Yorker, titled "Why AI Isn't Going to Make Art" (3m52s).
• The hosts discuss their favorite stories of the year, including investigative reporting and in-depth features on various tech companies (1m8s).
• A year-end reflection on the tech world and the changes that have occurred, including a shift in the hosting lineup at Equity, with a call for listener feedback on what they want to see or hear in the new year (4m39s).
• The introduction of a new segment called "Deal or No Deal" to spotlight startups and discuss favorite topics, including AI advancements (5m17s).

Venture Capital Landscape

• A discussion on the changes in the venture capital (VC) industry, including big exits from prominent VCs like Andri and Harwitz, and the rise of massive mega funds, such as General Catalyst's $8 billion raise and Jon Horwitz's $7.2 billion raise (6m38s).
• Statistics show that 25% of VC investors active last year have paused deals this year, resulting in "zombie funds" that are not deploying capital and are unable to raise new capital (6m49s).
• Despite this, some VCs are finding it easier to raise funds, with one VC stating that it's changing dramatically and might be headed towards another bubble (7m21s).
• The uncertainty in the VC industry has led to a "wait and see" approach, with some investors adopting a cautious stance (7m37s).
• Many Limited Partners (LPS) are seeking liquidity, but there hasn't been much, which might explain why they're hesitant to invest more, indicating a shift from a period where everyone was a winner due to abundant funding to a time with distinct winners and losers (7m46s).
• Giant firms are investing massive amounts of money into a handful of deals, which doesn't seem healthy for the market (8m10s).

Initial Public Offerings (IPOs)

• The year 2024 didn't see the expected number of Initial Public Offerings (IPOs) after the COVID-19 pandemic, but there were a few notable ones, such as Pony AI and Zer, which are Chinese companies and the first to list since 2021 following the country's effective ban on foreign IPOs (8m34s).
• Pony AI debuted with a $5.25 billion valuation, and Zer's shares shot up 38% on their market debut, making them successful IPOs (9m22s).
• Other notable IPOs include Service Titan and Reddit, with Service Titan being an example of pressure from LPS to achieve liquidity (9m35s).
• Companies going public in 2024 have asterisks by their names due to various reasons, and their IPOs might not be as triumphant as expected (10m9s).

Mergers and Acquisitions (M&A)

• More companies are opting for mergers and acquisitions (M&A) instead of going public, with Whiz turning down a $23 billion acquisition offer from Google and making its own acquisition instead (11m7s).
• The founder of Whiz has discussed the decision to remain an independent company and go big, reflecting the broader M&A landscape (11m22s).
• The antitrust environment around large companies like Google, Amazon, or Meta makes it challenging for them to make significant acquisitions, which could lead to regulatory review and potential deal failure (11m31s).

Security Breaches and Infrastructure Vulnerability

• The WordPress drama and CrowdStrike fallout are two notable stories that highlight the vulnerability of modern society's infrastructure to security breaches and hacking (12m0s).
• Margot was flying home during the CrowdStrike incident and was not impacted because she was on Spirit, but later experienced a ransomware attack at the Port of Seattle (12m14s).
• Anthony covered the CrowdStrike story and notes that it, along with the Port of Seattle hack, underlines the vulnerability of critical infrastructure to security breaches (12m57s).
• The CrowdStrike and Port of Seattle hacks revealed that the infrastructure of modern society can collapse if someone makes a bad decision with their security infrastructure (13m47s).
• Some people think that handing over security infrastructure to AI could solve the problem, but this approach is not without risks (14m3s).

The WordPress Drama

• The WordPress drama is an ongoing story that started in November and involves cease and desist letters going in both directions, with no clear resolution in sight (14m29s).

Emerging Trends and Startups

• The year 2024 is expected to have a continuing impact into 2025, with various trends and themes emerging, including the rise of AI and Defense Tech (14m55s).
• Mercury is a banking platform that allows users to pay bills, close books, and send invoices, providing complete visibility into business finances (15m12s).
• The TC team selected their favorite startups, with AI being a huge theme, including Poolside, a coding co-pilot startup that reportedly raised around $400 million (15m53s).
• Defense Tech and space Tech were also prominent, with companies like Seric Technologies, a defense unicorn, and Ponic, which raised $175 million in a Series B round (16m27s).
• Vaa Space is another notable company, which successfully manufactured a drug in space and brought it back to Earth safely (17m0s).
• The year 2024 saw many companies becoming dual-use, including those in the Defense Tech sector, with some companies not making the list but still worth mentioning (17m18s).
• Serial entrepreneurs like Shy Ho and Kyle Vogt are launching new startups, including Bot Auto, a self-driving truck startup, and Bot, a home robotics company (17m36s).
• The electric boat industry is also gaining attention, with startups like Candela, Zin, and Navier making waves in the market (18m28s).
• Electric boats are being used in many places as a cleaner and quieter alternative, with the potential to be 10,000 times cleaner and quieter than traditional boats if all were replaced. (18m43s)
• Blue Sky is considered a favorite startup of the year due to its exciting and inspiring growth, with the company being in an interesting position as it tries to preserve its identity with a growing user base of 25 million. (19m9s)
• Blue Sky's community has changed significantly since its early days, shifting from a small, distinct community with a defined political spectrum to a much larger and less defined group with an influx of new users trying to figure out the rules and culture. (19m31s)
• The evolution of Blue Sky's community is interesting to watch, and it will be worth seeing how the platform looks a year from now. (20m38s)
• New users joining Blue Sky are advised not to immediately complain about the platform and suggest it should be more like Twitter, as this is not the point of the platform. (20m53s)

AI Advancements and Investments

• AI advancements have been significant in 2024, but it's challenging to cut through the hype and identify notable developments due to the scattershot approaches of companies and the uncertainty surrounding AI's capabilities. (21m19s)
• Companies like Google, Microsoft, Open AI, and Anthropic have been releasing various AI products, but their effectiveness can only be truly evaluated once they are used by thousands or millions of people. (21m56s)
• Google's attempt to incorporate AI into search failed, but other companies like Perplexity and Open AI are trying different approaches, with Open AI finding a middle ground, although no company has made significant winning plays except in narrow areas like code assistance and biotech (22m8s).
• In biotech, AI is being used by specialists for specific tasks, and it's seen as a software tool rather than a super intelligent AI (22m33s).
• A lot of money has been invested in AI, with Open AI receiving $6.6 billion, Anthropic receiving $4 billion, and XAI receiving $6 billion, but it's uncertain if this pace will continue (23m0s).
• It's unlikely that the giant investment rounds will continue, and investors may start to expect returns on their investments, as the current investments are not providing sufficient returns (23m22s).
• Companies are trying new approaches, but they keep moving the goalposts, and at some point, they need to become viable businesses (24m4s).
• may be the year when companies will try to make money, as they're running up against scaling laws and can't just add more compute to increase capabilities (24m32s).
• Companies will have to make do with what they have and find ways to reduce costs, which seems like a challenging task, especially considering the high expectations from investors (24m48s).
• The business outlook for these companies is uncertain, and it's unlikely that they'll receive another giant investment extension (25m21s).
• The cost of developing and running AI models is increasing, with Open AI's video model Sora being a recent example, and this trend is expected to continue, creating challenges for new AI startups (25m30s).
• Despite the dominance of large players like Open AI, there is still room for AI-focused startups to create niche products and carve out market share, but it will be challenging (25m57s).
• Large companies like Open AI and X (owned by Elon Musk) are spending billions of dollars to prevent new startups from gaining traction and to build products that their customers are already creating (26m18s).
• This will lead to a consolidation of the AI startup sector, with mid-size startups being acquired or folding, and a decrease in antitrust worries (27m2s).
• This trend is similar to what happened in the self-driving vehicle sector, where mid-tier companies were consolidated or folded, and is expected to accelerate in 2025 (27m30s).
• The AI sector is expected to be very business-positive, with large companies snapping up smaller ones to prevent competition (27m15s).

Conclusion

• The Equity podcast will be back in the new year, and can be found on X and Threads under the handle @EquityPod (28m11s).