TechCrunch - How are founders positioning themselves for the next 4 years?
The podcast begins with a discussion on TikTok's legal challenges, including a potential ban due to non-compliance with a divestment law. Despite initial shutdowns, TikTok resumed operations after political interventions. The conversation shifts to a $500 billion data center project called Stargate, involving OpenAI, SoftBank, and Oracle. This project aims to build data centers in the US, with significant implications for infrastructure and energy use, particularly nuclear energy. The hosts also discuss the acquisition of Divvy Homes by Brookfield Properties for $1 billion, highlighting the financial struggles and implications for shareholders. Lastly, the podcast explores how startups are navigating the new Trump administration, noting increased access to government officials and potential shifts in policy focus.
Key Points:
- TikTok faced a potential ban but resumed operations after political interventions.
- A $500 billion data center project, Stargate, involves major tech companies and could impact US infrastructure.
- Divvy Homes was acquired for $1 billion, but many shareholders may not profit due to debt obligations.
- Startups are finding increased access to government officials under the new Trump administration.
- The podcast highlights potential IPOs in 2025, with a focus on fintech, AI, and cybersecurity sectors.
Details:
1. 🎙️ Podcast Intro & Hosts Introduction
1.1. Podcast Purpose
1.2. Hosts Introduction
2. 📉 TikTok Drama and Political Interventions
- A new law requires TikTok to either divest certain assets or face operational bans, reflecting a 'divest or ban' mandate aimed at increasing national security controls over foreign tech companies.
- Over the weekend, TikTok faced a temporary shutdown as this legislation took effect, indicating the immediate impact of the legal changes on its operations and availability.
- Despite expectations for a prolonged outage, TikTok quickly resumed operations, suggesting proactive compliance measures or legal strategies to mitigate the shutdown impact.
- The legislation's background involves concerns over data security and foreign influence, particularly targeting companies like TikTok that have vast user data.
- TikTok's rapid recovery highlights its strategic agility and potential negotiations or legal appeals to align with the new regulatory environment.
3. 🚫 TikTok's Temporary Shutdown & Executive Orders
- The Trump administration initially pushed for a TikTok ban, creating an uncertain legal environment that led service providers like Oracle to halt support, resulting in TikTok's temporary shutdown.
- The Biden administration chose not to enforce the ban, signaling a potential policy shift and providing a more stable operational environment for TikTok in the U.S.
- An executive order from Trump extended the deadline for TikTok's ban, aiming to protect service providers from legal consequences and facilitate TikTok's quick return online.
- Despite legal challenges, TikTok maintained user engagement through branding efforts such as the #saveTikTok campaign, demonstrating resilience and adaptability in uncertain times.
4. 🤝 TikTok's Future: Investors and Political Dynamics
4.1. Investor Perspectives and Legal Challenges
4.2. Political Shifts and Strategic Implications
5. 🛠️ Deals of the Week: Stargate and Divvy Homes
5.1. Introduction
5.2. Stargate Data Center Project
5.3. Divvy Homes Acquisition
5.4. Future IPOs and OpenAI Collaboration
6. 💡 OpenAI's $500B Stargate Project & Industry Reactions
- OpenAI is collaborating with Oracle and other tech partners on a $500 billion data center project called Stargate, indicating a significant investment in infrastructure.
- Sam Alman, CEO of OpenAI, emphasized the challenges in building data centers in the US, highlighting the project's ambitious nature and its potential to revolutionize infrastructure development.
- The Stargate project is perceived as a new beginning, potentially boosting US infrastructure on a large scale, reflecting OpenAI's strategic alignment with technological and political leadership in the country.
- Industry reactions to the Stargate project have been varied, with some praising its potential to create jobs and stimulate economic growth, while others express concerns over environmental impacts and resource allocation.
- Specific challenges mentioned include regulatory hurdles and the need for sustainable energy solutions to support the massive infrastructure.
- The project's scale and collaboration with major tech companies underline its strategic importance in positioning the US as a leader in AI infrastructure.
7. 🤔 Data Center Saturation & Environmental Concerns
- A $500 billion investment is projected, with an initial $100 billion commitment, indicating a massive financial scale and strategic importance.
- The project begins in Texas, highlighting potential impacts on local economies, infrastructure, and environmental considerations, such as increased energy consumption and resource strain.
- High-profile involvement from figures like Sam Altman and Elon Musk brings significant attention and scrutiny to the project.
- Environmental concerns are raised, focusing on the impact of large-scale data centers on energy consumption and resource management, necessitating sustainable practices.
- Elon Musk's skepticism about SoftBank's financial capacity underscores competitive tensions among tech leaders, influencing strategic alliances and public perceptions.
- Sam Altman's commitment to supporting U.S. interests aligns the project with broader national strategies, reflecting a focus on technological advancement and economic growth.
8. 🌱 Nuclear Energy's Role in Future Data Centers
- Concerns exist about potential saturation of data center projects due to their widespread construction and the rapid pace of development.
- The demand for AI, particularly generative AI, is a key factor influencing the growth of data centers, with projections indicating a continuous increase in demand, resembling a 'hockey stick' growth pattern.
- There is a possibility that demand may not grow as aggressively if consumer preferences shift away from AI integration, which could lead to overbuilding.
- Overbuilding could result in data centers becoming less necessary if growth projections are not met, leading to financial losses for investors and developers.
- Environmental impacts, such as increased energy consumption and carbon emissions, are critical considerations in the enthusiasm for data center expansion.
- Economic impacts include the significant financial investments required and potential market saturation, which could affect profitability.
9. 🏠 Divvy Homes' $1B Acquisition & Market Impact
9.1. Divvy Homes' $1B Acquisition
9.2. Nuclear Energy and Data Centers
10. 📉 Divvy's Financial Struggles & Shareholder Losses
- Divvy Homes, a rent-to-own startup, was acquired for $1 billion by Brookfield Properties, but the valuation significantly decreased from its last valuation of $2.3 billion.
- The acquisition funds are primarily allocated to debt repayment and inventory costs, leaving common shareholders and Series FF preferred stockholders without profits.
- This situation highlights the struggles in the proptech sector, where rising interest rates have led to shutdowns and bankruptcies.
- The term 'total consideration' in the transaction may involve financial engineering to justify the $1 billion valuation, suggesting complex financial maneuvering.
11. 🏡 Implications for Divvy Homes Renters
- The impact on renters is uncertain due to lack of clear information about inventory and contract terms.
- Possible scenarios include Brookfield Properties assuming existing rental contracts if terms are strong.
- Uncertainty remains on how many homes are in the rental to ownership transition stage.
- Potential risks are highlighted, drawing parallels to defense contracts where the inability to deliver promised results can be detrimental.
- Historical example: Canoo, a company with a military contract, went bankrupt delivering only one vehicle each to NASA and DOD.
12. 🎉 Startups in D.C.: Access in the New Administration
12.1. Startups and Founders under the Trump Administration
12.2. Challenges under the Biden Administration
13. 💼 Political Dynamics: Founders & Government Relations
- Venture capitalists (VCs) provided significant financial support to Trump, leading to increased access and influence within his administration for founders associated with these VCs.
- Mark Andreessen exemplifies this influence, where financial contributions to Trump translated into meetings and access to government for his affiliated founders.
- Trump's administration focused on American dynamism, companies, and infrastructure, suggesting a strategic alignment with business interests.
- Trump's current approach is less focused on traditional federal government protocols compared to his previous term, indicating a shift in strategy.
14. 🔍 Transparency and Access in Government Interaction
- EV startups, like Rivian, are actively pursuing traditional federal government support routes, such as Department of Energy loan guarantees, to fund initiatives like factory construction. This strategy exemplifies the reliance on established government channels for critical support.
- A major concern for nonprofits is the lack of transparency in government meetings, especially those involving the Department of Energy. These sessions are often closed to the public, and expected meeting notes are not released, hindering transparency and accountability.
- Startups face challenges due to informal meetings, such as those at venues like Mar-a-Lago, where founders meet key figures without any official records. This absence of documentation frustrates stakeholders attempting to understand government interactions and influence.
15. 💬 Political Alignment and Economic Opportunities
- Founders utilize personal networks to engage with influential figures and bypass traditional government channels, enhancing their economic opportunities.
- Venture capitalists (VCs) invest in political administrations with the expectation of favorable policies, demonstrating a strategic alignment between economic interests and political support.
- Silicon Valley displays mixed political affiliations, influencing policy outcomes based on whether they lean towards Democrats or Republicans.
- Reed Hoffman’s support for Biden, coupled with his opposition to certain antitrust policies, exemplifies the nuanced political alliances within Silicon Valley.
- The Republican administration's openness to startup engagement attracts entrepreneurs to Washington, DC, creating perceived economic opportunities.
16. 💼 Lobbying Trends and Government Interactions
- Foreign policy is a critical area of lobbying, with significant bipartisan overlap on issues such as China, indicating strategic alignment across parties.
- The onset of new presidential administrations typically results in a surge in lobbying efforts. Trump's administration saw particularly high activity, highlighting the influence of executive leadership changes on lobbying dynamics.
- Transparency is essential when the federal government invests in private enterprises. There must be a clear paper trail to ensure accountability to taxpayers, underscoring the importance of transparency in public-private ventures.
17. 📈 IPOs in 2025: Trends and Predictions
- Lobbying is a vital element for companies planning to go public, as it can significantly influence government interest and support.
- The realization of lobbying's importance often comes late, as seen in the case of Shield AI, where it was crucial for their products' government adoption.
- Growing awareness of lobbying's impact is evident through increased discussions on social media platforms.
- Successful lobbying requires the right mix of luck, timing, and determination, which can make or break an IPO attempt.
18. 💡 Goldman Sachs' Take on Public vs. Private
- Goldman Sachs' CEO David Solomon suggests that startups should consider staying private, stating that 'being public sucks'. This perspective highlights potential drawbacks of public markets, such as regulatory scrutiny and pressure for short-term results.
- Despite this stance seemingly counter to Goldman Sachs' traditional role in IPOs, the firm is strategically adapting by increasing its involvement with startups that choose to remain private, thereby aligning with market trends.
- Goldman Sachs demonstrated its capability to support large private funding efforts by helping Stripe raise a $6.5 billion round in 2023. This example underscores the firm's flexibility in catering to private market needs.
- By positioning itself to benefit financially whether startups go public or remain private, Goldman Sachs showcases its adaptability and strategic foresight in capitalizing on evolving market dynamics.
- The firm's approach reflects a broader industry trend where private markets are becoming increasingly attractive to startups due to factors like reduced regulatory burden and greater control over long-term strategy.
19. 📊 2025 IPO Candidates & Industry Insights
- Goldman Sachs is adapting its strategy due to a slowdown in IPOs over recent years, indicating a need to align with changing market dynamics.
- The year 2025 is projected to witness heightened IPO activity relative to 2024, suggesting an upward trend in the market.
- eToro aims for a $5 billion US IPO in 2025, reflecting aggressive financial growth plans and confidence in market conditions.
- Shein is considering an IPO on the London Stock Exchange, emphasizing its interest in tapping into the international market.
- Saleo, a cybersecurity firm, is progressing towards a NASDAQ IPO, illustrating the expanding influence of the cybersecurity sector.
- Chime, a prominent name in mobile banking, is preparing for an IPO, showcasing the growing importance of fintech innovations.
20. 💰 The State of AI Companies & IPO Plans
- AI, cybersecurity, and fintech are the top industries planning to go public this year, indicating a strong interest in technological advancement sectors.
- Notably, AI companies eyeing IPOs are not the well-known brands like OpenAI or Anthropic, but rather smaller, emerging companies seeking to capitalize on market opportunities.
- Many AI companies are still in the phase of heavy investment without profitable returns, posing a challenge for public offerings as investors typically seek financial stability and profitability.
- Despite this, Wall Street sometimes supports high spending in anticipation of future returns, allowing companies with significant potential to go public even if they are not yet profitable. This trend highlights the importance of strategic growth projections and market potential in investment decisions.
21. 💼 LP Pressure and IPO Timing Considerations
- Many major AI companies prefer raising funds privately, avoiding the stress of going public. Companies like OpenAI can leverage advice from Goldman Sachs and prioritize private funding due to their established reputation. In 2025, there is an expectation for companies with real revenue to go public, contrasting with the SPAC trend of 2021-2022, which involved companies with no near-term revenue plans. The SPAC model, popular a few years ago, often led to companies going public prematurely, which in hindsight wasn't always beneficial. LP pressure varies; some limited partners (LPs) are strategic corporations less focused on immediate liquidity.
22. 📅 IPO Speculations and Market Dynamics
- Early-stage VCs typically have limited influence by the IPO stage due to reduced involvement during later funding rounds. This highlights the shift in control as companies mature.
- Investors who are more deeply involved in a company may support delaying an IPO if it promises significantly higher returns, suggesting the strategic importance of timing.
- However, there is an overarching expectation among investors for an eventual IPO to ensure liquidity and returns, underscoring the necessity of a public offering.
- The balance between delaying for better performance and the pressure to go public is a key strategic decision for companies.
23. 🎧 Closing Remarks & Episode Wrap-Up
- Listeners are encouraged to explore Global Venture numbers for 2024 and IPO market expectations by accessing a recently published interview with Crunchbase News's Jana Tier.
- The episode is produced by Teresa Lo, edited by Kell, and supported by TechCrunch's audience development team.
- Listeners can follow the podcast on social media under the handle @EquityPod on X and Threads.