0:00

This episode is presented by Invest

0:02

Puerto Rico. If you believe your

0:04

business can go anywhere, Puerto Rico

0:06

is the place. Hello

0:19

and welcome back to Equity, a podcast

0:21

about the business of startups, where we

0:24

unpack the numbers and the nuance behind

0:26

the headlines. My name is Alex and

0:28

I'm joined today as I am each

0:30

and every Friday by my dear friend,

0:32

Senior TechCrunch Reporter on all things fintech.

0:34

It's Marianne as a video. Marianne, hi.

0:36

How's life? Life is good. It's a beautiful day

0:38

here in Austin. How are you? Well,

0:40

I got an eye infection. My eye did horrible, terrible

0:42

things. I got to spend a day on the couch

0:44

and now I am back at work and blinking a

0:47

lot. But I can see out of both sides of

0:49

my face, which does allow me to spy in the

0:51

other corner. It's Kirsten Korsak. Hey, Kirsten, how are you?

0:53

Hey, it's been a minute since I've been on. I've

0:56

traveled, I don't know, like seven different

0:58

places since the last time I was

1:00

on the podcast. So it's going to be back.

1:02

So I wasn't going to bring up the fact

1:04

that you were just going on full jet set

1:07

mode there for a bit. But give us your

1:09

chief highlight from the last business trips quickly. And

1:11

what did you learn that was the most interesting?

1:13

So Detroit was really fascinating to see

1:15

actually what's kind of going on downtown

1:17

with this incubator, Michigan Central. That new

1:19

lab is actually involved in and saw

1:21

how it's all laid out. It's very

1:24

neat. And we actually have a feature

1:26

coming up in a couple of weeks

1:28

about one of those startups. South

1:30

by was South by in Austin. Miss Jew,

1:32

Mary Ann, I know you escaped the city

1:34

at that time. And, you know,

1:37

there was still transportation stuff. But wow,

1:39

was there a lot of Gen. A.I.

1:41

stuff going on? Never heard of it. Orange

1:44

County was Rivian. So that was

1:47

a big show. Lots of fans.

1:49

Very interesting to see the R3.

1:51

That was the big surprise. And

1:53

prior to that was L.A. again

1:55

for the Strictly VC event in

1:58

which I interviewed Kedra Malakana. Waymost

2:00

co-CEO on stage and since

2:02

then they basically launched publicly

2:05

in Los Angeles

2:07

driverless so a lot happened Yeah

2:09

Marianne I went from my couch to my

2:11

desk to my couch and back to my

2:13

desk again I think it you had a

2:15

similar schedule. Yes, very very similar. I'm living

2:17

vicariously through Kiersten Yes, and you know who

2:19

else is going to be living vicariously through

2:22

people who have the right to travel Well,

2:24

it's Sam bankman freed because he's about to

2:26

be nailed down both feet inside a prison

2:28

for quite a long time Marianne can you

2:30

run us through just the high level numbers

2:32

here about why fraud is not a good

2:35

business model? Well, Sam bankman free

2:37

was sentenced to 25 years

2:39

in prison today for fraud and money

2:41

laundering at FTX Okay,

2:43

so we've all been wondering we were

2:46

all curious how long he was going

2:48

to get I think his attorneys argued

2:50

for far less Seven

2:52

years seven years right and

2:55

he could have gotten what up to 110 Yeah,

2:58

which that's that's a lot a lot. So

3:00

25 is a number I

3:02

think we should have a rule for every billion dollars

3:04

you squander. It's a hundred years in prison, you

3:07

know I think there should be some really stiff

3:09

penalties for certain behaviors out there. I think it

3:11

would help quite a lot I'm glad

3:13

he didn't get seven years. I think 25 a lot. It's a

3:16

lot I

3:18

don't think he's 25 years to get over being a

3:20

bad kiddo But I do think that it's good to

3:22

have the precedent set that if you do this you

3:24

get yeah I mean he's 32 now So

3:26

he'll be in his 50s when he gets out and

3:29

if he were to serve the full sentence and that's

3:31

that'll be interesting to See that play out not

3:33

sure I'll be paying attention to it 18 years

3:36

from now potentially But I'll recall the name

3:38

when that comes up and be like, ah,

3:40

yes I recall those times and we talked

3:42

about it on the equity podcast. What happened

3:44

to that guy? Well, it turns out not much It

3:47

is substantially less than let's say Bernie Madoff.

3:49

I think that's reasonable. Yes. Yeah, there's nuance

3:51

that anyways I'm sorry. I got so caught

3:53

up in the kind of breaking news of

3:56

SBS sentencing that I forgot to do the

3:58

show rundown So if you're curious what's going

4:00

to be on the pod today? Well, we

4:02

are going to talk about three deals of

4:04

the week. The first one all about Robinhood's

4:06

new offering, what's going on with Fisker and

4:09

Databricks just launched what? And then we are

4:11

going to dive into kid focused startups, which

4:13

are growing very, very quickly. And then a

4:15

new fund that does appear to be contratrend

4:18

in one interesting way. But first Marianne Robinhood

4:20

back on the show post IPO, what's going

4:22

on? Yeah, so Robinhood this week

4:24

unveiled a new credit card, which they

4:26

call the Robinhood gold card. This was

4:28

not a shock to those of us

4:30

who've been paying attention to Robinhood's activities

4:32

last summer, it did scoop up a

4:34

startup called X1 for $95 million. I

4:37

had covered that

4:39

company a couple of times. And

4:41

one of the features that that card had

4:43

that is being parlayed into this one or

4:46

has been parlayed into this one is that

4:48

card holders can get cash back, they

4:50

get 3% cash back. And that cash

4:52

back can be rolled into their brokerage

4:55

accounts at Robinhood and they can use

4:57

it to invest. That's just one of

4:59

many features that this card offers.

5:02

What was that company that was doing like that

5:04

it rounds up your purchases and then puts that

5:06

the extra into savings for you was acorns? Oh,

5:09

well, I mean, a legacy company is fidelity. I

5:11

have that retirement savings card. Oh,

5:13

that's cool. Oh, okay. But it doesn't

5:15

go to a brokerage, right? I mean,

5:17

put into a retirement, a dedicated retirement.

5:20

So that isn't a new concept. What

5:22

I like is that there's no annual

5:24

or foreign transaction fees, which I think

5:26

is going to be compelling for people because

5:28

there's a lot of hidden annual fees in

5:31

some of the more established, let's say financial

5:33

institution backed credit cards. Yeah, absolutely. But Marianne,

5:35

not everyone can get this card. There's actually

5:38

a requirement upfront that does, well, if you're

5:40

saying it's a very good point, put it

5:42

into greater context. Right, right. There

5:44

is no annual fee or foreign transaction fee. However,

5:46

you can only get the card if you're a

5:48

Robin Hood gold member that costs either $5 a

5:50

month or $50 a year, which

5:55

they say, oh, depending on how much

5:57

you spend, you could earn back fairly

5:59

quickly. That's how they're selling it. The

6:01

3% cashback is interesting because it's not on

6:03

just any one or two

6:05

categories like food, travel, or groceries. It's

6:08

on everything. And that,

6:10

as I was writing about this, made

6:13

me think a lot about parallels to

6:15

the Apple card which has a lot

6:17

of interesting features as well. But the

6:19

cashback it offers is 2% on all

6:21

purchases. I think it offers higher percentage

6:23

back on Apple purchases. But

6:25

across all categories, Robinhood's is 3, Apple's

6:27

is 2. I'm

6:31

glad you brought up Apple because I bet

6:33

some people are like, why is the equity

6:35

team discussing a new credit card offering? And

6:37

it's because, frankly, what we are seeing is

6:39

technology and tech adjacent companies like Robinhood get

6:41

more deep into consumer credit and we're seeing

6:43

companies that can essentially become fintech players that

6:45

we didn't expect to become them. I mean,

6:47

if you think about when Apple rolled out

6:49

the iPod and I told you down the

6:51

road, they're going to have high yield savings

6:53

in accounts and a consumer credit card, you

6:55

would have been like, why? Did

6:57

they become Goldman Sachs? But now it's kind of

7:00

normal-ish to do this. So Robinhood to me is

7:02

kind of following in a wave of

7:04

companies that are moving in the same direction

7:07

to become more financially relevant. We're

7:09

also finally starting to see sort

7:11

of the fruition of some of these acquisitions

7:13

that we were talking about, not just Robinhood,

7:15

but a number of other companies. Like, what

7:17

are they going to do with this acquisition? And now

7:20

we're seeing that play out. And so,

7:22

as you mentioned earlier, we could have predicted this, but

7:24

now we see what it looks like. And I think

7:26

that there's a number of other. I've got to go

7:28

back in our archives because there's been a

7:30

number of these types of acquisitions from some

7:32

of these companies that kind of put them

7:35

closer into the fintech world. Yeah, I kind

7:37

of nerd it out a little bit on

7:39

the aspect of it having covered the startup

7:41

from its early days, right? So I

7:43

always find it interesting watching a startup grow

7:45

and then to see one get acquired by

7:47

a larger public company like Robinhood and its

7:50

technology rolled into its offering like that. I

7:52

think it's pretty fascinating. Robinhood opted

7:54

to do this instead of trying to build

7:56

out the technology itself, which we often

7:59

see larger players. to these days.

8:01

Yeah. Also, I just think we're seeing

8:03

essentially every platform become like every other

8:05

platform, period. Like we used to joke

8:07

about this in the world of social media, like something becomes

8:09

big, Facebook clones it, and then, you know,

8:12

that's kind of how things went forever. But

8:14

it now seems to be a little bit broader

8:16

than that. It's like, for

8:18

example, LinkedIn is trying to do games like

8:21

the New York Times and videos up top

8:23

like TikTok. Why? Because they want to grow

8:25

more, apparently. And so I wonder if this kind of

8:27

falls, Mary, and underneath the same ages of once

8:30

you have some users, you eventually just want to juice

8:32

them for everything you can. And so I expect Robinhood

8:34

to launch an ad network in the next six months.

8:37

You never know. When it

8:39

does happen, we can all groan together. Anyways,

8:41

over to the world of automotive and EVs,

8:43

Kirsten, one of my favorite companies, and by

8:46

that, I mean sarcastically, Fisker is having one

8:48

hell of a week. And I want the

8:50

high level breakdown because so much has been

8:52

going on over at the Troubled Company. I

8:55

think Dumpster Fire is a more

8:59

accurate descriptor right now. So there

9:01

have been problems at Fisker for a while now.

9:04

But you know how when a company,

9:06

you just see it all of a

9:08

sudden accelerate from like, oh, that's a

9:10

problem. Hmm, that's a problem. Move federal

9:12

investigation. You know, this

9:15

is what's happened to Fisker. So you might recall

9:17

about four weeks ago or so,

9:19

we did have a investigation on

9:22

how multiple customer complaints

9:24

and federal investigations into the

9:26

fiscal vehicle, the software being

9:28

buggy, the hoods flying off,

9:31

rollaway problems. So that sort of

9:33

was a huge red flag that was

9:35

happening. But behind the scenes, there

9:37

was apparently a lot of internal money problems.

9:40

So the scoop that we had from Sean

9:42

O'Kane was that based on sources that we

9:44

spoke to, Fisker lost track of millions of

9:46

dollars in customer payments for months.

9:49

They did manage to find, locate

9:51

and recapture those dollars back. But

9:54

this is basically failing at a

9:57

fundamental level of what a company needs to do

9:59

to survive. which is first you have to make a

10:01

product and make a product that is of good enough

10:03

quality and then you sell that product and

10:05

then you got to collect that money because

10:07

otherwise you're basically giving away for free. So

10:11

that's what was happening over

10:13

at Fisker and it's unclear to us

10:15

whether they have resolved all these issues

10:17

but it did trigger an internal audit.

10:19

And then the last thing is while

10:21

that was happening, many other things have

10:23

been happening. Fisker basically is running out

10:25

of money. It's deal

10:27

with an automaker unnamed but reportedly

10:29

Nissan fell through and that was

10:31

a closing condition on its $150 million convertible note.

10:35

So now stock dropped 28%,

10:39

trade was halted and the same day

10:41

New York Stock Exchange then suspended them.

10:43

So this all happened in the span

10:45

of two or three days. Suddenly

10:48

and then quickly. On

10:50

the Fisker losing track of payment story that I

10:52

was reading as be prepped for today's show, the

10:54

thing that made me laugh the hardest was the

10:56

fact that they weren't sure who had sent them

10:58

money and I believe they sent cars to people

11:00

who hadn't actually paid for that. Yes, I

11:02

read the same thing. I read that and was

11:05

like, oh my goodness, how on earth

11:08

do you do that? You deliver a

11:10

car to someone who hasn't paid for

11:12

it at all. I mean, what

11:14

a mess. Look, we all clown

11:16

on Williams, the F1 team for using Excel to

11:18

track like 20,000 different parts for their F1 cars.

11:20

But at least Williams rolls up with a car.

11:24

I feel like here they must have had like different

11:26

systems that weren't talking to each other. But I'll just

11:29

say this, I didn't get a free Fisker Ocean and

11:31

that's a bummer. I could have used one. I

11:34

don't think you want a free Fisker Ocean. Clearly,

11:36

they're running out of money. But I

11:38

don't think figuring out how to collect money is

11:41

going to solve their problems. They're sitting on about

11:43

just under 5,000 vehicles in

11:45

their inventory and they just

11:47

slashed the price of their vehicle by

11:50

about up to 39% in the last

11:52

couple of days. So

11:55

imagine the desperation.

11:57

I don't actually understand.

12:00

why that's even happening, quite honestly,

12:02

because it immediately crushes

12:04

any existing ocean owner. The

12:07

resale value just now is

12:09

plummeted. I don't think that

12:11

even if they sold every single one of these, that

12:14

they would even be in a better financial

12:16

position because they certainly must be

12:18

losing money on those cars by selling them so cheaply.

12:20

At the end of the day, I think they

12:22

just want to get rid of the inventory and maybe

12:24

it makes it cleaner for them to enter into

12:27

bankruptcy. Oh man, you said the B

12:29

word. Now if it happens, we're gonna get blamed.

12:32

You've jinxed it. I think the only people

12:34

who could be blamed are the folks

12:36

maybe running Fisker, but I would be

12:38

shocked if Fisker doesn't

12:41

file for bankruptcy protection within this

12:43

court. Well, the quarter's about to

12:45

end, but within the next quarter.

12:48

That is my big prediction of 2024. How

12:50

about that? Well, I think you're dead on.

12:52

And I'll just say that I've always thought

12:54

the Fisker Alaska, which is their, I think,

12:56

yet to be released easy truck, was super

12:58

hot. Here's my little chef's kiss. I

13:00

mean, here's the thing. Henrik Fisker

13:03

is the CEO of the company

13:05

and is a well-known famed designer.

13:08

And his wife is actually a CFO. You

13:10

liking the Alaska pickup, or people actually

13:13

liking the design of the Fisker Ocean

13:16

is the problem here, which is having

13:18

a well-designed vehicle does not in any

13:20

way mean that you will

13:23

have a successful company. In fact, because

13:25

you have to execute on things like

13:27

that it works mechanically, the software works,

13:29

the service works. And that's

13:31

the big question. The software and

13:34

service for the existing owners

13:36

of Fisker, if Fisker dies,

13:38

who maintains that? It can't

13:41

just be pretty. Right. We

13:43

live in an era right now where we are

13:45

starting to get more and more modern vehicles from

13:48

newer companies. And if those

13:50

companies go out of business, because they are

13:52

so software-centric, it isn't clear

13:55

that you could even hold on to these vehicles

13:57

for the length of time that the average American

13:59

holds on to vehicles. today, which is about 11

14:01

years or longer. What

14:03

will this car look like in 15, 20 years? It's

14:06

gonna look like an Android smartphone still running like Android

14:08

4. By the way, the problems

14:10

that Kirsten's outlining here involving price cuts, impacts

14:12

on resale values, young companies that may die,

14:14

and software updates is also impacting a lot

14:17

of EV makers over in China. So while

14:19

this is a Fisker story, it's also a

14:21

global story. And I could go on

14:23

and on and on, for example, like the fact that Fisker

14:25

was gross margin negative back in Q3, but we have to

14:27

move on. We do. How

14:29

about Databricks? Yet again, but this time, not

14:31

because Databricks has dropped off an entire sheath

14:34

of new numbers showing off how fast they're

14:36

growing while still not going public, but instead

14:38

they have spent $10 million, give or take,

14:40

on a new generative AI model called DBRX.

14:44

Now, putting these models to the test is

14:46

a little tricky. It's hard to say which

14:49

one's precisely better for different tasks, but it

14:51

seems to be roughly on par with

14:53

some leading models and slightly not quite as

14:55

good as GPT-4, but Mary-Ann, to build something

14:57

almost as good as what OpenAI has in

14:59

the market today for 10 milli, seems

15:02

to be a pretty good deal. Yeah, I mean, honestly,

15:05

I have to give Kyle props, obviously,

15:07

he's the author on this and he

15:09

knows this space very well. So I

15:11

was trying to understand the nuance here.

15:13

What's the difference between Databricks' new model

15:16

compared to OpenAI's? I don't know, Alex,

15:18

did you get it? More or

15:20

less. So the way to think

15:22

about this is Databricks wants you to bring your

15:24

data over to Databricks and then

15:26

use their services for all of your data

15:29

and processing, data intelligence, AI needs and so forth. And

15:31

so what they want to do is make sure that

15:33

there's lots of cool models you can use for your

15:35

data over on Databricks. So it makes sense that they

15:38

have their own model and you can use it. It's

15:40

quasi open source in the same way that a lot

15:42

of other things like I think of LAMA2 is the

15:44

thing that really stood out to me that Mary-Ann is

15:46

the hardware costs are quite high. I

15:49

have downloaded LLM software

15:51

and tried to run models on my own

15:53

local environment. I failed, but I could download

15:55

them and run them in theory. This

15:57

requires, I think a CPU or GPU.

16:00

cluster of at least four H100s,

16:02

which are very expensive, hard to get your

16:04

hands on and not exactly a prosumer item.

16:07

So this is aimed at the enterprise. And

16:09

so it's, you know, not really for us,

16:11

but who does Databricks sell to? Well, it's

16:13

not us. So I guess that kind of sits well with

16:15

me. Yeah. I mean, that's, I

16:17

guess my question. So at least for

16:19

Nvidia H100 GPUs, a

16:21

single one of those costs thousands of

16:24

dollars. So who is the customer of

16:26

Databricks is my question. If it's not

16:28

us, who is it? Well,

16:30

if you want to use their recently

16:32

purchased company, Mosaic ML, it might help

16:34

with just that, bringing back your points

16:36

about acquisitions that are being announced earlier

16:38

and we're seeing kind of later tucked

16:40

into these mega corpse. I think what

16:42

matters here more than anything is the

16:44

competition for foundation models is not going

16:46

to be restricted to just open AI

16:48

versus anthropic versus alphabet. There are

16:51

other players that have the sufficient capital

16:53

resources and customer base to make this

16:55

a viable economic option. Now, I

16:57

think the thing that we'll want to know in

16:59

six months is, is anyone using DBRX or was

17:01

this essentially them building something that was then ignored

17:04

by the market? But I do think it's an

17:06

important moment for the trajectory of these technologies. And

17:08

that's kind of what I, what

17:10

I took away and wanted to bring up because

17:12

eventually at some point before we die, maybe, maybe,

17:15

maybe before SBS gets out of prison, they

17:17

will go public and then we'll get to learn

17:19

more. But this will be a point in that

17:21

eventual S1 filing, I think, right? Yeah.

17:24

I mean, I do think it's positive

17:26

that there are more companies

17:28

entering into this market that it's

17:31

not just dominated by open AI,

17:33

even though they are dominating a

17:35

lot, including headlines. So there's another

17:37

company that's doing something somewhat similar,

17:39

although there are some slight differences

17:41

here and competition is always good,

17:43

specifically around, I think, generative AI,

17:45

because it can be used in

17:47

so many dangerous ways that I think

17:49

when there's multiple companies working on it,

17:51

that is a positive. Yeah. But I'm

17:53

still waiting to understand who

17:56

Databricks customer will end up

17:58

being for this very. specific

18:00

product. The way that I think about it is,

18:02

I mean, I wouldn't be shocked if Yahoo was

18:04

a Databricks customer, but I think TechCrunch is probably

18:06

too small. And so I presume

18:08

this model is tuned for very specifically the enterprise

18:10

use case, you know, bring your own data, retrain

18:12

it with your own stuff, and then you have

18:15

your own in-house model. But we got to move

18:17

on. And that means we have to take a

18:19

very short break. But when we are back, kid-focused

18:21

startups, two of them, in fact, and how building

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more at investpr.org/TechCrunch.

19:02

This week, we had a couple

19:04

of stories on kid-focused startups raising

19:06

capital, which I, as a parent,

19:08

of course, thoroughly enjoyed because I

19:10

feel like people don't realize if

19:12

you don't have kids just how

19:14

much money is spent on children.

19:16

So anytime we have startups that

19:18

have new products or new software

19:20

or new whatever that helps make

19:22

our lives easier or help us

19:24

save money, our ears perk up.

19:26

One such startup is called Playtime

19:28

Engineering and they have come up

19:30

with something that, if you're musically

19:32

inclined, seems very, very cool.

19:35

It's a keyboard synthesizer

19:38

or a kid-friendly synthesizer.

19:40

Designed for kids ages three and up. How cool is that?

19:43

Yeah, this is really cool. So this

19:45

is actually started as a Kickstarter

19:47

campaign, which is kind of fun

19:50

and interesting. But when I walk through

19:52

a toy store or whatever, there's there is a lot of

19:54

like kid keyboards and how is

19:57

this different? Well, this

19:59

is pretty. This is pretty sophisticated for a child's

20:01

toy. I think they're looking to sell it for

20:03

about $350, which

20:06

is a lot and the company

20:08

acknowledges that. But apparently, it's really

20:10

more like the company describes

20:12

it as essentially a grid box

20:14

or electronic music production device fully

20:17

decked out with a drum machine

20:19

synthesizer built-in microphone for audio sampling

20:21

and sequencer all in one device.

20:23

This rips. So making

20:26

music. Yes. You can actually put

20:28

together tracks and things like that. It sounds

20:30

like. Yeah. Okay. And it has these really

20:32

chunky buttons and knobs because one thing that

20:34

I've learned by hanging around with children is

20:36

that their hand dexterity is garbage. They really

20:38

can't like have a baby try to pick

20:40

up one Cheerio. It's hilarious. They're like, they

20:42

can't do it. So you need to

20:45

have really big knobs that don't come off

20:47

and maybe just rip them off. And there's

20:49

a lot of things that go into children's

20:51

toy design. But looking at this thing and

20:53

being somebody who owns a consumer grade synthesizer

20:55

device that I bounced off of because I

20:57

was too dumb to figure out how to

20:59

make it talk to my software. I love

21:02

this idea. Let the kids have something cool.

21:04

Help them be creative. Get them into the

21:06

idea that art isn't something you just consume,

21:08

but can also participate in and create. Hell

21:10

yeah. Where was this when I was a kid? We had

21:13

to have like, paper decks. Like this

21:15

is wildly awesome. Yeah.

21:18

I mean, I'm sadly not very musically

21:20

inclined, but I do think if you

21:22

have children who want to explore making

21:24

music and you could afford it, that

21:26

this is pretty darn cool. It's

21:28

called MyTrex. And as soon as

21:30

my first daughter can use

21:33

it, I'm buying her one because I want to see what she comes up

21:35

with. So does that mean

21:37

she's going to come up with like the equity

21:39

podcast, like soundtrack potentially? I don't

21:41

think the production team here would

21:44

allow me to bring that into

21:46

the show. So

21:48

here's a little known fact, actually, we were,

21:51

I was kind of teasing you about having your

21:53

daughter do the synthesizer, but actually, the

21:55

technology that we use, the

21:58

synthesizer we use for equity

22:00

is the same as this. It

22:02

just doesn't have the big buttons.

22:05

Our podcast producer master doesn't

22:07

need the big buttons, but it's the

22:09

same exact technology. Exactly. So essentially what we're saying

22:11

is, as soon as my daughter is a couple of

22:14

years older, Teresa is out and Ada is in and

22:16

that's how we're going to run the show from there

22:18

on out. We joke. I just

22:20

think it's really cool to see more technology put

22:22

to use in this manner, except brings delight to

22:24

kids and also gets them off of TikTok on

22:26

their parents' phone. Marietta, there's another story and this

22:29

one is incredibly cool. I think this is fantastic.

22:31

And this is right up my alley. Tell us

22:33

all about Kidsie. Yeah, I thought so

22:36

too. I thought it was really

22:38

interesting. Kidsie's a new Chicago-based e-commerce

22:40

startup. And what they do is

22:42

sell kids' clothing, toys, and gear

22:44

at discounted rates. And

22:46

they do it in an interesting

22:48

and kind of different way. They

22:50

partner with retailers like Macy's, Target,

22:53

Kohl's, Walmart, you name it. And

22:55

we know that these retailers have

22:57

a ton of returns and open

23:00

box items that they don't resell.

23:02

And I never really thought about what happens

23:05

to them, but apparently they either get sold

23:07

for really cheap overseas or

23:09

end up in a landfill, which

23:11

is just such a disgusting waste.

23:13

So Kidsie buys these items from

23:15

them directly and then resells them

23:17

on its website. And it's recently

23:19

raised a million dollars in pre-seed

23:21

funding. And in just a

23:24

matter of months that emerged from beta

23:26

in September, they said that by January,

23:28

they had hit $1 million in annualized

23:30

revenue. So they

23:32

sold three dresses and a bib. So

23:36

this kind of, I mean, it sounds like

23:38

kind of like an overstock model. Yeah.

23:41

Is that fair? I would say

23:43

so. Okay. Which is a pretty big

23:45

company. So what I'm curious, of course,

23:47

and I'm guessing that they didn't provide

23:50

this information, but they hit a

23:52

really nice revenue number. What

23:54

is their costs and overhead? I mean,

23:57

are they already on the road to

23:59

profit? Well, she told me they

24:01

expect to be profitable in about two

24:03

years. It's early yet, so obviously we

24:05

don't know, but they get a take

24:08

rate on every item they sell and

24:10

the percentage varies across brands and categories.

24:12

On average, it's about 35%. Which

24:15

is a lot. That's a lot. Yeah.

24:18

And it also makes a lot of sense because if you're

24:20

a company that was going to sell it off for 10

24:22

cents on a dollar or throw it away, getting 65% of

24:24

a reduced amount is probably much better. And

24:27

it means that KidZ gets a big fat cut of this

24:29

stuff. I think this is just

24:31

great, Mary-Ann. There is so much waste

24:33

in little kiddos because they grow

24:35

fast and they are disgusting, foul little creatures.

24:37

And so everything's always torn, ripped, and covered

24:40

in snot. So it's just great to have

24:42

this system. And one thing that

24:44

I have been really lucky about is we have a

24:46

couple of friends here where I live and

24:48

they have kids that are about two years older than

24:51

our first. And so people just

24:53

gave us stuff. Yeah, that's ideal. We have so

24:56

many children's toys and books that people outgrew and

24:58

they're not having kids that just gave to us.

25:00

But not everyone has that community and paying full

25:02

ticket for these items is often prohibitive.

25:05

So having a way to get them

25:07

more treatment in people's hands and reduce

25:09

waste and support kids, what a... I

25:11

mean, it's cool to see a business where everyone wins. I

25:13

love it. Yeah, I think it's a

25:15

very cool model. I mean, the majority of

25:17

the products they sell are brand new and

25:19

unused. About 10% only are gently used. So

25:21

coming to website, there's a lot of popular

25:24

brands on there. I do think there's a

25:26

lot of potential, if this is done right,

25:28

to be a pretty successful company. And

25:30

interestingly, the co-founder shared her backstory.

25:33

She's a former journalist, Bloomberg TV

25:35

and ABC News journalist that went

25:37

on to direct a documentary. And

25:40

that documentary was on child labor and

25:42

global supply chains. And that's when

25:44

she learned about this inventory glut that

25:46

exists in the US and all the

25:48

supply chain issues faced by retailers. And

25:51

that kind of led her down this path. I

25:53

think it's absolutely fantastic. And if

25:55

you want to hear more about how entrepreneurs are

25:57

tackling the question of kids, well, we had to

25:59

interview with the CEOs of Wonder School an early

26:02

day on the podcast earlier this week. So go

26:04

back one episode and you'll see that in your

26:06

feed. It's a good time. There's an acquisition there

26:08

and who doesn't love seeing some venture back startup

26:11

combinations. Now moving on, we're going to talk about

26:13

sustainability and diversity for a second because there's quite

26:15

a lot going on here. Now, Mary

26:17

Ann, I want to start with this new summit

26:20

fund. It's about climate, so I

26:22

know Kirsten will have a lot to say, but

26:24

can you give us the TLDR on new summits,

26:26

new capital vehicle? Yeah, so new summit

26:28

investments is apparently raising a new

26:30

hundred million dollar impact fund and

26:33

it's mainly focused on investing in

26:35

managers, backing startups and other companies

26:37

focused on environmental and social problems.

26:39

So of course, all of us

26:41

welcome more money flowing into that

26:44

because who doesn't want these problems

26:46

solved? Yeah, to me, what's

26:48

really interesting here is the

26:50

sizable jump from its previous

26:52

fund. So this is its fifth fund and

26:55

the last one was I think around 40 million.

26:58

So that's quite a leap.

27:01

And what I'm curious to see what

27:03

happens here, they're calling it like an

27:05

impact fund, social and environmental problems

27:07

that is huge, hugely

27:10

broad. So is this going to be when

27:13

we think about environmental like climate tech,

27:15

so hard tech or is it more

27:17

on the social consumer end of things?

27:19

And so I'll be curious to see

27:22

where these funds end

27:24

up. Absolutely. You know, it's interesting.

27:26

There has been a, and I'm

27:28

going to try to be delicate here, call it

27:30

under the DEI backlash umbrella of views about investing

27:33

and how some norms have changed in the last

27:35

couple of years. So to me, this fund raise

27:37

does seem to be slightly counter narrative, which makes

27:39

it all the more exciting. And

27:41

I will say, it's not the only time we've seen

27:44

an impact or climate E or socially fund out there.

27:46

There's been a number that I've covered for TechCrunch AM

27:48

lately, folks who are trying to have an impact on

27:50

certain social and climate issues are still raising capital and

27:52

still going out there and doing it. Yeah,

27:55

I believe that there's been some recent

27:57

data coming out, right? That has talked

27:59

about. that there is still

28:01

interest in investing in these underdog

28:03

founders and also in diversity and

28:06

a number of female founders also

28:08

rising. We had a story recently

28:10

by Mike Butcher actually, and

28:12

it's a new study that zeroes in on the founders of

28:15

so-called unicorns. So these are companies worth over

28:17

a billion dollars. And they found that

28:19

most have, quote unquote, underdog founders

28:21

who are often drawn from the

28:23

top 10 universities. And there's also

28:25

a rising female founder makeup as

28:27

well. So while that

28:29

sort of seems to support just

28:31

your anecdotal recall just now about how you

28:33

are seeing quite a bit around the AI

28:36

and investments. Yeah, you know, one thing that

28:38

hit me from that study that Mike covered

28:40

was that 70% of unicorns,

28:42

and this is mostly focused on the US and

28:44

the UK, so not not the full global picture,

28:46

but those are two critical markets for billion

28:49

dollar tech startups, 70% of unicorns were

28:51

founded at least in part by an underdog founder, which they

28:53

thought of as an immigrant, a woman or a person of

28:55

color. And that was just more

28:58

than I expected, frankly, the challenge is kind of

29:00

my my perceptions of who's building all these companies

29:02

and is a bit more diverse than I thought.

29:04

So not to say congrats, VC, you've done it.

29:06

But I thought that was relatively encouraging data point.

29:09

It was it was definitely encouraging. I

29:11

was very pleasantly surprised to see that

29:14

I'm always kind of supporting underdogs, whether

29:16

it be like watching basketball or startups

29:19

grow. So this this actually made me very happy.

29:21

I do think also is interesting.

29:23

Mike had a bunch of great data points in

29:25

here, that when they looked at

29:28

like larger funds, actually

29:30

the top fund that invested

29:32

in unicorns with Sequoia, and

29:34

they backed only 2.8% of unicorns, which

29:38

basically what they're trying to say is

29:40

a lot of these big funds are

29:43

not necessarily the ones that are spotting

29:45

these companies that go on to

29:47

become unicorns one day. And I thought

29:49

that was really interesting. It's typically other

29:51

types of firms or funds that are

29:54

really getting in at the very early

29:56

stages of these unicorns. It's fascinating. I

29:59

have my skeptical face. I read that slightly

30:01

differently. The data point, if you include accelerators,

30:03

is a little bit different because YCA and SV

30:05

Angel invest in so many companies, they get

30:07

a higher percentage of them. But

30:09

to me, 2.8% of the

30:12

84 trillion unicorns out there is quite

30:14

a lot. I guess the question

30:16

that I would have is what percentage of

30:18

Sequoia's portfolio becomes unicorns versus what fraction of

30:20

the total unicorn pool they have? Because

30:22

I don't... I mean, Marianne, I totally see your point.

30:24

2.8% does not sound like a lot, but given that

30:27

every firm only backs a small fraction

30:29

of the backed companies, could that not

30:31

actually be a more impressive number than it

30:33

looks like on the price side? Well, it could

30:36

be. I'm not so much concerned with Sequoia,

30:38

but I'm just thinking in general, the fact

30:40

that that was the top, that means that

30:42

a lot of these so-called top tier venture

30:44

firms are not necessarily the ones that

30:46

are backing these companies that go

30:48

on to become unicorns. That makes

30:51

sense. I think the point of

30:53

what both of you are saying now is

30:55

fragmentation, is that this is quite a fragmented

30:57

market. And there isn't any clear, dominant-winning VC,

30:59

while we oftentimes point to them that it's

31:01

a far more fragmented market, which is a

31:04

good thing and a bad thing, because then

31:06

it's hard to track success, right?

31:08

Absolutely. Although this does allow

31:10

me to cap off the show with my

31:12

favorite version of an Ankhja, which is people

31:14

say that the press are haters and that

31:16

we are just bitter peons who are trying

31:18

to tear down other people's success. Well, there's

31:20

no bigger hater in the world

31:22

than an active venture capital fund, because

31:25

they love to tell you how they turn down 99.9% of businesses that

31:27

come their way, some of

31:30

which go on to become unicorns. So if you want to figure

31:32

out who the biggest hater in the world is, go find your

31:34

local friendly VC and tape a sign on them that says, it's

31:36

me. And with that, we're done for the

31:38

day, everybody. And when it comes out

31:40

Mondays, Wednesdays, and Fridays, except for when we do

31:43

have an interview episode and then we drop those

31:45

when we can, we have two sister shows found

31:47

in chain reaction. Today on the pod, we had

31:49

Kirsten Koracek, the head of all things transit, automotive,

31:52

and awesomeness at TC and Marianne, who covers Fintech

31:54

down in Austin for us. So that way we

31:56

can combine tacos and interest rates. My name is Alex.

31:59

Equity's back on Monday. See you then. Bye. Bye.

32:02

Bye. Equity

32:04

is hosted by myself, Alex Wilhelm,

32:06

and TechCrunch Senior Reporter, Mary Ann

32:08

Azevedo. We are produced by Teresa

32:10

Locun Solo with editing by Kel.

32:12

Price Durbin is our illustrator and

32:15

a big thank you to the

32:17

audience development team and Henry Piccavet

32:19

who manages TechCrunch Audio products. Thank

32:21

you so much for listening and we'll talk to you next time.