TechCrunch Equity Podcast: Elon Musk’s Grok Goes Open-source [Summary + Transcript]

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This episode is presented by invest Puerto Rico. If you believe your business can go anywhere, Puerto Rico is the place. Hello and welcome back to Equity, the Techrunch podcast about the business of startup, where we unpack the numbers and the nuance behind the headlines. This is Alex. Good morning. Welcome to the Monday show. Today is March 11, 2024, and you and I are going to take a look back at the weekend and a look at the week that is to come. But speaking of the weekend, if you didn't know, we dropped an awesome interview with Roger Lee of Leosta. FYI. Over the weekend, Mary Ann chatted with him about why startups are shutting down so much right now and why so many more closed last year than we saw in 2022.

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Lee, of course, is an investor in sunset, one of the two companies we profiled the other week that helped startups shut down. But on the show this morning, we have stocks in crypto, news on Reddit's IPO, why Grok is going open source, new troubles at Techstars, and then a really neat new fintech round. Let's go. Let's start with a look at the world of money, and that means the stock market. Over in Asia today, stocks are down sharply, especially in Japan. They are lower in Europe, and stocks are set to fall in the US at the open. Now, on the earnings front, I only have a handful of names for you this week, so let's talk through the list. On Monday, Oracle and Asana, Wednesday is Uipath, and then Sentinel one. And Thursday will bring us Adobe Smartsheet, Pagerduty, and Wibo.

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So yes, it's a quieter week, but one that should still be very interesting. Uipath's report will include a healthy dose of AI. Sentinel one is amongst the fastest growing public software companies out there, and Adobe's earnings in a post figma deal world are very interesting. So not that many names, but hopefully a sheaf of juicy nuggets. And then there was crypto. If you have been living under a rock, I have an update for you. Crypto prices are up dramatically in recent weeks, including a 10% gain by bitcoin in the last seven days and a 15% gain by Ethereum's token in the last week. Elsewhere, there are now more than 100 billion tether tokens out there, which implies that tether is holding $100 billion in assets to back the most popular stablecoin. But it's not alone in seeing growth.

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USDC is back over the $30 billion mark, which is good news for the company because the number two stablecoin maker is considering an IPO of its own. And of course, when the major cryptos are up, so too are the silly ones. Dogecoin and the Shiba Inu token are worth 25 billion and $20 billion apiece by the somewhat crude crypto market cap metric. But still, that's a lot of money, no matter how you slice it. Crypto winter is over, and that was determined by rising token prices. So in other words, crypto is back, but it seems to be back in roughly the same form as it was the last time. Next up, big news that matters.

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And the biggest news that matters the most this morning is good news, because Reddit has filed a new s one document that indicates that it's making good progress towards going public. And of course, recall that the company is still looking to list on the New York Stock Exchange under the ticker symbol RDDT. Now, if you want more on Reddit's finances, we have an equity shot that you can listen to. I will link to it in the show notes, or if you are feeling adventurous, you can scroll back through your equity feed, but we will surface that for you. So what is in the new IPO filing? Well, Reddit plans to sell about 15.3 million shares while existing shareholders are looking to offload about 6.7 million. There's also a 3.3 million share underwriter option.

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But really, guys, the biggest news is that Reddit is targeting a per share price range in its IPO of $31 to $34 per share. Now, that can change. It can go up, it can go down, but that first window is super critical. And Axios was up before me this morning and ran the numbers. So if you trust Dan Premax ability to do arithmetic, and I do, Reddit is looking to raise between 682 and $748,000,000 in its IPO at a fully diluted valuation between 5.8 and $6.4 billion. Prior reporting had indicated that Reddit was considering a valuation of around the $5 billion mark. However, I can definitely see the company getting out closer to six or even $7 billion because Reddit has a massive new revenue stream from licensing its data to AI companies.

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That fact bakes in growth to the company's future, and I would say, most critically makes Reddit a way for public market investors to bet on the growth of new AI technology. Why is that? Well, in its filing, Reddit reported that it has racked up, quote, contract value of $203,000,000 from, quote, certain data licensing arrangements that it landed this year. In other words, licensing Reddit data to AI companies is big business. So if you think AI is going to be big, well, maybe Reddit will too. Next up, Elon Musk says that X, formerly known as Twitter, will open source Grok, the LLM that it offers subscribers of its most expensive subscription tier at some point this week.

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The move is notable in that it will bring yet another modern AI model to open source circles, and because in the background, there's Musk's suit against OpenAI itself, which competes with Grok with its own well known chat GPT service. That lawsuit kicked off a lot of debate in the technosphere, with OpenAI backer Vinod Kosla calling the suit a massive distraction from the goals of getting to AGI. Now, Musk has a lot of backers in the tech world of his own, and some of them were critical of Kosla's own take, arguing that open source AI dev is the way to go and that OpenAI's more recent, more closed model is perhaps less salubrious for global technology. Now, Kosla, of course, wants OpenAI to be worth as much as possible, period, because he owns a piece of it.

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But I do think that the open source versus closed source AI debate is good for tech in general, because competing methods of building new technology means more competition, period, which will lead to better products at a lower price. Now, by open sourcing gronk Musk is adding a little bit more weight to one side of the debate and making it seem a little bit more likely that there are principles, and not just pettiness behind his own suit against OpenAI. What's next in tech? That's not the right question. It's where Puerto Rico more than just a tropical paradise, it's an innovations paradise where startups and global players coexist in a vast and vibrant ecosystem where talent runs deep, highly skilled and bilingual. Plus, the island offers the most competitive tax incentives in the US.

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If you believe your business can go anywhere, Puerto Rico is the place. Find out more@investpr.org. Slash TechCrunch next up, let's talk about TikTok. And we have to, because there's a bill advancing in Congress to force its parent company, ByteDance, to divest it or suffer a ban of the short form video app in the United States. Now, this bill passed the House Energy and Commerce Committee by a vote of 50 to zero, which the Wall Street Journal reports took TikTok by surprise. When's the last time anything passed in Congress by a vote of 50 to zero. That's crazy. Well, there's even more at play. The Journal writes that, quote, Bobby Kotick, the former chief executive of video game publisher Activision, has expressed interest to bytance cofounder Zhang Yi ming, according to a person familiar with the situation.

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Now he's thinking about taking over TikTok with a big deal, and that would require a whole lot of money. TikTok is worth more than 100 billion. Everyone thinks. If it's 100 or 200 billion, I don't know. But Bobby Kotick's idea here would be a potentially massive transaction. Here we are watching history actually being written. So keep an eye on Congress to understand what might happen. But if TikTok does have to be sold byteDance, a lot of people are going to want to make a chunk of money on that deal and perhaps even become its brand new shiny american CEO. Scooting along, Techrunch reports that Techstar's $80 million advancing Cities fund, which was raised through J. P. Morgan's private bank platform, may not make it to a second fund.

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Techstars has been investing from the vehicle since 2022, with a goal to back more than 400 companies founded by underrepresented founders. And that led to the creation of techstars programs in at least eight cities, including Oakland, Atlanta and Miami. But by late 2023, JPMorgan was a little bit less engaged than before. Why is that? Well, Techrunch reports that the diversity focused investing effort didn't hit its target investing goals, at least according to one definition of diversity. The background to all of this is that capital raised by black founders is incredibly small compared to larger investing flows that startups tap. So if the advancing Cities fund fails to make it to its sophomore investing vehicle, that could limit those capital flows even more. Techstars, of course, has been rebuilding its in recent months after missing its revenue goals last year, leading to layoffs.

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Moving on across the pond, UK based Griffin bank, an API driven banking as a service or bass platform, just obtained a banking license roughly one year after starting the application process, which is pretty quick. Now, the goal here is not to open accounts for individuals, but instead to let Griffin customers offer their own users that ability, essentially making Griffin Bank's overall service more feature rich. The good news on the banking license front led to Griffin closing a $24 million Series A extension, which is good news for Fintech, which has seen its own luster dim in the eyes of investors in recent years. And over on the site, my dear friend Ron Miller interviewed Denise Dresser, Slack's new CEO, about what she plans to do as the head of the well known corporate chat product that sold to Salesforce years ago.

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Techwind reports that Slack's growth has slowed in recent quarters, giving Jesser a double challenge, one, running a big business inside of a far larger corporate home, and two, getting growth back on track in a more challenging software sales market than Slack enjoyed back in its early days. And that is our show for this fine Monday morning. Of course, we are equity pod over on X and threads. And if you want even more from me, well, I'm Alex over on X. Equity has two sister shows, chain reaction on all things crypto, and found talking to founders about how they built what they did. We'll talk to you soon, no later than Wednesday morning. Bye. Equity is hosted by myself Alex Wilhelm and Techrunch senior reporter Mary Ann Azaveto.

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We are produced by Teresa Loconsolo with editing by Kel Bryce Durbin is our illustrator and a big thank you to the audience development team and Henry Picovett, who manages Techrunch audio products. Thank you so much for listening and we'll talk to you next time.