Welcome to a recap of Equity, TechCrunch's flagship podcast about the business of startups. This episode is packed with deals, antitrust insights, AI, and more.
First, Kirsten explained the recent court decision that brought some relief to Elon Musk.
Earlier this week, one of the many lawsuits Musk is facing over his firing of 6,000 Twitter employees following the company's acquisition in 2022 was dismissed. The lawsuit, filed by Twitter's former head of human resources and another former manager, alleges that Company X paid fired Twitter employees less severance pay than was promised in their contracts.
While this outcome may be good news for Musk, as Equity Pod points out, it doesn't put an end to his legal troubles: Musk is facing at least one other lawsuit from CEO Parag Agrawal and three other former Twitter executives, who are seeking $128 million in severance pay from Company X.
Next, Rebecca analyzed Microsoft's decision to decline observer status on OpenAI's board of directors, which will mean the AI company will no longer accept observers. While the established tech giant said it has made enough progress with OpenAI that it is “confident in its direction,” it's hard to imagine Microsoft giving up such a coveted position so easily. We believe the decision comes in the wake of ongoing antitrust investigations into the influence of large tech companies over emerging AI companies.
Becca then talked about Duolingo's deal to acquire Hobbes, a Detroit-based animation and motion design studio. It's interesting to see an acquisition happening at this stage, as Hobbes is a company Duolingo has worked with for years on several features, including Duolingo Music. Perhaps Hobbes was in financial trouble and needed a helping hand. Either way, Duolingo is calling this an acquisition-hire deal. Hobbes is not an AI company, but I expect we'll start seeing similar acquisitions of smaller AI startups as larger companies acquire AI startups they already work with.
Continuing without the founder
I've noticed a few articles recently exploring what happens when a company's founder or owner passes away. Today, Rebecca covered the story of Unseen Capital, whose founder, Kayode Owens, passed away shortly after raising $30 million in 2021. This VC's mission was to back early-stage healthcare companies launched by underrepresented founders. Pharmaceutical company Eli Lilly was one of Unseen's LPs, and brokered a deal for Seae Ventures to acquire Unseen's mission, as a move to protect its own investment while demonstrating faith in Unseen's mission. This is a good match, as Seae Ventures is also a diversity-focused VC firm.
Meanwhile, a recent TC article on deep tech funding caught Equity Pod's attention. The gist is that a recent survey of 30 deep tech VCs across eight countries found that highly technical CEOs are raising larger rounds. The survey also noted that pre-seed and Series A deep tech hardware rounds will be larger in size in 2023 than in 2022.
While the survey seems to paint a bright picture for tech CEOs, it doesn't paint a complete picture: For example, the survey's focus on Europe got Equity staff thinking about whether the same statistics hold true in North America.
And it followed rounds up to Series A. Equity Pod wondered whether the results would have changed for rounds beyond Series B. Additionally, it believes the rise of deep tech-focused funds could also play a role here.
Equity is TechCrunch's flagship podcast, produced by Theresa Loconsolo and posted every Wednesday and Friday. Subscribe on Apple Podcasts, Overcast, Spotify and allcasts.
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