Tech Brew Ride Home - Thu. 10/03 – The Monster OpenAI Raise

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Thursday, October 3rd, 2024. I'm Brian McCullough today. OpenAI raised their round and it basically broke all the records. The whole WordPress mess has gotten so crazy that WP Engine is suing. Using Rayban meta smart glasses to docks people in real time and you'll never guess the reason why you're about to see more ads on streaming video. Hint, you'll likely endure it. Here's what you missed today in the world of tech. Well, they did it, y'all. OpenAI raised 6.6 billion, led by Thrive Capital, valuing the company at $157 billion with participation from Microsoft, Nvidia, SoftBank, and others. They also got a $4 billion revolving line of credit from

Starting point is 00:01:18 J.P. Morgan Chase, City, and others. That would bring its total liquidity at this point to more than $10 billion. This is the largest VC deal of all time. This also makes OpenAI the third most valuable VC-backed company after ByteDance and SpaceX. And OpenAI is now worth far more. more than any VC-backed startup at the time of its IPO. Enough superlatives for you, quoting Axios. OpenAI is planning to shift to a for-profit structure and investors can ask for their money back if it hasn't completed those changes in two years, Axios has learned. The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems, open AI said in a blog post,

Starting point is 00:02:04 end quote. Thrive, which again led the round invested around $1.3 billion with an exclusive option to invest up to $1 billion more at the same $157 billion valuation through 2025. And OpenAI has asked investors to avoid backing rival startups such as Anthropic and XAI, quoting the Financial Times. During the negotiations, the company made clear that it expected an exclusive funding arrangement according to three people with knowledge of the discussions. Seeking exclusive relationships with investors restricts rivals access to capital and strategic partnerships. The move by the maker of ChatGBTGBT, BT, risks inflaming existing tensions with competitors, especially Musk, who is suing OpenAI. Venture firms are party to sensitive information about the companies they invest in, and close relationships with one company can make it difficult or contentious to also back a rival.

Starting point is 00:02:56 But exclusivity is rarely insisted on, according to VCs and many leading firms have spread their bets in certain. sectors. Sequoia Capital and Andrescent Horowitz, for example, have backed multiple AI startups, including both OpenAI and XAI. Open AI can command unusual terms and an outsized valuation because investors believe the company could dominate the next wave of AI innovation, which they argue will be as significant a shift in consumer behavior as the internet or mobile. Because the round was so oversubscribed, OpenAI said to people, will give you allocation, but we want you to be involved in a meaningful way in the business so you can't commit to our competitors, according to one person with knowledge of the deal. A partner at one leading VC firm noted that ride-hailing app Uber

Starting point is 00:03:37 had a similar policy, quote, when they were in full world domination mode, adding, if a company holds all the cards, they can force people to do things unnaturally, end quote. Now, I want to point out that anyone putting money into Open AI right now in this round, if they expect that money to double, Open AI needs to reach a $300 billion valuation roughly, with no dilution from later rounds. So, you know, that's quite an ask. And also from the Financial Times analysis along the lines of, is this a bullish sign? Could we look back at this as the peak of the AI mania, or more along the lines of when people were shocked when Facebook, say, was valued at $10 billion? $1. Quote, Open AI could also be on the way to becoming a wider tech platform. Many other companies have integrated its AI into their own products and services.

Starting point is 00:04:25 The tools it is building to make its technology more useful in the business world have given it a rare opening in the enterprise market. It is tempting to draw parallels with earlier hot startups such as Google, when the search company's stock market value first hit $150 billion in 2006. It was not the clear winner in search that it went on to become with less than half of the market. the market. It's $10 billion in revenue that year was similar to the $11 billion open AI is reported to project for next year, however. But it is here that the comparisons break down and the scale of the challenge ahead for OpenAI becomes more apparent. Google was already churning out cash in 2006. OpenAI without a functional business model is on track to burn through more than $5 billion in cash this year with little prospect of stemming the flow

Starting point is 00:05:11 in the short term. Along with the sharply escalating expense of training ever larger models, the considerable computing power needed to respond to users' prompts, will continue to weigh heavily on margins as it grows. Nor does it seem to be able to use pricing as a weapon, although it has brought down prices rapidly to match greater efficiencies and responding to queries. The costs of querying for other LLMs that are available through the main cloud services has fallen pretty much in parallel. That points to OpenAI's biggest challenge, the lack of deep moats around its business and the intense competition it faces. On the consumer side, META said last week that 500 million people are now looking at its

Starting point is 00:05:49 meta AI at least once a month. A sign of the vast captive markets available to OpenAIs big tech rivals. Google and META have also ready-made advertising businesses, which have proved to be the best route to monetizing large-scale digital audiences. ChatGPT can point to a favorite position on the iPhone, thanks to a deal with Apple, but Apple is only making the chatbot available through its serious isn't, and even then only for handling questions that are beyond the current capabilities of its own AI models, hardly a recipe for long-term success as OpenAI tries to cement its early consumer gains. Competition on the enterprise side is also growing fast. Close ally Microsoft is diversifying away from its early reliance on OpenAI, while the capabilities of open-source

Starting point is 00:06:31 AI models have advanced rapidly, making them viable alternatives. Metazalamah hasn't yet become the Linux of AI, as Mark Zuckerberg suggested last week, but the risk of commodification looms large, and quote. WP Engine has filed a lawsuit in California against Automatic and WordPress co-founder Matt Mullenweg, accusing them of, quote, abuse of power, extortion, and greed, quoting TechCrunch. WP. Engine accused automatic and Mullenweg of not keeping their promises to run WordPress open source projects without any constraints and giving developers the freedom to build, run, modify, and redistribute the software. Matt Mullenweg's conduct over the last 10 days has exposed significant conflicts of interest and governance issues that, if left unchecked, threatened to destroy that trust.

Starting point is 00:07:21 WP Engine has no choice but to pursue these claims to protect its people, agency partners, customers, and the broader WordPress community, the company said. The case document filed in a court in California also accused Mullenweg of having, quote, a long history of obfuscating the true facts about his control of WordPress Foundation and WordPress.org. On Wednesday, automatic published a proposed seven-year term sheet that it had sent to WP. Engine on September 20th, asking the hosting company to pay 8% of its gross revenues per month as a royalty fee for using the WordPress and WooCommerce trademarks. Alternatively, WP. Engine was given the option to commit 8% by deploying employees to contribute to WordPress's core features and functionalities or a

Starting point is 00:08:01 combination of both people hours and money. WP Engine didn't accept these terms, which included a probation on forking plugins and extensions from Automatic and WooCommerce, end quote. Two Harvard students have demoed using Ray-Ban meta-smart glasses, PIME eyes, and other tools to instantly identify strangers' names, phone numbers, addresses, and more, all in the real world, all in near real time. Quoting 404 Media. A pair of students at Harvard have built what big tech companies refuse to release publicly due to the overwhelming risks and danger involved. Smart glasses with facial recognition technology that automatically looks up someone's face and identity. identifies them. The students have gone a step further to their customized glasses also pool other information about their subject from around the web, including their home address,

Starting point is 00:08:56 phone number, and family members. The project is designed to raise awareness of what is possible with this technology, and the pair are not releasing their code. And Poon Winn, one of the creators told 404 Media. But the experiment tested in some cases on unsuspecting people in the real world according to a demo video, still shows the razor-thin line between a world in which people can move around with relative anonymity to one where your identity and personal information can be pulled up in an instant by strangers. Wyn and his co-creator Kane Ardefeo called the project I-X-ray. It uses a pair of meta's commercially available Rayband smart glasses and allows a user to, quote, just go from face to name, when said.

Starting point is 00:09:37 The demo video posted on X on Tuesday shows the pair using the tech against various people. In one of the first examples, Ardefiah walks towards the wearer. To use it, you just put the glasses on and then you walk by people. The glasses will detect when somebody's faces in frame, the video says. After a few seconds, their personal information pops up on your phone. In another example, the demo shows a test on what it describes as a real person on the subway. Ardefio looks at the results of a face match on his phone and then approaches a woman he calls Betsy. He introduces himself and claims the pair met through a particular foundation, presumably referencing something included in the search results. Being able to use a pair of glasses or a smartphone's

Starting point is 00:10:16 camera to instantly unmask someone has been a red line in technology for decades. In her book about the rise of facial recognition, New York Times reporter Kashmir Hill detailed how both Facebook and Google had the technology to use facial recognition in combination with a camera feed, but declined to release it. As Hill mentions, Google's chairman, Eric Schmidt, said more than 10 years ago that Google built that technology and we withheld it. As far as I know, it's the only technology that Google built, and after looking at it, we decided to stop, he added. A. Company called Clearview AI broke that unwritten rule and developed a powerful facial recognition system using billions of images scraped from social media. Primarily, Clearview sells its product to law enforcement.

Starting point is 00:10:55 Clearview also has explored a pair of smart glasses that would run its facial recognition technology as well. The company signed a contract with the U.S. Air Force on a related study. Now, although Nguyen and Artifio haven't released the code for their project, they have demonstrated in a public setting that it is absolutely possible for someone to use, mostly off-the-shelf products and services, to build a pair of glasses that automatically dockses people, end quote. Spotify has launched offline backup, a playlist of downloaded songs that users recently listened to, available automatically for premium users, quoting TechCrunch.

Starting point is 00:11:34 Paid users can already download songs for offline consumption. However, Spotify wants to give them more songs for offline playback by leveraging the local cache on your device of recently streamed tracks, along with some songs in your now-playing cue. While the list is not personalized through algorithms, you can filter it by artists, mood, and even genre. The list will appear only when you have enabled offline listening and have streamed more than five songs recently. You can tweak offline listening settings through settings and privacy, then storage, then offline listening and settings and privacy, then playback, then offline toggles. Spotify said the offline backup playlist

Starting point is 00:12:09 will automatically appear on the home screen when you are not connected to the internet. Alternatively, you can also add the list to your library for easier access. Notably, Spotify's CEO Daniel X said last year that the company was testing a feature called Offline Mix. However, it is unclear if Spotify ever rolled out that feature to all users. Offline backup could also be the new iteration of Offline Mix as a feature, end quote. Blowing up traditional TV just to reconstitute it example number infinity, Amazon plans to increase the number of ads on Prime Video in the next year. Why? Because they can. They have apparently not seen a drop in subscribers since adding advertisements in January 2024. Quoting the F.T. Kelly Day,

Starting point is 00:12:58 vice president of Prime Video International, who oversees the streaming video business in global markets, told the Financial Times there would be an increasing number of ad slots for brands to target in 2025. Talking ahead of its first London up front on Wednesday, when television companies present their plans to advertisers to attract money over the next year. Day said its advertising load would ramp up a little bit more into 2025. Amazon has joined a highly competitive market for ad-supported streaming services. Most rival platforms, including Netflix, Max, Paramount Plus, and Disney Plus have brought in an ad-supported tier at a lower price than subscriptions that carry no ads. It will, on Wednesday, attempt to woo advertisers with new data, showing it can reach about

Starting point is 00:13:39 19 million monthly British viewers, almost a third of the population. Overall, Amazon said it had a global ad reach of about 200 million people, the average monthly potential viewers of ad-supported Prime Video, with more than half in the U.S. Day said that Prime Video had deliberately launched earlier this year with a very light ad load. For example, no ad breaks in the middle of a program, which had been a, quote, gentle entry into advertising that has exceeded customers' expectations in terms of what the ad experience would be like, end quote. The e-commerce group automatically flipped its more than 200 million total global subscribers to its ad-supported service unless they actively chose to pay more for the premium ad-free service. Day said, we know it was a bit of a contrarian approach, but it's actually gone much better than we even anticipated.

Starting point is 00:14:25 She said that churn. When customers leave the prime service had also been much, much less than we anticipated. We haven't really seen a groundswell of people churning out or canceling, end quote. Day declined to say how many customers had moved to pay more for their ad-free tier, but said it was below the figure estimated by some analysts of 20%. Amazon will also unveil interactive and shoppable ad formats for Prime Video. Viewers will be able to add an item to their cart or learn more about a brand by simply clicking their remote or scanning their mobile device without having to leave shows

Starting point is 00:14:58 on the streaming service. Amazon is seen by rivals and analysts to have a uniquely strong ability to convert advertising to sales on its own retail platform, end quote. Finally, today, I thought this was worth mentioning, given the lead story today. Pitchbook says that in Q3, U.S.VC. investments rose around 8% year-on-year to $37.9 billion across 3,77 deals. AI startups got 36% of the deal value and 27% of the deal count from Q1 to Q3 of 2024, quoting Bloomberg.

Starting point is 00:15:35 Stronger companies raising capital are receiving larger deals to help whether the market slowdown, wrote analysts Kyle Stanford and Nalen Patel in an email accompanying the data. Most venture-backed companies remain stuck in the private markets, though, with only $11.2 billion in activity stemming from initial public offerings or acquisitions. That is the lowest since the second quarter of last year and well off the totals of around $200 billion quarterly in most of 2021. Just 10 startups listed on the public markets last quarter, end quote. Nothing more for you today. Talk to you tomorrow. Thank you.

Tech Brew Ride Home - Thu. 10/03 – The Monster OpenAI Raise

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