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Lots happening in tech this week, although it feels like all
of a sudden between the DealNews it just got completely switched
around with the Biden announcement this week about the
tech industrial. Comp yeah, it was like a drive
by shooting presidential address.
You know, all of a sudden we have plenty of going on in
Silicon Valley and then the administration is like, Oh yeah,
the my Eisenhower style warning about what's going on in America
is about the oligarchs in the tech industry and the techno
industrial complex. I mean, it's, it's crazy to hear
when if you think about like, you know, Eisenhower warning
about the military industrial complex and that's, you know, a
thing of history books. And so now we're watching.
It's like, wow, is, is tech this bad?
What? What was your reaction?
I mean, yeah, it's it's interesting too, also because of
tech's, you know, increasing involvement within defense
world. But that's an aside for another
day. I would say my initial reaction
was it was quite peculiar. I mean, partially, I have to
think that some degree, you know, the tech people, a lot of
tech leaders coming out and either endorsing Donald Trump or
remaining silent in this election when they had
historically been larger Democratic donors, or at least
that was the public perception maybe played a part in this.
It felt maybe a little personal on a couple accounts but I feel
like. Really easy.
Easy to be wary of the tech industrial complex when, you
know, Elon Musk opening up his pocketbook might have lost you
the election, right? I mean, it's very personal to
Biden in that this the tech set did a lot to, you know, I mean,
Elon was literally what, paying for the Trump ground game.
So clearly it was very personal to the election.
It feels personal and it also feels like a shift in the
attitude of government towards the tech sector.
I mean, we hear it newcomer, very pro tech, pro innovation.
It seems historically like that's one of the end all be
alls of why people come to America and American identity
and valleys, right And. Wow.
The real. Texas girls coming out over
here. I know my my individualism
programming. Just immediately shot to the.
Front for this one, but seriously doesn't like a shift
in how the government is approaching tech, or at least
one side of the government, before a new party takes control
of the White House. Right.
Yeah. I mean, you know, I'm on both
sides of this. On the one hand, right after the
election, I said, you know, I didn't vote for Trump.
I think it's going to be a disaster.
But the best possible outcome is that tech gets its talons in
Trump world. I still think that's true.
Like I think to me, tech sort of a tech administration is the
best case scenario. Everyone wants their friends in
tech in. The right exactly right their.
Enemies in tech they don't want in the administration.
Right. But I mean, I just think the
general tech ideology of inevitably it's about sort of
growth, pro GDP, sort of loose regulation on tech, sort of very
free market. Like that's better to me than,
you know, the sort of nationalist version of Trump
that's all about sort of rounding up immigrants and
tariffs. Like that's clearly sort of in
contrast to the tech version. And then, you know, we could
have sort of a neo con administration out of nowhere.
That would be worse to me too. So if if if the options are sort
of extreme tech favored capitalism, sort of nationalism
and protectionism or a return to neoconservative Republicans, I
would pick the tech set. That's still true.
Absolutely. Well, if you're picking out of
those three, that's easily. That's the path.
Those are the paths, right? Am I missing one or like?
No, not at all. And our government's about to
get a lot more efficient seems too.
So in some ways, when talking this week to people over at JPM
Healthcare, I meant a lot of people mentioned that the new
regulatory environment could really be favorable in part for
biotech development, health development.
And that's one thing that this new government set has really
set out to cut back a lot of red tape within a lot of federal
agencies, which no doubt would be helpful for innovation in
these sectors. I mean, the, the oligarchs idea,
I am deeply troubled by the idea.
You know, Trump's putting, what, Jeff Bezos, Mark Zuckerberg,
Elon Musk on stage with him as if they're like cabinet members.
I don't like the sort of pay for play that's been.
Happening. Around this, you know, that's
one part that I will say like it does seem like a lot of these
tech people have been really quick to go ahead and I won't
say kiss the ring. You know, that's literally what
it feels like. Yeah, donate right ahead of
inauguration, like signaling with their money, hey, we're
going to be your friend. Which to me feels like a little
bit more ominous. And, you know, ominous, the
inauguration donating obviously is always a thing.
I think what's more troubling is because it's like they're going
to mar a Lago. It feels like very like, yeah, I
mean, it's kiss the ring. It feels very sort of mobster
esque, which is you have to sort of pay your, do not pay your
dues. You have to sort of, you know,
yeah, you just have to kiss up to the leader, pay your yeah,
you have to pay your respects to the great leader.
And it feels like sort of proximity to him personally.
I mean, semaphore basically had a piece saying, you know, it
used to be we'd track all the, you know, business, money and
politics, like looking, reading the tea leaves.
And now it's the opposite where everybody's just like, yeah,
obviously I'm kissing up to Trump.
That's that's the name of the game.
And then you pair that, you know, Ezra Klein's podcast just
did something about how the Republican Party has moved from
being, you know, an ideas type party or a party really ruled by
a shared coalition of people trying to get some policy agenda
to a personal party, one run by Trump and where it's really
about that guy. And so I think tech has been
uncomfortable. It's become a cult of
personality. In some ways, tech's caught on.
They're like fine, Yeah, all right, I want.
What we'll do is. Amazon to be the most important
company. And if it's not me, it's going
to be Zuck. And so we're all going to kiss
the ring. It's, you know, classic sort of
collection action problem. And that's that's how we get
sort of, yeah, the destruction of democratic norms.
So to that degree, I agree 100% with Biden that they're
oligarchs. That's terrifying.
But then he just he sorry, I just lost my ran.
I mean, he he's hitting on he's attacking profits, which is a
classical classic, like caricature of Democrats.
Like profits are the worst thing in the world when it's like
profits reflect businesses successfully delivering things
people want. And then he just like throws AI
and it like he's shitting on AI and worried about that and
social media, it's just like a kitchen.
It felt very haphazard. It was sort of like a take
choose your own adventure of grievances.
Right, right. He doesn't seem the sharpest.
You know, it's not necessarily that.
Yeah, it feels an airtight argument.
I think we can note where there are some causes for concern and
also view the concept of the tech industrial complex being
portrayed as much of A boogeyman as the military industrial
complex was, is to be somewhat of a false comparison.
Right well, to be an extreme Silicon Valley booster, the key
element of Silicon Valley is that you know, it encourages new
entrants. So it's it's there, you know
there's a power center and certainly there are these VCs
that stay in the mix and are power brokers.
But it is like really searching for the next person with a great
idea to thrust into the heart of everything, right?
If you think of the new hot company, is is always like the
most important piece of it. The problem with the defense
industrial complex is that it was a lot like the government.
There's a lot of protectionism. It's slow.
It's sort of X extracting things against American interests where
Silicon Valley is really a machine of people trying to say
who's got the best new thing. Let's immediately pump them to
the center of all our money and the culture.
And so, yeah, I guess I'm just saying Silicon Valley is good in
a way that the defense complex isn't.
Counterpoint to you, Eric, how would you feel about the startup
part of Silicon Valley versus the big tech part of Silicon
Valley? Because it seems like also a lot
of these fights have been picked with, you know, the Googles and
the Microsoft's of the world rather than the innovation
economy. I mean, people in the
administration were, you know, this is much more active
antitrust administration. We'll see what happens, but
it'll probably let less so in the future, and there'll be more
exits. But, you know, Gary Tan spoke
pretty highly of Lena Khan over at YC because, you know, it
leads to antitrust enforcement, leads to more little tech
flourishing. Right.
I mean, big tech is very company specific.
Google, Microsoft, backbone of America represents everything
great about what we're doing. Amazon pretty good, important to
the, you know, logistics and getting us everything.
Facebook somewhat soulless. I don't know.
I'm never going to be able to book anybody from them if I say
that. But no, I mean, you know, not
the medic guest. Come back, Mama is good.
But I just have to say, like, I mean, you even look at like the
Facebook product. It's just like shameless, you
know, I I just don't. And then Mark Zuckerberg went on
Joe Rogan and he's shitting on Apple for never coming up with a
new idea. It's like Apple delivers me the
best device, best thing I hold built by anyone to date, whereas
Mark Zuckerberg is like taking advantage of the fact that I
look at Facebook every once in a while to, like, put a bunch of
shit in front of me. Yeah, I, I I just think, yeah, I
don't know. Zuck is not the bastion of
principles. He's the most opportunistic here
and just sucking up to Trump every couple years.
It's like I'm going to totally reinvent myself.
Yeah. So company specific views of of
the big tech ones here. The the last thing I'll say is,
you know, I we always want to cover politics less and they
keep dragging us back in. I think if Kamala had won, we'd
gotten away with it. But we will be keeping you up to
date just. When we thought we were out.
We will be keeping you up to date on your favorite oligarchs
malevolence, so stay tuned. Moving on, Eric, you had this
great story of the behind the scenes of the bench fall and
return. Eric, what even is bench?
What is this Canadian company you fell into?
Yeah, not a company I'd heard of a month ago.
You know the companies? Old founder Ian Crosby basically
after bench went kaput, tweeted out the story of how the board
removed him and basically said I hope this is a lesson to all
VC's not to remove your founders.
It's only going to be a disaster and something every VC wants to
be on board with. So you saw a lot of people being
like who did this to you? And like Amjad Mossad at Replit
was like, these are the VC's never to take money from and
just very simple, satisfying narrative that people want to
see play out on Twitter. And I, you know, played my small
part tweeting out pitch book with the list of board members.
And that got people being like, oh, you know, I wasn't even on
the board then. And so then.
Oh no, you. You were a factor in the witch
hunt. Era right, exactly.
So then it's like all right, let's what actually happened
here? Was this as simple a story?
And you know it wasn't. What did you find in your
reporting? I mean, people should go read
the story on newcomer.co to get the full picture, but what
what's your biggest take away around the merits of being
founder friendly or not? And what happened with Bench?
You know, Bench was a substantial company, about 35
million in revenue doing an accounting business.
You know, they basically figured out how to do it, a services
heavy business pretty well, you know, using some technology.
Then they raised a substantial Series C at the peak, you know,
in 2021, 30 million in equity and like 30 million in debt.
And then they spent a lot of it, Ian Crosby spent a lot of it
trying to build like a banking business and new ideas, not a
lot of it seemingly to make the core bookkeeping business more
scalable. And so all of a sudden, the
business is losing a lot of money on products that it hasn't
even launched without necessarily a plan for how
they're going to raise more money that they might need
eventually. And so that freaked out the
board. You know, the board sort of
pushed him out. And then at the same time, his
executives sent a letter to the board sort of complaining about
him and asking for an investigation into him.
So it was just sort of the perfect storm of, you know,
classic perfect. Storm and almost and almost pile
on, if you will, to the founder. Here these stories are always
more complicated than could be boiled down on Twitter, but yeah
I mean, I think it's an open question I mean you read the
story do you did you come away pro founder or yeah what was
your point of view I'm. Going to take the case for being
founder friendly on this one, because we know what happened to
bench after they pushed the founder out, right?
It basically collapsed and they had a willing buyer, but it was
not the exit that VCs dream of. So that's I'm going to put stake
my claim here for that case that being founder friendly and to
go, you know, to focus on sort of a very pro founder posture in
this case actually made a difference, made a difference in
the future of this company. The fact that they did not do
this. Yeah, I don't know.
In your own reporting, you can take another stance.
I mean, replacing the founder always has this sort of anything
could be the alternative world and then often it's terrible.
I think the key thing is if you are a founder that wants to stay
at your company, generate profits or at least grow revenue
substantially and improve profit margins, you know, like at the
end of the day, like board will put up with bad behavior if
you're delivering like business results.
But if they're you're angering your executives, your strategy
seems sort of wild and you're not your core business isn't
throwing off a bunch of money, then you know, you don't have
anything like revenue, revenue growth, profits.
Those are the things that 'cause people to ignore questionable
sort of behavior and sort of people who piss people off.
If you don't have those things, all of a sudden it's like you
should be a nicer person to these executives.
And that's, that's sort of my view.
It's like, sure you can like, you know, the, you know, the
Uber is my sort of case study. And it's just like, man, you
burned so much money and then you didn't let your early
investors really take a lot of money off the table.
If you just let, you know, Benchmark, just sell their stake
and walk away, then maybe you don't have the mutiny anyway.
So these investors? Are I see your point here?
I see your point here. Yeah, strong, strong opinions
loosely held on my part. I'm, I'm always generally pro
founder. But when like you, to your
point, if the actual core part of the business is no longer
functioning, what are investors supposed to do at that point or
not function? The actual core part of the
business is off the path and you don't see the revenue that you'd
want and you don't see the profits that you want because
you're working on these other projects.
That to me seems like a point where it makes sense that people
would want to intervene, because if you're not landing on what
you've promised to do, how that path may not be the way that the
business should be going. But if I want to flip this side,
it's like the founder gets sort of these intangible things about
the business. They have a really visceral
sense of what they're good at and what the business is capable
of. And so they can steer it towards
new ideas and sort of things that are going to deliver sort
of a level of creativity that a traditional business wouldn't.
And that's what you're betting on with a startup.
And if you get rid of the founder, you're sort of just
going to be a regular company. And so you're never going to
deliver sort of the exceptional returns the venture capitalists
want. So we can both see both sides of
it and like I. I It's a nuanced position.
And it's funny with this specific one, I mean, I will
say, like, I mean, clearly that Crosby brought in executive
coaches to try to improve the relationship with executives in
some ways. And that was a negative
experience, you know, that it went poorly.
And so it's like if that had gone well, you know, there are
there are things where it's like if they could have found a way
to to sort of improve that, you know, there are little things.
And and, you know, even some of the executives that I talked to
sign the letter regret that he was sort of like totally ousted
from the company. You know, it might have been the
kind of thing where it's like bringing Aceo who can make it
seem a little more normal or bring in a new CEO, but you're
the chair and you're still the visionary.
And also like this this guy, a lot of people praise him Ian,
for being like a visionary, you know, And so in some ways it's
very natural that the visionary CEO plays more of a chair role.
So, you know, I it really seems like they should have navigated
to that and this letter maybe it.
Seems like there were to jump in.
It seems like there were avenues that they could have taken that
weren't entirely just 0 sum ousting the the the founder of
the company from the company. He didn't have to keep leading
the company, but they made the call to fully remove him in a
way that led to a lot of spite and animosity and ultimately
seemed to be not productive. But if you get this intense
letter from executives, you already sort of want the guy to
go and you're going to have to do in a complicated
investigation where you might, you know, I then you're like,
whatever, like let's let's manage this guy out.
I know. So it's it's a tough it's a
tough one. I have a lot of empathy for
everybody around employer.com, you know, is scooping up the
remnants and I think they're going to be potentially buzzy
with a number of acquisitions. I also think sort of sadly for
Bench, there's this trend now, which is like service heavy
businesses can be sort of smoothed out with AI.
And so I think investors are actually somewhat excited about
things like bookkeeping at the moment because you can throw
language models at them to try and really extend bookkeepers
across a lot of customers, which is what Bench was trying to do.
So it is sort of the classic, maybe, you know, wrong time,
right idea. And then Crosby, you know, he's
at Mercury. He's actually working as part
of, you know, a banking startup on accounting.
So he sold his company to Mercury.
So it's always he's doing what he wanted.
So I just feel bad for the he's. Doing what he set out to do
right yeah I just you know I feel bad for the employees that
get sort of caught up in this right that we're working on this
mission and don't have as clean of an exit as maybe the founders
or executives will out of this right moving on from 1 startups
lows we can move to another startups highs with our deal of
the week with rush capital coming in any sphere the makers
of cursor the popular coding assistant that's powered by
generative AI raised 100 and. 5 million in new funding Co led by
Thrive Capital and A16Z and Benchmark additionally
participated in the round as well.
A really big round for what won our newcomer Superlative for
Product of the Year, right? Yeah, No, no bigger honor.
No, the buzziest. You're actually building.
Buzziest product in Silicon Valley right now?
Probably that in granola. AI have got to be two of the
buzziest AI products at the moment.
But as we've covered in the newsletter, coding assistants
had a really big wave earlier last year with a lot of VC sort
of staking their claim into which ones that they thought
were going to be the Microsoft Copilot upender Cursor seems to
be in the lead right now just based on user chatter and based
on venture interest. But we will see.
There's always room for more entrance in the space.
It's pretty, it's pretty saturated.
And leads, as we've seen in this AI era, can have the lead and
then be immediately usurped by a new up and Comer.
It's, it's hard to be at the top for very long.
Everyone's always nipping at your heels a little bit.
So congratulations to any sphere for the funding.
There's a subplot in that Anthropic, I think Cursor is
like running through Anthropic. So like it's great business for
Anthropic too. And it'll be interesting to see
who really benefits more. Is it like Anthropic sort of
genius, or is it Cursor's product that's more valuable and
that that'll play out over time? Well, that's our show.
We covered everything from politics to startup failures to
startup wins. It's all of Silicon Valley in
one episode. Run the gamut.
All right. See you guys next week.