Foundry is shutting down in slow motion

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Transcript

A special thanks to Ram Iyer for his help tidying up the original machine transcript.

Alex Wilhelm: Hello, and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. Today is February 16, 2024. My name is Alex, and I’m joined today by two of my long-running work besties. In one corner, we have senior TechCrunch reporter on the fintech beat, Mary Ann!

Mary Ann Azevedo: Hi, Alex. How are you?

Alex: I had really good doughnuts today. So it’s been a pretty good day overall.

Mary Ann: I’m jealous.

Alex: Well, my stomach does not agree, because I need to go for a run. But we also have Karyne Levy with us! Hey, how are you?

Karyne Levy: I’m doing very well. Thanks for having me on the show again.

Alex: Oh my gosh, an absolute pleasure. This is just like all of our various meetings we’ve had over the last couple of years together, just now in a live, recorded format. So nothing bad will happen whatsoever.

The good news is we have the right people today for this show. On the pod today, the deals of the week are Rasa, Ultraverse, and Hippo Harvest. A little bit of blockchain in there, a little bit of robots, even some fintech. It’s going to be great.

So for the first theme, we are discussing venture capital’s transitional moment, and why this year is going to look very different from what we have seen in years before. And then we’re going to close off with what YC wants to see from startups today.

Mary Ann, kick it off with Rasa, which just put together a very nice Series C.

Mary Ann: So I wrote about Rasa this week. As you all know, I generally cover fintech, but with this one, there’s some fintech involved, because this is a conversational GenAI company that serves financial services companies. And it was interesting to me because, first of all, it’s been around since 2016. They’ve been doing this for a while. The startup actually started out as an open source platform for developers to build chatbots, voice apps and other services that would employ conversational AI.

Then a few years ago, they decided to shift toward the enterprise, which seems like a very smart move for the company. They hired a former Oracle executive, Melissa Gordon, as CEO, and now they’re counting two of the largest banks in the U.S. as customers — two of the world’s three top banks, American Express and Deutsche Telekom. So their strategy seems to be paying off. They said their ARR doubled last year.

And now what they’re doing is, they’ve developed infrastructure to give developers at these large enterprises the ability to build what they call robust, generative conversational AI assistants that are more human-like and have more personal and meaningful interactions with users.

Alex: So just to kind of boil that down into idiot terms for myself: Essentially, in the world of financial services, a big chunk of the economy, there’s a lot of conversations. And so what Rasa is doing is building tailored AI chat tech to help companies in that particular niche better interface with customers, right?

Mary Ann: So that when the customer is having the interaction with the bot, you know what it’s like — you can usually tell right away, this is a bot, right? But sometimes you actually kind of doubt it, because the bot’s talking to you in a way that feels more human-like, and that’s what Rasa’s goal is: to make it feel really almost human-like. And Rasa, again, it’s not building the chatbots directly. It’s giving these developers at these companies the infrastructure to do it themselves and to kind of more personalize and customize the chat so that they actually have a way to vet potential answers beforehand, things like that.

So something that their chatbot can do is if you ask it to transfer money — not their chatbot, but a chatbot their technology would help develop. You could transfer money, check balances, and even reset a router in someone’s house if they’re having an internet problem. Things like that.

Alex: So, Mary Ann, when I saw this, I had two main thoughts: One, it seems more tailored AI work on a vertical basis makes a lot of sense given that each industry is different. [And] the second thing was — haven’t we just talked about this a little bit with Bret Taylor, former co-CEO of Salesforce, [now at Sierra]?

Mary Ann: So I asked Rasa about that. And what the CTO told me was that it’s different, because they said Sierra is more of an agent, whereas what Rasa is doing is not building an agent. It’s more of an LLM- powered chatbot.

Alex: So this is when it gets a little dicey for me, because you said that the Rasa technology will allow them to create things that lets people do things like transfer money, reset their router, okay? Isn’t that kind of the same pitch that Sierra is making? That these AI agents will help take actions for the end user?

Mary Ann: I think that the end result is the same, but the way they get there is different. That’s what he’s saying. But one thing they do have in common is they both claim to be addressing issues like hallucinations, where large language models sometimes make up an answer when it lacks the information to answer accurately. So that is something else they have in common.

Karyne: Yeah, that’s what I was going to say. Imagine asking it to transfer money and it’s hallucinating how much money you have or where to transfer it. I don’t know how much I trust it yet, but at the same time, I also wonder how is this any different than the options that they give you right now? So if you’re using a chatbot, and it’s just instead of naturally talking to it, it’s like, “Here are three options. Click this button to transfer the money. I wonder why this is any faster or easier than just selecting it yourself rather than having a chatbot do it?

Mary Ann: I haven’t used it. So I’m not going to be able to speak firsthand, but apparently they claim that . . . the developers are able to customize [the interactions] a lot more . . . accurately to what an actual person within the company would say. So that again, these are all their claims. Two quick asides that I have to point out before I forget. Two things that I also found interesting about this company: One, PayPal Ventures was an investor. Did I mention that they just raised a $30 million Series C? I don’t think I mentioned that.

Alex: I teed you up with my intro by not saying the dollar amount, like, “There was a Series C,” and then you’re like “AI agents.” So I thought we were gonna go backwards.

Mary Ann: Yeah, I forgot to mention that they raised $30 million in a Series C round of funding. That was co-led by Stepstone Group and PayPal Ventures, with participation from existing backers, including Andreessen, Accel and Basis Set Ventures.

They said their valuation is up, of course. I don’t know what it is, because they wouldn’t say and PitchBook didn’t say, but it was PayPal Ventures’ first AI investment. I thought that was notable. I was surprised that it was its first — I would have thought that they had invested in something else that was AI-related prior. And another thing that’s totally unrelated to AI: I really love the story of the CEO, who was a former pole vaulter who used Title IX to compete with men before women could compete in the sport. I just love that.

Alex: Well, that’s awesome. Also, pole vaulting is terrifying, because you take a large stick, and then you fling your body into the air, and then you go, “Wee, gravity!” How is that a game? Or sport? It’s cool. I mean, it’s awesome. I can’t do it. I’m not knocking it at all. It just feels kind of like a sport that we invented before we had cameras and balls to kick around, like, “Hey, I’ve got a stick. I’m gonna go over that tree.” Skilled but scary, says Theresa, our producer. I agree with that.

Mary Ann: Right? Anyway, so there’s a lot of different things related to this company. Part of the problem, I think, is we’re seeing so many startups using AI, claiming they are AI-powered, building AI stuff. It is getting harder and harder to differentiate them and tell them apart, so I can understand why you would have these kinds of questions.

Alex: We need better definitions for AI agents versus conversational AI bots. And I wonder if there are these distinctions without major differences, or if there are big differences and we’re simply missing the point. I think, probably in six months, we’ll all know the answer to that. But right now, it still feels a bit nascent. Not a fad, though, I don’t think this AI business [is a fad]. Everyone wants to save money on customer support costs, so expect more of this. But a place where there might be a fad, Karyne, is apparently the world of AI and crypto.

Karyne: Yeah, so just this week, there was a company called Ultiverse. It’s based in Singapore, and they raised $4 million at a $150 million valuation led by IDG Capital, which has invested in other Chinese gaming brands, like Tencent, and Xiaomi, as well as crypto upstarts like Coinbase and Circle. And what Ultiverse does is it blends AI and crypto gaming, or blockchain gaming. And so I think the fad is the crypto gaming components, but maybe also the AI component. So it’s an AI-powered platform for crypto game production and publishing. So they publish their own games, but then they can have other companies build games on their platform. And so they’re using LLMs that already exist, like GPT-4, Llama and Stable Diffusion to train in-game, nonplayable characters, which I think is maybe the best use case for AI that I have heard of within the gaming community yet. And I will say that I’m a gamer, but not these types of games. So I’m not quite sure about blockchain gaming as a whole.

But a bunch of people are playing this. They have a mobile cricket game that has about 200,000 Unique Active wallet addresses across all of their games. Right now, the monthly active users are about 830,000 people. Most of the people who are playing the cricket game are non-crypto users. So the game uses something called account abstraction, which means that even people who aren’t spun up on crypto-related things can play and then get paid out. But I think the main component here is the AI features that they’re trying to help introduce and trying to get others to use on their platform. (laughs) Tell me more.

Alex: I’m a little skeptical of parts of this. That’s not to be rude because I do think that trying to bridge different nascent technologies or rapidly emerging technologies is a cool thing that could yield at the intersection of them — in this case, AI and crypto — something special. I also agree that the use of modern AI tools like LLMs inside of video games is super awesome, because then you can have more than three dialogue options. Of course, there’s voice acting and stuff to be considered there, but it’s possible to do cool things, especially with text. Huge fan. And crypto gaming to me — people like to speculate; they like to trade, like to invest. Okay, cool. It’s just when you smush them together, I get a little weird.

So I was on the Ultiverse website and I was poking through their material on Terminus, which is “a decentralized virtual Metaverse platform that’s built on both the BNB chain,” so Binance’s chain, “and Unreal Engine 5.” And it just feels like a MMORPG-ish thing with some crypto crap slugged onto it. I just don’t want an NFC gallery in my game. I want to be left alone. And so that’s what I kind of struggle with. Maybe I’m just an old man shouting at a cloud. But that’s my advice.

Mary Ann: I mean, I’ll be honest. I’m not super well-versed on gaming, or even crypto to be honest, even though I’m the fintech reporter. So it’s hard for me to visualize all of this and try to understand it. But my first thought is, it feels kind of gimmicky. And that could just be me talking out of my you know what. But in the company’s defense is that they use account abstraction, so that even if you’re not well-versed in crypto or have crypto knowledge, you can still play and it could still be fun. I just don’t know how many other games out there might be like this. I mean, are there other AI-powered games? Or you know, is this just the beginning of a trend, or what? I don’t know. Are we going to see more of this?

Alex: People hope it’s a trend. People want it to be a trend, because they think crypto is the future. And so, to me, there’s a religious viewpoint here that, like, if you believe blockchains are the future, then you need to bring AI to them or vice versa, because they’re both the future. So the future has to come together.

Karyne: Yeah, I think one of the most famous, maybe infamous, examples of a blockchain game and a crypto game gone wrong was the Axie Infinity debacle, where people were just scammed out of money and had to farm for coins or whatever was going on there. And so the implication of when you think of a blockchain game, you’re like, “Oh, great. It’s a scam.” I think this is based on an article that was written last month by one of Ethereum’s co-founders that is called “AI + Crypto.” And his points were that AI could really be used in crypto gaming in four different ways — with non-playable characters, you could use AI to judge the results of a game, or their various other applications. And so here is one way that they’re doing it, and in this case, they’re using AI to really speed up the production of the game. And it just happens to be a blockchain game on top of it.

Alex: There are so many ways to approach gaming as a model. There are companies that produce free-to-play games that have in-app monetization. Even some new games like Stormgate, an RTS [real-time strategy], is approaching it that way. Very cool. There’s MMORPGs [massive multiplayer online role-playing games] that have subscription-based economics. There’s indie publishers that sell games for a discrete price and then also upsell you on the soundtrack. Then there’s the Paradox model, in which you make a game and then add DLCs [downloadable content] to expand the content over time. All of these models work for different types of titles, and I can see a place where AI fits into, essentially, all of them in time. Crypto gaming seems to always have an NFT gallery and some speculative currency, and people trying to grind out extra money.

Karyne: Yes.

Alex: And until blockchain brings something that isn’t that, I don’t care about it. When blockchain makes my games that exist already better; when it makes a better grand strategy game, a better city management game, a better RPG, then I’m here for it. But I don’t want fucking NFTs.

Mary Ann: Yeah, I’m having flashbacks to like two years ago because you know how I feel about NFTs.

Alex: Since we’re here now, I’m going to talk more about this. So, on the Ultiverse website, there’s this little thing about “Are you ready to meet your meta GF or meta BFF?” And it was this two-week long moonlight NFT mint, so I went on OpenSea and I looked it up. And it’s just like one woman’s head with different characteristics attached to her, and some of them are rare. I don’t know, is this what we’ve managed to accomplish in all these years of crypto? It just feels a little bit modest compared to the progress we’re seeing elsewhere in the world of technology.

And that brings me to robots! Everyone’s favorite segment. My deal of the week is Hippo Harvest. They just raised a $21 million Series B. Tim De Chant had this for us as a TechCrunch exclusive. The company raised the money from Standard Investments, Congress Ventures, Amazon Climate Pledge Fund, Hawthorne Food Ventures, and Energy Impact Partners. The company is now worth $145 million, and it’s going to use small robots to run indoor farms, and it thinks it can do this much more efficiently — cut back on water usage, fertilizer usage. You know, I think we’ve all become accustomed to the idea of warehouses using cute little ’bots to zip around and move things. Why not use those same now-commoditized robots to grow lettuce and other goods? So I think this is awesome. But, Mary Ann, you are our skeptic-in-chief, so I want to know: What do you think?

Mary Ann: I agree, I think it’s cool. Really, really cool, actually. They said that they can grow the greens using up to 92% less water — that’s huge! Thirty-five percent less fertilizer and no pesticides! So if it works, why not? This is great! So they want to stick with greenhouses rather than vertical farms. I guess, the angle of this is, it’s more of a robot startup really than just indoor farming. This sector has struggled. We’ve seen a few players in this space for bankruptcy — AppHarvest, Fifth Season. Iron Ox had some layoffs, and Bowery Farming, which was booming a few years ago, also had some layoffs and valuation cuts. But this feels like it’s a little different. It has real potential, from my humble perspective.

Karyne: I have a question, though: Is this going to drive up the costs of, let’s say, lettuce? Because aren’t robots expensive to use?

Alex: Well, commoditized robots are less so. So if you’re Amazon, and you’re gonna have — I’m gonna make up a number here — 1,000 warehouses across the United States [whispers, “That’s not the right number”]. You’re going to have a bunch of robots inside those warehouses. And when you start thinking about robots in the hundreds of thousands or millions of units, the costs are going to come down quite a lot. You’re going to figure out a way to build them.

And so the idea here is take that commoditized tech and then apply it to the struggling area of indoor or vertical farming. And so the to your point, Karyne, is not only can those units be cheap enough to make this work when you purchase them, but also then to run and maintain them. And that’s going to be the gambit. But on the price point, here’s my pitch to you: Karyne, you’re at the store and you’re going to make your beautiful child a lovely salad for dinner because he’s a growing boy and needs to eat greens. And you’re staring down three lettuce options. The cheap version, which has no marks about where it was grown, how it was grown, etc. Then there’s an organic-ish version — you know, the lettuce was patted on the head and sung songs and so forth. And then there’s a third option: This was grown indoors; it saved water. If you buy this lettuce, you’re helping the planet. How much more would you pay for option three and option two?

Karyne: Well, I’m from the Bay Area, so you know I’m going to go for the most woo lettuce that exists on the shelf. So I will go for the one that did. And being in California, we’re one drought away from being cut off from the rest of the country. I get it. And that makes sense. And I would pay a little bit more for that, I suppose. But with food scarcity, urban farming is trying to become a thing. I’m here for it.

Alex: I mean, one thing I’d argue is that when we talk about food scarcity, and people being priced out of the standard goods of life, one thing you could also say, and this is not a positive, but maybe food is actually too cheap in terms of its impact on the planet, and we’re just pushing some cost to the future and not dealing with the now because just economically, it’s [easier] to do it this way. Hippo Harvest, I hope it does really well. I love this. I’ve always thought that urban farming makes a lot of sense — shipping stuff across rail lines is pretty efficient, but if you put it into a truck, it’s not. So I’m really into this. And also I don’t like farming. So let the robots do it. That’s just hard, not into it.

Now, when we come back, my friends, we’re talking about some big ventures’ comings and goings. Mary Ann has all you need to know. We’ll be right back after this short break.

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Mary Ann: So this week, I wrote about the Foundry Group. This is a venture capital firm that’s been around for 18 years and done a lot of investing. Apparently it has a very impressive exit record: Some companies in their portfolio are Fitbit, Zynga, and AvidXchange. And the big news was they’ve decided to wind down operations and not raise any more funds.

So this was a little unexpected to most of us, because the firm just announced a $500 million fund last May. Now, after I published the story, I had a lot of people cry out on Twitter that this was not unexpected. Everybody knew that this was the plan all along. Maybe you knew it if you were another venture capitalist and had talked to Seth Levine, for example, one of the co-founders and partners, and heard him tell you. Because apparently he had talked about his plans, which started to brew in his mind sometime in 2023, that he may decide not to invest anymore, and that turned into the fund deciding to wind down.

But anyway, most of us did not know about this, so it was generally unexpected. And they wouldn’t talk to me directly about the decision, but I did get pointed to some blogs, and apparently they said that, yes, this is unusual, and VC firms rarely make decisions like this. But it’s something that they planned to do when they started back in 2006 — they decided not to build a legacy or generational firm; they wanted to focus just on the work of investing. And then they . . . kept saying, “Is this going to be our last one? Is this going to be our last one?” And they decided not to raise another one. So that’s basically it.

But to be clear, when we say they’re shutting down or winding down, that doesn’t mean their doors are closed or they’re not doing anything. That’s not the case at all here unlike OpenView, which I think was in December or January — I lose track now — it did actually shut down and lay off partners. Foundry still has 33% to 40% left out of its $500 million fund to invest. So it’s planning to still continue to lead Series A and B financings out of that fund. The company says it will also continue to work with businesses in which it has investments for years to come.

Alex: And that’s the critical thing. There’s two ways to shutter a business. One is to just close your doors, lock it and run away, and the other is to wind down new operations and then support what you have already in the market. For VCs, the product is investment, so they’re shutting down kind of in slow motion. This will slowly degrade in terms of total activity until it reaches zero at a point down the road.

But here’s my thing. Mary Ann, I watched you get dragged on Twitter for this. And two things piss me off. Part of our job is to go into the weeds and pull things up so people can see them who didn’t already know that they were there. So simply because you, an insider in the VC world whose friends are VCs and founders, knew this does not mean that the TechCrunch audience did. A lot of people read TechCrunch, and there’s not that many VCs out there. And then also you didn’t get it wrong. I didn’t like it.

Mary Ann: Well, thank you for defending me, Alex. I was pretty shocked by the number of people who got really upset by the wording of the story, I guess. They actually, I feel, misinterpreted the intentions in my reporting. It was a very fact-based article. I had no malicious intentions, no hidden agenda. But I will say I was touched and impressed by the number of people who rushed to defend Foundry. The firm clearly has a lot of supporters and fans and portfolio companies, other VCs, or general observers. And to me that says a lot about the firm and the character of the partners. So I was very impressed by that. Yes, I was actually pretty touched by that, to be honest with you.

Alex: There is a way, though, to show respect without crapping on someone else. I’m just saying.

Mary Ann: Yeah, I appreciate that. Thank you. Yeah, you have to have a thick skin as a reporter. I know my intentions; I know what I set out to do when I wrote the piece. So I can take comfort in that. I will also say that while there were a number of people kind of declaring this to be a negative piece, I didn’t hear any negative feedback at all from the firm itself. I would like to point that out.

Karyne: So . . . if the firm was happy with the reporting, then who cares about the haters? You know, you got it correct, and they’re okay with it, then I think that means it’s a really good, solid story.

Alex: To take it one step further: If the firm is happy with the reporting, we should have been meaner?

Mary Ann: Well, I don’t know if “happy” would be the word, but they didn’t refute any of it. And they seemed comfortable with the language used. But anyway, overall, it was a big deal in the venture world. This is a firm that’s been around for a long time — almost two decades — had made over 200 investments, and had a really great reputation [and] it seems like . . . a lot of exits. So they were prolific investors and well-regarded ones. So it is a loss for the venture world. So that is news.

Alex: But think about how long a venture fund lasts, right? I mean, we used to think of these as 10-year instruments? Now they’re more like 12. And so you know, get piles of money and you’re doing a big fund, and maybe you’re looking around and thinking to yourself, “What if I opened my long-hoped-for miniature golf course-cum-personal bar/indoor farm that I’ve always wanted to on my property. I don’t want to do 12 more years of work?” I kind of get it. I mean, if I had one-tenth of the money of these partners, I would not be working. So I don’t know, it’s weird to see a firm shut down. But on a personal basis, I get it.

Mary Ann: I do, too. I totally get it. So I think we just have to be careful to understand that this sounds like apparently a thought-out decision. It isn’t one where it feels like in the case of OpenView, [which] really kind of was very abrupt, shutting down and having to lay off people. They seem to be two very different cases. But what we are seeing overall, and what I keep hearing from others is that the venture world is shrinking. And regardless of what the reasons are, there are a lot of firms that seem to be either scaling back, winding down, cutting staff. So it’s an overall, and I hate to use the word “trend,” but this is something we’re probably going to be seeing more of in different forms.

Alex: Yeah, but there’s some good news out there as well, Karyne, for both Earlybird Health and Homebrew. What’s going on there?

Karyne: I mean, it looks like they are growing. So you know, even within the shrinking of all the firms that we talked about, there are a few that are still growing up and down.

Alex: Yeah. Earlybird Health is a Europe-focused health tech fund, and they doubled essentially from Fund I to Fund II. If memory serves, I think they put together like €175 million for their new fund. And then Homebrew, which is mostly now working with Partner Capital, is putting together a $50 million fund that we don’t quite understand yet, Mary Ann, I don’t think? But the gist is, from our guess, it’s probably an opportunity fund or something similar along those lines.

Mary Ann: Yeah, exactly. From what I understand, what I heard is that they didn’t want to use SPVs anymore for follow-on, pro rata investments. So they are targeting this new fund.

Alex: Mary Ann, I knew exactly what you just said, but not everybody has been so enmeshed in venture things. So SPVs are special purpose vehicles. Essentially, it’s like a micro venture capital fund you put together for a single deal. Let’s say you have allocation but don’t have enough capital. You can put together an SPV, raise some more money and put that in. It’s a single check. Pro rata rights essentially allow a prior investor to defend their current percentage ownership in a company over time. They need to put in more capital for that, usually at higher prices. Pro rata rights are a big deal in venture land, both in terms of how people use them or abuse them. And I think that should cover it.

Mary Ann: Thank you, Alex. You’re so good. Like putting things in everyday language.

Alex: Well, Mary Ann, isn’t that what we do all day?

Mary Ann: You know, it is what we’re supposed to do.

Alex: All right. Yeah. Well, wait till you see the post I wrote with Ron. It’s full of complete jargon, and I can’t wait to get it down. All right, Karyne: I want to talk about Y Combinator, everyone’s favorite, or least favorite accelerator. Controversial, certainly. At times, very popular and very successful. And they have a new call for startups out there. Walk us through what they’re looking for.

Karyne: So they are putting out a call for startups in areas like AI, spatial computing, climate tech, and health tech, among other things. I don’t think that the AI and spatial computing aspects of their list are very surprising considering that AI is hot, hot, hot, and Apple’s Vision Pro just came out, and so they are expecting a lot of startups to be working on spatial computing-type apps, I suppose?

They haven’t done a request like this since 2018. Of course, they updated the list a little bit during the pandemic, when they were looking for COVID-related startups. Healthcare startups are still on their list, but this time they’re focusing on cancer treatment, and other kinds of help in the healthcare industry, such as eliminating the middleman when it comes to certain aspects of healthcare.

Alex: Mary Ann, I’m curious. The Vision Pro is out, and some people have bought it. It got some good reviews, some mixed reviews. Do you think that’s gonna be a big enough niche to launch startups on top of in the coming years?

Mary Ann: That’s a good question. I don’t know. Like, how about with Meta’s? Did startups launch off its comparable device? Because I don’t know.

Karyne: I don’t think in this way.

Alex: Yeah, not like this. I mean, there are some games that have been made that are VR-compatible, that I presume work with Quest headsets. But no, not like the similar boom we saw with the launch of the App Store for iOS, for example, which did lead to generations of new companies. I just think it’s still too small, the space. Like Microsoft tried this with HoloLens. Name a company that built a killer HoloLens app. Silence.

Mary Ann: I would agree. I mean, I was a little surprised to see that as one of its main areas of focus. Of course, obviously, climate tech and applications of AI were not surprising. But yeah, I thought it was interesting, too, that this is the first time they’ve done this really since 2018, except as Karyne mentioned, when COVID hit. So I’m just wondering, what drove them to start this back up again?

Alex: Well, I mean, gosh, I feel like we’ve almost gotten done digesting, at last, the excesses of 2021. And so maybe after you finally finish your heartburn and indigestion, you begin to kind of look at the menu again. And then this analogy started for cheeseburgers.

Mary Ann: Yeah, maybe it wants to be more targeted now and hoping to entice startups in these areas. Not that it’s trying to deter startups that aren’t doing these things, but I guess it just wants to be more targeted in its approach, and then who applies for its cohorts.

Alex: Okay, I’m gonna throw in somebody else here, because I think we should broaden our context. If Tim, our resident climate genius, was here, he would mention things like the Inflation Reduction Act, changes to green energy financing. And I’m saying climate words. Trees. Things like that, Tim would talk about those. So I think there has been a top-down national shift and focus toward more climate tech that could unlock spending from both governments and private corporations. So climate tech, as a new theme for YC, kind of fits in there for me.

And then defense technology has certainly become much less disliked in venture circles — guns used to be kind of under a vice clause, but now people want to make really big guns and sell them to the government. Cool, fair enough. And then space. I really think that now the space costs have come down so much on a launch basis, especially with shared launches and larger rockets coming from SpaceX, there’s a lot more stuff you can do there. And this week, just because I wanted to bring it up somewhere, Varda Space, which makes drugs in space, because there’s less gravity so you can do cool stuff. Got permission to bring them back! So we’re soon gonna have space drugs on the market. So I think this YC list makes a lot of sense. I mean, look, they’re kind of dissing crypto a little bit, but I’m not shocked.

Karyne: And maybe that’s fine. And I don’t remember where I read this, but when they were creating this list, they’re thinking of it as like a conversation starter, like a prompt for people who are working on something and don’t know quite yet where it’ll fit in the market. This could be directionally helpful for them. Yeah, I’m really looking forward to Demo Day as well. When is Demo Day?

Alex: I think it’s April 3 or April 4. So coming up. And of course, we are going to have all things Demo Day on this show. Sometimes we even do an extra episode just to dig into the coolest companies that we saw. So Mary Ann, Karyne and I will be bringing you that very soon.

But that’s all the time we have for today. Equity comes out three times a week: on Mondays, on Wednesdays, and on Fridays. And if you’re a social person, come socialize with us, because we are @equitypod on X and Threads, and we are @techcrunchpod on TikTok. All right, bye, everybody. Talk to you soon!

Equity is hosted by myself, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azevedo. We are produced by Theresa Loconsolo, with editing by Kell. Bryce Durbin is our illustrator. A big thank-you to the audience development team, and Henry Pickavet, who manages TechCrunch audio products.

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