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Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. Today is Friday, May 22nd. I'm Kirsten Cororus, tech editor over at Techrunch and I'm joined as always by our weekend editor Anthony Ha and senior reporter Shaun O' Kaine. This week, what was really remarkable is that the Open AI Elon Musk trial was not the biggest news of the week. Somehow didn't think that was going to happen, right? Okay, but we should still talk about the news at least a little bit.
Um, the fact that Elon Musk did lose the trial, although he sort of seems to be trying to declare a moral victory partly because he lost on what is arguably you could call it a technicality, which is just the statute of limitations that the jury said his uh whatever damage he may or may not have suffered. It happened kind of too long ago and he waited too long to file the lawsuit. You know, you can do a lot with two hours. You can go see a movie. You maybe go on an extended run. you get a good nap in or you can apparently have your entire jury deliberations and turn around and come back and say, "Uh,
actually, yeah, this is we're throwing this out. Goodbye." Uh, you can tell Elon Musk no in two hours, which I find pretty remarkable these days, as we'll get to it later in the show. It gets harder and harder to say no to this guy. It is getting harder and harder. The obviously his lawyers did not say no to him because they much must have known the statute of limitations. they must have known that this was going to be bumping up against and they said yes anyway and went ahead and spent a few weeks in a trial and they may be spending more time because you know they've they've said that they're going to appeal um and so you know we'll see where that goes. I think the other question is sort of
regardless of what happens moving forward is like is it fair to call OpenAI the victor? I mean, certainly in the in the legal sense that is true and things could have, you know, I guess potentially gone a lot worse, but I there's also this sense that OpenAI's reputation has been damaged pretty significantly by kind of what's come out. So, even if they won the legal case, you know, they're also maybe it's a case where everyone's kind of the loser. We should say Musk has said he's going to appeal. uh as is usual for Elon Musk, he has sort of backed himself into a sort of like ideological knot of at the same time calling this like a sort of procedural decision that doesn't really
matter on the merits and then also claiming that this is setting a dangerous precedent that allows other people to go loot charities without, you know, recompense. And it's like, you really can't have it both ways, man. Just pick a lane. Uh so we'll see where it goes. I think, you know, as far as OpenAI goes, I think it was a pretty obvious sign of their confidence of where this goes for the rest of time, uh, that, you know, two days after this trial was ended, we got reporting that they are about to file confidentially for their own IPO within a matter of days or weeks. So, you know, I think they are ready to put this behind them.
Well, if we have learned anything and what we're going to talk about later is that Elon can have both. On the show today, we're going to have deals of the week from the company behind OpenClaw alternative NanoClaw. And then we're going to talk about an anthropic acquisition that's pretty interesting. We're going to then get into AI and the tension between consumers and the tech companies that really are embracing AI and pushing it on these consumers. And then of course, we're going to get into the SpaceX IPO. I'm not a big nano claw open claw follower but the headline here is more than just that they raised 12 million in seed funding. So the company is called Nano Co and the product is Nano Claw
which is sort of this secure alternative or at least it builds itself as the secure alternative to Open Claw and in addition to raising the 12 million seed they sort of said that was kind of an alternative to they were doing that instead of taking this $20 million buyout offer. So it seems like again like very quickly there's there's been a tremendous amount of interest. Yeah. And it's kind of cool because these are brothers and so that's kind of like a fun, you know, family startup story, but the pace of which they were playing around and built this product to getting the seed round was something
like, I don't know, it was less than two months. You know, I'm certainly curious who was willing to put up $20 million for them and who it was that they rebuff. We've seen other I mean the open claw guy got sort of acquired or aqua hired or whatever you want to call it by open AAI like we've seen a bunch of these folks who come up in this space get snatched up by some of the leading labs and in those cases we tend to see those people get paid a lot of money you know you are getting uh sort of more money than the dollar you put in and 20 million to me here yes this is a more targeted thing this is not like breaking
the world in a way that uh that OpenClaw itself was. But, you know, I wonder if that $20 million is coming from we know that there was some interest from the Hugging Face CEO who invested in this company and in this round. Uh I'm just curious because this that 20 million feels like a figure that's like in the middle. Uh and if this was coming from like a you know a meta or open AI, I think we would have seen uh I think it would have been a lot harder for these guys to say no. They've only existed for two months. So, give them a break, Sean. You know, 20 million is still a lot of money. I'd take it.
I'm with Sean here that I think that 20 million for like an AI start hot AI startup, however new it is, feels like the low end right now. Okay, fair. But we should say they were led by Valley Capital Partners. And you're right that the Hugging Face CEO was an angel investor. And that one was interesting because I guess he just reached out to the founders via like social media somehow and was like, "Hey, I'm really interested in your product." And it became like within a couple of exchanges and a conversation then it turned into this investment. So, you know, to me 20 million sure low
compared to some of the others, but maybe that is the cap or the bar that these founders set. I mean there is something to be said about taking too much money and diluting your equity if you don't need to. I also wanted to just talk a little bit more about the product which I haven't tried myself but one of the things that was like really striking when kind of open claw fever hit everyone right was like oh this like is this really powerful you know agentic AI uh but then you started to see these examples of um oh like but you got to be careful or it might delete a bunch of crucial files or do something else that's like really harmful and irreversible. And so basically what you know Nano Claw does is it basically
operates in a sort of container so it doesn't get access to a lot of that other stuff on your computer. And that I guess makes sense but at the risk of being glib that also just feels like a real sign of a product that's not quite there that like I don't know. I just feel like a piece of software you should be able to run it normally on your computer and not have it risk destroying everything. You literally just described like everything that is happening right now in the AI industry which is it's a little precarious out there in some respects. I am happy to see some folks who are expressing caution in a number of ways here. Caution because they want to take some time to build up
the business the right way. Uh you know you look at the website for Nano Co. You know, I know this is not targeted at a general consumer audience, but it is a very clearly not targeted at consumers kind of thing in the way that they describe what they're offering. And so, I think they need to work through who exactly they want to go sell this stuff to and how exactly they want to build it, figure out what their product really should be. uh and also that they showed some caution around the uh more uh what would what should I call it the wildest tendencies of openclaw to do kind of really remarkable things that you don't realize that it's doing uh you know I guess it's it's nice to see
especially as we uh you know are coming off a trial where two big companies or two big players in this space have spent the last couple years yelling about you know inventing digital god you know sort of facing off against each other we And we have these people who are sort of like actually we want to dial it back a little, you know, and we know we want to aim at something a little smaller. You mentioned earlier that it's not really clear totally who their customers are, but we kind of know some of their fans and we could, you know, read into that a little bit and one of the people who was most vocal about it um was Andre
Karpathy who was an OpenAI co-founder. Big alarm bells went off this week. he went over to Anthropic, which we're about to talk about. Um, but he was actually a big supporter of this startup, and I think helped bring a lot of attention and probably some investment. Yeah, I liked it. you know, uh, Julie Bort, who wrote this story, and she also wrote a story about, uh, Nano Co when it first really blew up earlier this year, had this really funny sort of anecdote that these guys told her about involving when they found out that Andre Karpathy had started tweeting about Nano Claw uh, and how much he loved it. And, you know, they're sort of like, you know, they're painting this kind of scene of like waking each other up and like, we got to
respond to this. We got to take this momentum and run with it. They basically sat on the couch all weekend. It just makes, you know, gives me this like really vivid idea of, you know, how much we've moved from these sort of like garagebased Silicon Valley startup to a like legitimate couch startup scene where there's just so many people starting up companies without even, you know, sort of getting up off the sofa. Well, Kirsten, you mentioned uh that we were going to be talking some more about Anthropic, and in fact, uh that's kind of our next deal is this acquisition they did of a startup called Stainless. But I have to say, by the way, I love
the garage the couch analogy, and we should definitely write a story about that. Um, I don't know if stainless was built in a garage or on a couch, but they did create something that literally every AI lab wants. SDKs, which are like a software development kit, is nothing new. Um, but what they did was they created a way to automate that um for APIs and that is important for AI labs that are creating AI agents. So instead of having to manually go in and like change a lot of various parts of it without getting too deep in the weeds, um this tool was able to automate and sort of maintain things. And that's really important when you're launching a bunch of agents like you know dozens, hundreds, you know, if you were to
believe Jensen um Wong, the Invidia's uh co-founder and CEO on his earnings call the other day, uh billions of agents. Okay. So, it'd be nice to have them automated. Yeah, this feels like another one of, you know, the latest in the line of these kind of like take a piece off the chessboard moves that we've seen where, you know, typically we've seen that in sort of aqua hiring of, you know, hollowing out scale AI or buying basically the open claw guy. Uh, you know, this one was a bit more traditional in what you described as sort of like buying a product that's filling a need and doing it quickly before it spreads too far to other people and becomes like a sort of a
monopoly problem where you're owning a little bit too much of the stack. So, I mean, it seems like a smart move from Anthropic in that regard. Uh, we should say it paid reportedly around $300 million for it. This is one where, you know, we were seeing a more mature idea uh get a lot more of Anthropic's money thrown at it. Um, which is, you know, it's not the only one that we learned about anthropic throwing money at this week. Sounds like it's sort of aqua hireish, but not like I think often when I think of an aqua hire really, it's that like the product really is just sort of going to go away entirely and it's just about like hiring the team. And it sounds like
Anthropic does have some intention or at least is acting as if it is some intention to use the technology for itself. It says that, you know, this is that it's used um this for its own SDKs kind of for a while now. So, it's not like they're throwing the tech out entirely. They're just not making it available to any of their competitors. Yeah. I mean, they noted that they have been using this since the beginning. So, I think that's pretty remarkable. They obviously see value in it. They still want anyone else to have it. It feels very much like, you know, this is my ball. I'm taking it home with me. You can't play. Um, you know, Sean kind of alluded to this a little bit that, you
know, Anthropic's been throwing money around in a few places. And I think the dollar signs that I really want to know is what it costs to get Andre Carpathy on board because they just brought him on. They've hired him. That's a big deal for a number of reasons. um open a he was an open AI co-founder. He had then gone to Tesla. Then he went back to OpenAI then he left and was starting this company that I really didn't see much activity from. It was Eureka Labs. But he is an incredibly high-profile person in the world of AI and now Anthropic has him and they're you know I would love to know what it took.
I mean I'm guessing it's a big number. Yeah. I'm guessing it's more than any of us make. How about that? And that's Oh, that's you know. Yeah, that's safe. I think the other thing I mean that this is something we talk about a lot but just solidifies that sense of you know a couple years ago when you said AI open AI really was sort of unquestionably the first company that came to mind and it still is but that there's a sense of that sort of they don't quite have the heat that the way they did before and Anthropic is sort of you know breathing down their neck or ahead of them in some categories. We're also seeing I think you know what could be an
important inflection point for these companies in the way that they compete against each other in the sense that it got reported this week that uh you know Anthropic is maybe headed for its for first sort of like good quarter where it's not just like deeply in the red and is actually building what looks like a sustainable business which you know is not only important for them but is important in how it distinguishes itself and its business from these other players. anthropic is not really going out there and saying we're going to partner up on all these data centers. We're not we're going to put shovels in the ground and do all this incredible hard capex that like OpenAI is trying to
do with Stargate that Tesla and XAI are doing with their own sort of compute. You know, Anthropic has really kind of stayed pretty narrow in that regard. I mean, they still they don't even have an image generator, right? like they are as focused as these companies seem to come which still is arguably not focused sometimes but it seems to be paying off for them. Uh, and you know, I would imagine that probably played into Andre's interest in joining them versus you I mean, listen, you go to OpenAI right now, I know that they have stopped their side quests, but they haven't stopped their side quests, right? Like, you don't know what that company's going to do any given week, and you probably
have a better idea what Anthropic will. you mentioned uh an inflection point and I want to note that there is another inflection point that seems to be happening and I'm wondering if um I know Anthony noticed it because he wrote a little bit about it which is there seems to be this moment right now that's happening especially with younger generations where they are actively pushing back um in somewhat public ways against all of these tech companies open AAI anthropic but also some of the more legacy ones like Google um pushing AI products on us as consumers, right? Right. And this was I mean I think a pretty visceral thing, not like a carefully detailed like position paper or anything, but just that at a
number of commencement speeches um and I wrote about two, but I think there was actually a third as well that I hadn't seen until my piece published where the commencement speaker, in one case, Eric Schmidt, the former CEO of Google, started talking about AI and about the future of AI. And I mean it wasn't like just pure boosterism but it was like it was pretty like yeah this is pretty great. Um and the students did not agree because they would they just started booing and kind of like it's pretty remarkable to watch these videos because it like it picks up momentum and then it sustains and like in some cases um you can see the speakers are like genuinely really surprised at how
negative the response is. Probably one of the stories that got the biggest reaction this week was from our editor Sarah Perez who wrote about Google search as you know it is over. Google had their IO developer conference. They announced a lot of stuff. We have a ton that we will probably show um link to in the show notes. But this story in particular resonated with a lot of people because they are changing Google search and they are putting AI front and center. So those 10 blue links that we used to always see are disappearing. And I'm very curious to see if Google sticks with it if they get a lot of push back. I think that they will just because they have to make this whole AI play work. But I don't know.
What do you two think? Well, I mean there's they've been on a slow march to this for a while now, right? Like, so part of me thinks there's been so much momentum built up behind this that I don't think they care how much blowback they get. Maybe they'll tweak things here and there, but like they clearly seem to see some value in doing this. you know, at an extremely high level, they do not seem to be willing to reckon with the sort of like basic mechanics of if they let the open web die, they lose the sort of fresh creation of new information that their AI is supposed to serve up to people. And maybe the assumption there is just that their AI will get smart enough to figure that out and like make it new somehow. I
don't really understand that, but I don't see them really turning this around. I will say they, you know, they have sort of said like that blue links are not going away. They're further down the page, but like you know, it is clear that they want you, this has been the end goal for a while, keep you at the top of the page when you open up Google search. You know, whoever, we haven't clicked past the first or second page in years anyways, and all of that has been stuffed with sponsored stuff. And so now, you know, it's all about sort of audience capture. I feel very pessimistic about this. It feels like and I'm sure that you know, they have seen engagement and I noticed myself that like as much as I
did not like the idea of AI overviews, like that I would get lazy and that would be the first thing I'd read when I did a search. And I'm sure they're seeing that engagement kind of happening across the board. I mean, eventually I got sick enough of it that I just started using a different search engine. But like what Sean was saying is it just also just seems so shortsighted in the sense that like I don't like this idea that oh we can just put all this information at your fingertips. Well like where's this information going to come from if you've kind of just destroyed the business model of every other publisher on the web. And also like why would those publishers then work with you? Because right now you
know again I think there's like a lot of legal stuff around fair use and things but like fundamentally it's like okay you can crawl our web page because you're going to give us traffic. Well, if you're just going to extract all the value from that and give us nothing, why would any publisher want to be indexed by Google anymore? Yeah, I mean, that's a good point. Also, the fact that this isn't just limited to Alphabet, the parent company's Google search product. This is going to YouTube as well. We're seeing a lot of like AI powered conversational search to video. Our AI editor, Russell Brandom, did a really interesting story kind of summing up how this is sort of spilling out everywhere. like so many companies,
smaller startups, much smaller than Google um has been in a decade or more um all going after AI search and getting money for it. So I kind of wonder if these companies are probably ripe for acquisition targets, but these are companies like um Exa Labs and Parallel that are raising money all to bring AI search to consumers. to that point like one thing that I'm not saying I'm optimistic about but I am really interested to see develop is for the last I mean what 20 25 years trying to create a competing browser because like let's be real that's really what we're talking about when we're talking about Google search you know trying to create a browser and or a search competitor to Google was just a
non-starter we saw a bunch of people try but you just never could create that data flywheel that Google has spent decades building on to make the results good. And the financials were just not there if you were doing the browser component. Like trying to get people to actually pay for a browser is really tough. Uh and so there has never really been competition to Google search or really to Chrome in a lot of ways. But all of these advancements that we've seen in AI, partially driven by the technology that Google has developed, has made it possible, it seems, for competition to actually try to make a stake, you know, in this market. And, you know, I'm hopeful that there is some version of that, you know, is
willing to compete with Google on like what we think Google to be as far as like a resource versus a product. My only hesitation is that they're going to compete on like what Google's trying to do with Google search right now, which is like become a singular funnel where all your questions go and you know where the answers come from is really not your concern. Yeah, I hope there is more competition and that it does feel like in a way that was unthinkable a few years ago, you could imagine Google at least being less dominant. Um, and I would love it if a competitor instead of being like, I'm
just going to build another chatbot was like, you know what's great? The internet. Let's build a search engine that lets people access the internet. And I think that's a great business idea that someone should build. We're out of time to talk about that, but we have one other little story that we want to touch on, and that's a SpaceX IPO. Ask me anything. This is going to go super quick, right? Yeah. Exactly. Yeah. Real short, real short segment. So there, this is something that I think longtime listeners know that you guys have been real excited about, really eager for. What were the things that
that just jumped out at you the most? Sean, please kick it off. Uh, I will very quick scene setting. I will say like for a long time relative to like how short our memories can be. It was not that long ago that this was not on the table, right? Like Elon Musk hates public companies. He hates being a public company with Tesla. He hates having to do the earnings calls or whatever. But all of a sudden, we saw a shift six, seven, eight months ago to uh I'm going to do orbital data centers and SpaceX is going to go public and we're going to merge all my other companies together. So, I just want to put that context out there uh because I do think
it informs some of the wild stuff that we see in here that as lawyered up as the document is in this S1 filing that dropped this week, it still is full of a whole bunch of really wild ideas. To me, the craziest thing that is in this document is that SpaceX says it has a total addressable market of $28 trillion, which is like, you know, ballpark US GDP. Uh and that's not the crazy thing to me. The crazy thing to me is it says 22 trillion of that is going to come from quote unquote enterprise applications. And for a moment when I was reading through this document yesterday I was like okay like I guess they mean like enterprise clearly we've seen attachment in enterprise AI from these from anthropic and open AI like I guess they mean that
but they must also mean like the orbital compute stuff that they've been talking about and like Starlink for business. No, those things are separate. They are talking about a, you know, they are telling investors that they're going to the public for money from that they will be able to, you know, eventually get to a market that is $22 trillion just on sort of enterprise AI. They go deeper into much weirder ideas in the filing about sort of like quote unquote human augmentation, you know, using AI to make it so much more, you know, everything possible for humans to accomplish. That was the thing that really jumped out at me more than anything else. Like yes, of course the Mars goals, you know, Elon
Musk getting a pay package that's associated with establishing a colony on Mars, but that this one it's such a concrete thing to pitch to people that also just feels so ridiculous to me. Yeah, concrete. I don't think a concrete thing to pitch without any actual real details on how it plans there um is sort of the crux. What really stood out to me was we I think a lot of people traditionally think of SpaceX as a rocket launch company and there they've always been kind of more than that. I mean there's Starlink which is the one big money maker. Um but everything kind of came to that beginning point of democratizing um space travel and the reusable rocket.
And so a lot of people think of it as a rocket company. But when you look at their capital expenditures, um, they're not putting all their money towards space, which to me was not what I expected, especially because so much hinges on Starship, which is actually supposed to, as we're recording this, is I think supposed to be launching, um, weather dependent. Um, so here's the line, and I'm reading it just so I don't forget. So 3.8 billion for space on capex. A lot of money. Um 4.1 billion for connectivity. So that's Starling. Okay, that makes sense because the company is making money off of that. It is actually growing enterprise. But then 12.7 billion for AI, which by the way is
also the segment, this is the X AI merger that happened earlier, um is burning through enormous amounts of cash. So, I don't know. That to me was what really struck me. Certainly burning through enormous amounts of cash, but one of the things we learned in this filing is that Enthropic, as part of this deal that got announced ahead of the IPO, is paying them already around $1.2 billion per month uh over the next few years to access the compute that they have in, you know, at the sort of Colossus One facility in Memphis. So, like they are finding ways to patch those holes to a certain degree. I mean, they also have like $30 billion in debt.
So, like it ain't over yet. But like I think it's interesting that they are doing that and trying to shore up the business in some ways. And yet, like that's still even in the most idealistic version of that down the road, selling compute isn't even like what they think their biggest addressable market might be. Yeah. What also jumped out to me about the AI business, I guess thinking about it in the context of um SpaceX's larger business is the fact that uh if I remember correctly, they were basically profitable in 2024, but then lost billions of dollars in 2025. And I think a lot of that I imagine has to go has to be to do with just, you know, higher and higher expenditures. And I guess then
that zooming out from that also just thinking about the business and valuation of SpaceX as a whole. They're uh I guess looking right now to raise at a $1.75 trillion valuation which you know with these kinds of filings that number could change. But uh Kirsten I think you have some thoughts on whether or not that is a good valuation. think it's overvalued and I'm sure there are a lot of people out there who are getting upset. I think space is cool. I'm a huge space person. I'm very much into that and I think it's great. I love the fact that there is amazing tech coming out of these um companies here in the US. That being said, I think it's overvalued in the point that Sean kicked
the whole discussion off about. Um there's there's some stuff in here that is just very hard to nail down and that TAM is just so incredibly high and not tied to anything that is real. Um, I think that they have a growing Starlink business, but that even is showing how their cost of revenue when you really dig into the numbers. Their revenue is going up, but their cost of revenue is also going up. And so, there are some headwinds there that I think are important to note. Also, Space Launch, they did add some new launches, but that is not a fast growing business right now. And their costs, their costs are going up. So a optimist and someone who's all in on Elon Musk might say, well this is he's building the next
great company and this is the future and it's innovation and in all caps. Um but there is a limit to that I think and um my limit is that valuation. It is below it. And here's the thing if you disagree I mean don't just don't go near this stock right? Like this is not financial advice, but like the other thing that I really focused in on in this filing is that like for all the control that Musk has at Tesla. He it is that and then some here at SpaceX. I mean, he is going to walk away from this IPO with more than 50% of the voting control. He's going to be able to name, you know, whoever he wants to the board of directors. It's already full with a bunch of people who are really close to him.
uh it's just like as controlled a company as you're going to find on a publicly traded market. And then you add in all the other stuff that has changed sort of as a result of his decisions over the last few years in just corporate law like moving to Texas, moving away from Delaware. You aren't going to be able to bring a derivative suit against SpaceX if you're a shareholder unless you own 3% of the company which like at a $ 1.75 trillion valuation is like a $52 billion position. So like there's just he is so insulated at this company that like if you really disagree with where the market is pricing this company when it starts trading next month really there are no levers for you to really like act on that disagreement other than like
trying to short sell it which like you know good luck because like in a couple weeks after it goes public it's going to be added to the indexes and the price is just going to go up even further at that point once institutional investors pour in and it's all in our 401ks. So I want to note one disclosure really quickly. We don't hold stock in any of the companies we write about. Anyway, go ahead. I think this also speaks to like sort of the paradox often of talking about both Tesla and SpaceX and Musk in general is that often there are these really impressive accomplishments and in the case of SpaceX certainly there's like a real business there where it's bringing in like tens of billions of dollars in revenue and you know and to a large extent has
created these new markets and also like to get to the valuation that they're talking about requires There are so much essentially fantasy math, speculation, you know, whatever you want to call it, where it's just like the numbers, the real numbers on the page don't matter at this point. It's just kind of like, well, do you believe that like we're going to like, you know, be a multilanetary civilization and SpaceX is going to control a lot of that business cuz if not, like maybe this isn't a great bet. It's all about faith. Yeah. Speaking of faith, I want to know two real quick things. one to your point about the numbers. If you look at other major companies that have gone public
and like the largest listings ever, you will note that these numbers that they're targeting are just like sort of a tick above a Ramco. Like there I don't think there is any coincidence in the fact that they are trying to make sure from the jump that this is the biggest IPO ever. Uh but to the bigger vision stuff, there is not one mention in here of, you know, the sort of biological viability of a multilanetary uh civilization, which to me as a prospective investor would seem like a pretty big risk factor that should have been included in this perspectus of like is that part even possible? Sure, the engineering may be possible, the technological side of this may be possible. Musk has shown an allergy his entire career to considering the
biological limits of human space flight, which you know, repeated flights to the ISS have shown are real and go well beyond radiation, you know, risks. You're such a cynic, Sean. I mean, why don't you believe in the future? We are going to be able to talk about this so much more. We've got the IPO debut coming up and so stay tuned uh for our next episodes. Equity will be back next week. Until then, you can find equity under the handle at equity pod on X and threads.
