AI slop, government stops, and startup uncertainty

Interactive Transcript

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spk_0 Hello and welcome to Equity TechCrunch's flagship podcast about the business of Startups

spk_0 Today is Friday October 3rd, I can't believe it's already October.

spk_0 And I am Kyrsten Korsek, Transportation Editor here at TechCrunch and I'm joined by

spk_0 Senior AI reporter, Max Seth and Weekend Editor, Anthony Ha.

spk_0 And you guys, before we get into deals, I really want to talk about Max's new favorite actress,

spk_0 Tilly Norwood. Max, what do you love about her?

spk_0 Oh God, this is a great way to start the show.

spk_0 You're just going to get so much hate email from the actresses and creatives of the world.

spk_0 Yes, no, this is great because my girlfriend is an actress.

spk_0 So Tilly Norwood is an AI-generated actress with 40,000 Instagram followers that caused a stir this week

spk_0 because, well, she's not real.

spk_0 And actresses were upset about kind of the level of attention that it was getting.

spk_0 I think that this is especially interesting with the launch of Sora that happened this week.

spk_0 Open AI's Image Generation app.

spk_0 Open AI's Video Generation app, sorry. And we'll talk about that more later on the show.

spk_0 I think it's fair to say that it was obviously kind of a stunt that basically this startup, Shacoia,

spk_0 they went on stage at the Zeroclumb Festival and they said, hey, we have this AI-generated actress.

spk_0 We're looking for representation. Obviously, they wanted a lot of press coverage.

spk_0 They wanted people to sort of, you know, they wanted some back and forth about it.

spk_0 And I think they got that maybe more negative commentary than they were expecting as Max leaves you sag after,

spk_0 which is like the main actors union in the US.

spk_0 And I think a bunch of other kind of industry groups basically universally kind of condemn this.

spk_0 Then the startup had to then kind of walk it back a little and say, hey, hey, hey, we don't see this as a replacement for human actors,

spk_0 but just a tool for human creativity or something like that.

spk_0 I will say this. I think that it really struck a chord throughout all creatives about, hey, these are really cool tools.

spk_0 But wow, I could, I am potentially replaceable.

spk_0 And I think that the bigger, broader question for society is, do we want that?

spk_0 Maybe we can do it, but do we want to do it?

spk_0 Too big of a question to get into on this show.

spk_0 But Max, what else are we talking about today?

spk_0 Yeah. So later on the show, we're going to get into deals of the week from Periodic Labs, a new AI lab,

spk_0 as well as Lithium Americas, which is an interesting deal with the US government.

spk_0 And then we're going to get into some big themes that we're talking about, including AI companies wanting to make money,

spk_0 which is new for them.

spk_0 And also how government actions are impacting startups and the venture capital space.

spk_0 I want to talk about Lithium Americas, because this is written by Tim DeShant, who's our climate tech reporter.

spk_0 And it's really interesting because there has been speculation about this, and now we're seeing this deal come to fruition,

spk_0 which is the US government is taking an equity stake by renegotiating a federal loan into Lithium Americas,

spk_0 which by the way is a Canadian minor. But there's some specifics of the deal, I think, that are worth noting before we kind of get into the conversation,

spk_0 which is they are taking collectively, I guess you could look at it as a 10% stake, but really it's a 5% stake by converting some warrants into the company.

spk_0 And then another 5% stake into this joint venture that Lithium Americas has with GM for this Lithium mine in Nevada.

spk_0 So it's sort of like 5% 5%, but of course, what's more interesting, not just this deal, is that it seems like there's a bit of a trend here.

spk_0 But it seems like, you know, just in general, it's just to put a name on it, like the Trump has this interest in taking stakes in companies.

spk_0 I mean, Intel was kind of the big headline where again, he was sort of taking grants that the Biden administration had already made and decided he wanted the government to have a stake.

spk_0 And at least as far as I can tell, I don't think we really know what that's going to look like in terms of like if we imagine this a couple years from now, the government having a stake in a bunch of like for profit companies,

spk_0 and then say you have a company that's competing with a government backed, you know, Intel, like what is that actually going to mean for you?

spk_0 I think it's eyebrow raising if nothing else.

spk_0 And that's what I think that is we need to be thinking more about, which is the long term implications of something.

spk_0 I mean, the argument of the Trump administration is like, hey, we're not giving this money away for free.

spk_0 We're getting something in a return and there are folks who absolutely believe and buy into this strategy.

spk_0 But there is the long tail of this, I think, is really interesting, which is what's the limit of government intervention within these companies?

spk_0 Now some people have compared this, I think in my belief incorrectly, to some of the like the big government bailouts that happened during the Great Recession in 2008, government did step in and like bailed out for instance, some automakers and there was some deal making there like if we give you this money, you have to do this.

spk_0 So there was an exertion of control, but there wasn't necessarily like a direct stake.

spk_0 And so 10 years, 20 years from now, how much of that stake will be, you know, how much power I should say will the US government have over an Intel?

spk_0 Will they right now they don't will they have someone on the board, for instance, will they give sweeter deals to Intel as opposed to a competitor to your point Anthony.

spk_0 So so to me, it's like interesting now, but really what is interesting to me is like the long term 10 year, 20 year implications of this.

spk_0 Here's some curious if you can kind of tell us a little bit more based on what you know about lithium America's I mean, is this a similar kind of deal as Intel was where they really needed some saving here?

spk_0 I don't know I don't think that they needed saving. I mean GM bought a 38% stake in this company.

spk_0 There was some concern that due to prices falling that this was at risk, but to me this felt like just an argument that was being used in the short term.

spk_0 A lot of these big energy deals or mining deals, you're not just looking at the current market conditions. You're really looking out over 10, 20, 30 years.

spk_0 I mean, that's how fossil fuel companies work and mining companies as well.

spk_0 And they do this so that they aren't necessarily putting a project at risk based on fluctuations in the market of like with the prices, but that is the argument that's being used.

spk_0 Whether that is just a debating tactic, you know, I think I think that there's some merit in that and not so much that the steel is at risk.

spk_0 I will say one thing though, which is that because EV adoption and of course lithium mines are often tied to, you know, the demand for EVs, there's still demand, but it's slowed.

spk_0 There have been a lot of bottom makers who have like step back or stopped or paused laid production on EVs, killed off models, changed some factory plans.

spk_0 And you know, you could say potentially, well, does this mean that this is a risk for this mine as well? I don't see that necessarily.

spk_0 I should also mention that the government has also taken a stake in MP materials, which is a really interesting company that I covered years and years ago.

spk_0 And they are pretty much the only rare earth minerals mine in the United States. And you can see why a country would want to do that, right?

spk_0 Because we're heavily reliant on rare earths for all sorts of things, including smartphones.

spk_0 Right, I think part of the context here was, you know, and these are things I really had not thought about until this year, but as sort of trade tension started to escalate between China and the US that there've been, you know, all these articles highlighting the importance of rare earth minerals to the tech industry.

spk_0 And you know, you don't think about it until suddenly, you know, our access to some of those minerals is is in threat.

spk_0 My sense is that you mentioned lithium for EVs, but this is also important for smartphones. I mean, is this something that's like pretty widespread in its usage in the tech industry?

spk_0 Oh, yeah, absolutely important. I mean, lithium is actually abundant in the world, but it does take effort and money to to mine it.

spk_0 And so it is absolutely important. And if the goal is to bring to build up domestic manufacturing and take, be come less reliant on foreign countries is absolutely important.

spk_0 I think the question is how we go about that? Do we do it through regulatory requirements? Do we do it through incentives and subsidies?

spk_0 Or do we do it through the US government taking direct stakes in these companies? So there's a bunch of different ways you can do that. I think that there's some differences of opinion on how you accomplish that.

spk_0 But we need to talk about this other deal, which I think Max has a lot to say about, but it's this periodic labs, which has the most insane seat rail that I've ever heard of a company. I think maybe the largest.

spk_0 Well, not quite the largest. I will say because Miramarod is thinking machines lab. I think that was the largest. I believe it was close to a billion. But yeah, Anthony, you kind of dug into some of the details around this.

spk_0 And I'd love to kind of hear just what are the brass tax of this deal? I want to make sure I don't get leave off anyone because this is kind of a crazy list of investors. So let me look at the notes here. So it's again, it's a $300 million seat round. And racing, Horowitz, DST, Nvidia, Excel, Elad, Gil, Jeff Dean, Eric Schmidt, and Jeff Bezos all invested.

spk_0 This is one of those startups where when you hear the pitch, you're just like, well, yeah, they can do that. That would be incredible. And so the pitch is essentially automating scientific discovery.

spk_0 And partly leading off from this idea that essentially right now the the generative AI that we use is trained on the internet. And we've kind of exhausted that as a source of knowledge. But great.

spk_0 Can we now basically use AI to create automated versions of the labs where scientific discovery is happening. And that becomes kind of the next big frontier for AI.

spk_0 So Max, I imagine you have some opinions about this. Yeah. So I mean, this is not the first AI for science lab that we've seen pop up. There were other labs like this.

spk_0 Lila sciences comes to mind as one of the examples of future house to believe that there are some others out there that are trying to kind of create AI systems that can come up with novel scientific discoveries.

spk_0 I also just think that it's worth pointing out that, you know, there's AI models can't do this today. I mean, there's a lot of work being done towards this. Google's made a lot of progress with alpha fold.

spk_0 But I mean, this is still really kind of they're chasing super intelligence really is what we're talking about like if AI can come up with new science like that is, you know,

spk_0 to a lot of people that that's a kind of super intelligence of an AI system. And so this is really a bold bet that all of them are making. And it's very much in the realm of open AI and anthropic and these kind of big AI labs.

spk_0 I think it's worth noting to that they use a kind of an interesting word to me or a word I think that's going to catch a lot of attention, which is AI scientists, which to me feels like replacing people right and into the nod of like super intelligence.

spk_0 But I think there's some nuance differences that maybe max you can weigh on a little bit because of your familiarity with AI, which is there are you mentioned some startups, but there are companies that are using AI modeling to help with drug discovery.

spk_0 I could think of another startup aionics that is using their whole thing is building custom models based on scientific, you know, papers and existing materials, not just scraping the internet to help specifically.

spk_0 Speed up the discovery of the electrolyte that sits in between the anode and the cathode in a battery, so kind of like a drug discovery, but for batteries.

spk_0 So this exists, but this what they're trying to do feels different to me. And is that fair?

spk_0 Yeah, I would say that's fair. I mean, I think that, you know, really what they're trying to do is hook AI models up to laboratories. So, you know, an AI model comes up with a hypothesis for an experiment and it's hooked up directly to like an automated laboratory,

spk_0 but it does. They'll be competing with open AI for stuff like this opening. I just launched that's opening for science program. And yeah, I mean, this is, you know, just one of the most competitive spaces now.

spk_0 I mean, my sense reading the coverage and just looking at their website is also this is kind of one of those classic seed announcements where there's a big vision that's being presented and they're not necessarily sharing a lot of details yet about how they're actually achieving any of these things.

spk_0 And how many of you know, whether whether they've actually built anything yet or really it's been about, you know, assembling the team. I think one thing that was very.

spk_0 I guess maybe impressive is not quite right, but it certainly this swaged some of my skepticism was that if you look at the team they've assembled certainly there's a lot of people from the AI world. One of their founders, you know, came from Google DeepMind where they actually worked on a tool that discovered a bunch of new crystals.

spk_0 But also there are a lot of people from the material science world. They have like a scientific advisory board. So this isn't just, you know, a bunch of AI people saying, hey, we can reinvent science.

spk_0 And we don't actually know anything about how science is conducting the laboratory. This is anyway they've gotten some scientists on board to, you know, at least explore the possibilities.

spk_0 This is one of the big things about periodic labs is that they have assembled this team of former open AI and Google DeepMind and meta researchers.

spk_0 It was actually interesting to see given all the news this week that, you know, what one researcher at periodic labs said, you know, if you want to come build AI for science instead of the infinite AI tick tock slot machine.

spk_0 Please come join us at periodic labs, which I thought was a great advertisement for them.

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spk_0 It's also a great transition to what we're going to talk about next, which is about how AI companies are starting to make money and sometimes that looks like the AI tick tock slot machine.

spk_0 So just start us off. Kirsten, I'm curious. Did you see some of the new kind of AI power tick tock competitors that came out this week?

spk_0 The videos that have been used or have been produced using these tools have been a little bit disturbing. I think probably the one that like stuck with me the longest in a bad way was so I'm talking about Sora to this is opening eyes product.

spk_0 And one of our reporters had a great story about it and she is a word terrifying, but the video that I'm thinking of is these pigs eating and there's like sound in there too.

spk_0 And then Sam Altman, you know, an AI generated version of him looks at the camera and says something about like are you enjoying your AI slop or something to that effect.

spk_0 And it's disturbing on like various levels. I'm sure that there are even worse videos out there that will sit with me longer, but like this stuck with me all day like this image.

spk_0 So yes, I am to answer your question familiar with these new products.

spk_0 As we talk about I do want to push back slightly on the way we're framing it in the sense that I do assume that part of the reason they're you know that opening has launched the sort of app is that the hope that they will monetize it at some point, but actually right now this is actually just another thing they're spending money on and and as you think you mentioned in your coverage is a free app that they might start charging you know money to people who want to make a ton of videos.

spk_0 But right now this is actually not being monetized, but we can definitely see what the path might be.

spk_0 I think one of the other stories this week was about how meta is basically saying hey we're going to use all year AI chatbot data for targeted ads and also by the way you cannot opt out of it.

spk_0 So I think this is definitely the direction we're going in, but opening is not actually monetizing this right now to pull it back just a second.

spk_0 To me, this is really I don't think that we're at this like big transition moment quite yet, but because I think things are happening at the same pace, which is the first phase of AI and the buzzies sort of like ecosystem of what was happening in AI is tons of companies raising money and few of them specifically like opening I having incredible raises and excuse me incredible raises.

spk_0 And also crazy valuations like open AI I believe now is valued at 500 billion dollars and then there's a ton of other smaller AI style.

spk_0 It's all chasing the same thing all chasing money at the same time now we're starting to see some of these companies going hmm we should probably figure out a way to make money off of this.

spk_0 And to me that path is less clear, but you are seeing a lot of experimentation into Anthony's point it feels like let's just see what sticks kind of moment and I'm wondering if either one of you have seen any products that have come out maybe they're free, but you see an actual pathway to revenue.

spk_0 I think that the case for Sora making revenue is pretty clear to me like I think that it looks like tick tock it looks like reals it's going to make money in the same way that those will I mean this is opening has not announced you know that it's going to monetize that it's going to put ads in it.

spk_0 But you can see like I don't know like if it you know looks like a duck sounds like a duck then it's a duck like these things look like what they are I think that you know.

spk_0 More broadly I think you're right here, so I think what we saw this week was a lot of companies are kind of laying the foundation for ways that they're going to make money in the future we've also seen open AI create this new kind of discover like feed called pulse that generates you kind of these morning briefings and that is another surface that people think will be a place they put ads in the future so I do think that there are a lot of kind of paths here to actually you know generating some revenue.

spk_0 But we're not quite there yet where they're flipping the switch to turn on the ads to turn all of this you know into motion.

spk_0 I mean I think one of the steps you know in order for it to actually become a big money maker is obviously a lot of us would have to sign up and start using Sora I will admit as an old cranky person just reading the description seeing the videos that a man posted particularly in her article I was just like no thanks this is not for me I don't like this.

spk_0 That to me it felt like something that was going to be taking all the things that I already kind of don't like in social media in terms of the amount of deep banks you know AI slop content and it's like all the stuff I don't like very little the things I do like and so I feel very kind of disenchanted and skeptical but I'm curious if either of you feel differently.

spk_0 Oh I feel the same but here's my question I guess which piggybacks on what you're what you were just saying which is it feels like there isn't going to be infinite uses for just creating AI slop videos like it's going to have to evolve into something different because first of all there's a number of companies that are kind of creating these tools to do that.

spk_0 And like what is the audience appetite for this like at some point and people are already rejecting it I know right now it feels like a novelty and like it's cool to create things and kind of crazy slash terrifying things but to me at least there's a limit to that appetite and so the survivors and the ones that actually make money are going to be the ones that then figure out ways to show the audience consumers how to use this in ways that will like actually be a lot more interesting.

spk_0 So I think that there's some key distinctions between the AI video app that opening I launched and that meta launched where opening I keep part of it is that you create videos of yourself and your friends.

spk_0 Whereas with me does AI video app is you just create slop like you just create stuff that doesn't look like anyone and it got a much more negative reaction because of that and I think that honestly it was a really good insight that open AI had to say that people like when they look at apps and it resembles like people they know I have to say like I think I am a little bit more bullish on these kinds of apps moving forward just because when you look at what's happened to Facebook and Instagram in the world.

spk_0 And the last year it's like they're filling up with AI generated content and like on Instagram like people do seem to kind of be very amused by like the brain rot kind of stuff like and it's terrible in some ways but it is also like this like weirdly indulgent kind of like funny crazy thing and I don't know like I just like see that happening on regular social media so I understand why open AI is trying to capture that on its own.

spk_0 So I think I have a platform now is any of this good for society I don't know I don't think so but that's not what they're focused on.

spk_0 No, I think I have the answer to that question although I do like Anthony sound like this like grumpy like anti tech person which I'm not.

spk_0 But I will say that I am going to disagree with you a little bit I don't think it's going to go away.

spk_0 But I do see already an appetite or desire for things that aren't artificial and real like right now there is a large group of people who are using this and enjoying it and like kind of like reveling in the the brain rot piece of it kind of embracing it and it's like this moment in our culture.

spk_0 But I think that the pendulum is going to swing the other way and my prediction if not this is a prediction show but my prediction is that you're going to see people really seeking out things that are real and authentic and then the question is how does AI fit into it I don't think it's going to go away by the way like I'm not going to be one of those people with like the Internet is just a passing fancy but I think it's going to have to evolve because at some point then novelty wears off like people start rejecting brain rot it's just like a natural cycle so it needs to have like what is the next.

spk_0 So I think that's the first thing that it's going to be used for what are the real tools that are going to make people like live in their real life in a better way and if they can figure out that and you can monetize it then you you've got my attention.

spk_0 I think it's a good point and I do also want to move on to our next theme here which is a very real thing that is happening right now which is the government shutdown and how it's actually affecting startups and venture capitalists.

spk_0 Pearson you were just kind of explaining some of the impacts that this is having on the startup world when we were offline and can you just dive into a little bit of how this might affect companies in ways people might not realize.

spk_0 Yeah I will do that but first I want to ask the two of you if you have personally had anything happen that you were going to do that now because of the government shutdown you're wondering hmm is this going to affect me at all.

spk_0 No you're like no I'm good not that I'm good but there's no immediate I had one meeting canceled because someone said they had to go to the airport.

spk_0 One meeting cancel and Anthony is not really sure how it feels about it but otherwise not impacted.

spk_0 I'm actually about to I was just about to renew my passport and I'm kind of like her but to your question about startups I will say this we have a great article on and we're going to have a lot more coverage of this in the future talking about the government shutdown and how it.

spk_0 May impact startups and I'm going to put the may in kind of quotes because it's only been a couple days and really this comes down to how long this will take so a prolonged shutdown is going to affect a lot of people her article and when she speaks to a lot of experts about this is really focused on how it will specifically affect startups and it will in multiple ways kind of in the same ways that it can affect companies but the key difference is that many of the people who are in the market are in the market.

spk_0 So many of these startups have raised just like a million dollars in seed money that not the 300 million dollars that you know periodical have they might have a longer run away so small delays in things like permitting process like you can think of the myriad of defense tech companies that are out there that are seeking or waiting for regulatory approval maybe on something like drones or you know some other kind of permit.

spk_0 If that gets pushed off a few weeks okay a month and then government returns and then they get pushed the bottom list suddenly that becomes an existential issue for them.

spk_0 I do think one important piece of context here is to think about this not as like we're going from this period of you know government predictability and stability into a shutdown but that we're going from this period that's also there was already really chaotic and unpredictable I mean obviously one of the big things was the H1B changes that were announced just a week ago

spk_0 and the fact that you know application fees are going to go up by a hundred thousand dollars and lay there's all these workers were being told not to go overseas or to come back from overseas.

spk_0 And so you know that is not to say that you know people should feel one way or another about the shutdown but I think in some ways that's also made the situation even more precarious right that you were going from this situation where you were

spk_0 pretty a bit like I don't know what's going to happen if you're a startup founder and now that's you know doubly triply 10x the case.

spk_0 Right I mean I think that that that one thing you can say regardless of how a company or its founder it's CEO executive team feels politically they can all agree on one thing which is certainty is positive and uncertainty is bad.

spk_0 And every company will say that and when there is an uncertain environment for whatever reason it creates a ripple effect throughout that business and they have to make changes and decisions based on an uncertain environment.

spk_0 And so you get these bizarre scenarios sort of these Schrodinger cat scenarios where it's like if things stay certain we get this but also this other thing can happen and it is like the literal opposite of it and we're seeing companies publicly traded companies issuing guidance like this and I we're starting to see startups sort of reflecting and kind of preparing for this as well and I should mention that like if the visa processing

spk_0 processing system is frozen which it is right now and a startup also is looking at you know permits being halted or slow or delayed suddenly you're looking at hiring slowing or even layoffs.

spk_0 Despite Anthony and my experience it seems that the government actually does a lot of meaningful stuff that impacts a lot of people's lives apparently not ours but other people's so I mean it's worth knowing that we don't know how long the government is going to be able to do that.

spk_0 So the government shutdown will really be the last one I believe was just over a month sometimes there are a couple days sometimes there are a week but a week for a startup there's a lot that could go wrong there's a lot of forms they need to file so a lot of uncertainty there.

spk_0 This also feels like the reflection of how the startup landscape has changed and say the last decade and especially over the last few years in terms of I mean I think for a long time this is not necessarily the fear of a government

spk_0 shutdown but just sort of the uncertainty around you know having the government as a customer or somebody you need to rely on is why I think there was such a focus on consumer internet startups for a long time or it's one of the reasons was that hey you don't ever want to be just like sitting there trying to get you know the government to sign off on something.

spk_0 But now you know obviously there's a lot more ground and defense tech a lot more in deep tech where you maybe need various kinds of regulatory approvals and so like it just feels like much broader swaths of the startup landscape.

spk_0 Now depend on the government and various ways in ways that wasn't necessarily true 10 years ago.

spk_0 Yeah absolutely that's a great point and also I should mention before we shut down the show for this episode.

spk_0 Just for now.

spk_0 Yeah not forever sorry folks no but one other piece that I failed to mention before which will also be affected and is something near and dear to my heart which is IPOs and so there's been this really great IPO window that has opened up the latter half of this year and the SEC is you know only doing very limited functions right now which means that any company that's trying to you know debut on public markets may also see that slowed which you know for me personally

spk_0 I don't like that and I am sure those companies are getting nervous about do they now change their plans is the IPO window closing and so that that is another one I feel like we should mention as well.

spk_0 And on that note we are not canceling the show at just ending this episode in the meantime you can always find us on social media at equity pod on X and threats see you next week.

spk_0 you

AI slop, government stops, and startup uncertainty

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