OpenAI's new media M&A and old media exposé

0:04Today, we're joined by Alexia Bonatsos, the founder of Dream Machine, an early-stage venture fund, and the former editor of TechCrunch. In the wake of TVPN's acquisition by OpenAI, we're going to talk about new media. I'm Ashley, and Helen is also here this week. Great Chat is brought to you by Mercury, radically different banking left by over 300 ,000 entrepreneurs. We use Mercury to run this podcast and love recommending it to other founders and fund managers. It's free to get started. Try it for yourself and visit mercury.com to learn more and apply online in minutes. Hey guys. Hi. Hi. Alexia, thank you for joining us.

0:44Thank you for having me. I'm honored to be a part of the chat. Yeah. Well, it's been like a very slow Newsweek. So I'm sure we'll have nothing to talk about. Yeah. Is there anything going on? It's funny. I feel like last week seemed like we were on a high note. The thing that a lot of people have been pontificating about for a while, like the first one person, billion dollar revenue company kind of like seemed to finally be real with some caveats around it wasn't actually just one person and it wasn't a billion yet. But Medvi, the GLP one startup where the founder, you know, vibe coded all of these automations and, you know, had done hundreds of millions in revenue and was growing quickly.

1:33And then that narrative turned like really quickly.

1:37Alexia Bonatsos:Well, what I thought was significant about this one was that the New York Times covered it, because for those of us who are, you know, glued to Twitter, we have heard several of these, you know like overnight sensations one person one person companies um who have vibe coded like the core product and this one was interesting because i think as we often talk about like there's our little bubble world and then there's like the world world and this one most like you know exactly and so what was so interesting was that even though like nationally i think this is where you're going next. The second wave was like, you know, people pointing out all of the holes in the story right on Twitter.

2:22Alexia Bonatsos:Like I saw a couple of accounts point out that there were a bunch of fake, fake doctor accounts that were created on the platform and that, you know, there's a lot of fraud or scams or something like that. And can, you know, the all of the readers of the New York Times, are they going to follow along? Do they care enough to follow along the storyline? Or Or is it like, oh, I read this article in the New York Times. That's it. Do you know what I mean? I enjoyed even just the juxtaposition of the Twitter conversation, which happened very, very rapidly. Right. It was like the story was published.

2:58A few tech people did like the victory lap of like, oh, the thing we've been talking about is finally here and just like took the reporting at face value. and then like almost instantly there were people who were sort of picking that apart and people found you know like letters from I guess it was like the FDA or whatever and so there were a lot of things that weren't represented in the New York Times story. The guy who picked it apart the New York Times wrote the oh my god this is this is real and he wrote no this is not real David Tucker Carlson MD is not a real guy. That's right yes yes that's right and then

3:36Alexia Bonatsos:there was like a there was like a cartoon character one that was like Donald Duck or something. That's Dr. Donald Duck. Yeah, doctor. That's Dr. Donald Duck to you. That's really funny because my thought was this is like the business milkshake duck. Do you remember that meme? It was like a it was a cartoon and it was like, here's a duck. He's eating a milkshake. Everyone loves him. And it's like the duck is racist. And it was meant to just sort of describe how quickly like the tides can turn on the internet and became sort of a cancel culture meme. And this is like the business version of that.

4:11But yeah, the funniest thing is I think it was Erin Griffith who like posted the piece she wrote on LinkedIn. And it was like a completely alternate universe where I had to, I had to scan so many comments before anyone was like, this seems suspicious or like some things don't add up. And so even the difference between Twitter and LinkedIn on this piece was like just completely different worlds. And like Helen, to your point, the average New York Times reader will probably never see any of the fact checking or pushback. Just like when we talked about the Brian Johnson piece, where there was like a completely different dialogue happening online from that sort of New York Times takedown.

4:53It's like sometimes these stories don't break containment, or at least the conversations around them don't. So you think that the New York Times readers are going about their day-to-day wondering what the next billion-dollar AI one-person company is going to be and could it be them? Like, are they...

5:13Alexia Bonatsos:Oh, that's such a great take. I hope that they're, like, inspired and they're like, maybe I should vibe code my way out of death. You know, like, maybe that's the goal, you know? It's funny because Aaron Griffith also played a role in the kickoff of the Delve drama. This time she was not the one who wrote the piece, but she was the one who shared the anonymous sub stack that went viral, I guess, like a couple of weeks ago now. It's almost surprising how much staying power this story has had. And we had another turn of the Delve drama. I guess it was on Friday when YC took delve off its website and booted it from its community.

5:58And the founders responded with what I thought was a probably not a masterclass in crisis communication video that they posted on Twitter. Yeah.

6:08Alexia Bonatsos:I mean, I watched the video. I also saw like the kind of awkward note that's like, why we and YC have decided to part ways. And it's like, that's okay. I think YC is now like a 15 ,000 person community, you know, it's been around for a long time. There were times where their class sizes got pretty large. And I think that when you say something like that, it can get fact checked pretty quickly. So that was that was risky. You know, somebody pointed out over the weekend that the Dell founders are, you know, MIT dropouts, but they're very young, like they're 20, 21 years old. And, you know, there were two sides of that argument.

6:51Alexia Bonatsos:One, like these are just kids like they don't if you're wondering why their comms strategy isn't that of a brunswick group is it locked in they're in no chris lahane for them but on the other hand a good point was made like you don't raise you know however much they've raised like 20 something million dollars like and not assume the responsibilities of you know a corporation and you know all the things that come with it and so i you know uh one thing i thought was interesting was i feel like people were very critical of gary's response and like being removed from yc but not a single critic about you know of the series b lead who removed them from their website insight right yep they removed them like instant like instantly and like quietly disappeared nothing and then their series A investor, the Series A lead also removed them from the website.

7:46Alexia Bonatsos:And it was like, YC took that action much later and got so much heat for it, even though arguably, you know, early stage investing, right? Like there's a lot less to underwrite. And, you know, and they wrote a much smaller check. And so when I asked that question, you know, somebody was like, well, Gary likes to be sort of like this moral arbiter on Twitter. So I think that's why he got a lot lot of the backlash. But I don't know. I can see both arguments. I only saw people lauding Gary. I didn't see people mad at Gary. You brought it up earlier. That YC is all about founders. So if you're misleading other founders, then you're against the TOS.

8:29Like, I just saw people congratulating him. I think it was more meta commentary. So like a friend of the pod, Yoni from Slow said something like, it's the worst of all worlds to remove them from the website and community, but not say anything publicly. I kind of feel like internal statements are external statements these days. Like Gary absolutely knew what he posted in Bookface was going to end up like screenshot and circulating on Twitter. And I thought his messaging was good. It was really simple. It was that Y Combinator is not just an accelerator, It's a community and people know that and that community has real value.

9:09And so I think that the decision to remove Dell from the community makes sense for the very reason you just said. Like this is a company that mostly serves other startups. And if it's not doing that well, that like YC stamp can be misleading. The thing I think is so interesting, and I'm fortunate I haven't had this challenge myself as an investor, is the decision to just remove a logo from your website. Does that mean you also give back the money? Are getting off the cap table? Yeah, exactly. I had this discussion with my husband. A really interesting example years ago was Sequoia invested in a company called Finnex that was in the FinTech space.

9:54And afterwards, the story was, and I have no idea what the actual behind the scenes was, was that like Stripe saw Phoenix as competitive. And so Sequoia wasn't going to mess with their like prize, you know, prize possession. Stripe just said, Phoenix, you can have the money. We're off the cap table. Like we're not even taking the money back, but we're no longer involved in this investment. So that was like in my mind, I'm like, OK, that is a legit removal of logo use case. In the case of, you know, all of the funds involved with Delve. And like, this feels very superficial to me. It's like, let's pretend we never did it.

10:36Unless, you know, they're somehow like actually giving that equity back or like selling it to someone who wants it. So it's kind of a funny, like, it doesn't really have any teeth and it just sort of draws attention. It's like a little bit Streisand effect-y.

10:52Alexia Bonatsos:I think we pay attention more to how firms are responding to conflicts within the portfolio because we're like living in unprecedented times, right? There are some firms that are investing in both Anthropic and OpenAI, and that was unheard of just a couple of years ago. And now I think. And like. Yeah, exactly. But also, like right now, as a lot of, you know, company, SaaS companies from the last five to 10 years are trying to figure out their second act, right? And leverage AI and like sort of create an agent first version of their previous, you know, enterprise software platform. I think you're seeing a lot of companies within portfolios start to compete with each other, too, that were before never competitive.

11:40Alexia Bonatsos:And so I also think that firms are kind of in uncharted territory. We're like, well, when we made the initial investment, they were not competitive. but now you know everyone's sort of trying to remake themselves and be ai first or agent first and they're sort of landing in the same spots and so what do we do uh and this is for firms who are historically very very black and white on like not um not investing in competitors so yeah i don't know we'll see so i think this is kind of one of the reasons why people say pay such close attention to how firms respond to competitors. So even if you were playing a gentleman's game, like you're being dragged into this new reality.

12:22So I've tried this. You invest in one thing, then you preclude everything else that looks like that thing. And then that thing changes to look like something else.

12:29Alexia Bonatsos:Oh, totally. Maybe like something in your portfolio. Yes, I am absolutely not a hardware investor at all. But one of my best investments is a dev tools company that pivoted to gaming hardware. And they're doing amazing. So like it's you just really never know, especially at early stage. That's always happened. Like even before, like, Helen, the dynamic you described, like early stage investing is always a little bit of a wild card, right? Like you're mostly backing people and those people are going to learn things as they build. And I think where this gets really interesting is when it's happening at the growth stages with firms that are putting in tens or hundreds of millions of dollars.

13:08or, you know, in the case of some of these like gross stage rounds, billions of dollars, tens of billions, like who knows what the cap is that you can't pretend like, oh, they pivoted into being competitive. We didn't know. And it really makes me wonder like what information rights look like for those deals. Right. Because obviously a lot of, you know, like Anthropic is like announcing its ARR on a monthly cadence now. But I'm sure there is a lot of information that such substantial investors would normally be privy to that is not being shared because, you know, you're on two other competitive cap tables.

13:47So it's like more concentration and fewer companies, these bigger firms and like less insight into what's going on, which is always a fun combo. What's so interesting about the New Yorker piece that dropped, a thought that crossed

14:03Alexia Bonatsos:my mind was for a lot of the firms on the cap table, I think they broke a lot of rules where they're just, they didn't reach their ownership, you know, targets with this investment. They don't have a board seat. Who knows if they even have information rights in some cases. I think a lot of them also like invested a very large percentage of their total fund in this investment. So it's just, it's one of those things where it's unprecedented in this case where like, it's been diluted so much. This is such a huge consequential company that has raised so much money. And for firms that aren't mega firms who invested, like I know of some who like put their entire fund into that investment, right?

14:47Alexia Bonatsos:And which is why when there are moments of sort of like, oh, what if this isn't, you know, a sure thing or it's, you know, too big to fail, Like if it doesn't follow that arc, like what happens is sort of, you know, we'll see soon. But I think that's what's sort of so crazy about this. My hot take now, what, like a day later, not having read the piece. So, you know, gather your grains of salt is that this doesn't feel existential to me for Sam, like in the same way that Elon's antics haven't been existential for him. And I think it's because he has always been a mysterious figure. And, you know, people may love him.

15:33People may distrust him. But the thing that is like known and core is that Sam is like very good at winning. And he's like a very good deal maker. And he ascends, right? Like he went from looped to running YC to running open AI. And I think that the people who've bet on him did not bet on him because they saw him as this like moral bastion for tech. I think they were like, this guy is going to build one of the most complex businesses. One of the biggest swings or the biggest swang in history in so many ways. And like he's going to figure it out. And so at least for like an investor audience, a tech audience, I don't think anything in this is going to make anyone go like, whoa, like I thought Sam was one way and he's another.

16:24I think it's more like, oh, some of the whispers I've heard seem to be substantiated or believed by other people. But I actually don't think that this this New Yorker piece is the undoing. Like that is my, again, not having read it, but seeing people's like hot takes. Based on the vibes. Based on the vibes. And listen, like we've talked about this a lot. Open AI is the category leader. And so all they can do is get like chipped away at, right? Right, right. They can only go down. It resulted in three other swings. That's how big the swing was. That's true. That's true. They've had to get rid of swings because there are so many within the company.

17:08And so anyway, so that's my take on the New Yorker piece. But yes, was it on Thursday of last week? It was like the day after April Fool's. OpenAI announced they had acquired. But they also, prior to that, they announced that round, the$120 billion round. Oh yeah,$122 billion round. All of the news hits or news blips are all pegged to this raise announcement, Which is something that you wouldn't necessarily get if you're reading Twitter. Like it's just they announced it and then they're like, OK, well, we need to change strategic direction or all of the things that are bubbling up. We move on really quickly on Twitter.

17:44We're like new day, new slate for clean slate for news. But yeah, OK, so like the No More Sidequests, which I think was like around the same time as the Rays announcement, the TVPN acquisition on Thursday, which a lot of people thought was a April Fool's joke at first, but it was not. And then a bunch of exact departures and shifts on Friday. So the CMO stepping back, the COO moving into a smaller special projects role, Fiji, who was the CEO of applications, but now is like the CEO of like, what was it, AGI? AGI. Announcing that she was going to go on a medical leave. Then there was a news story around tensions between Sam and the CFO, Sarah Fryer, around like IPO timing and approach and maybe just sort of like invest spending generally.

18:46And then on Monday, this like massive Ronan Farrow New Yorker profile hits. My hunch, because this is a profile that's been in the works for 18 months. And I heard a little clip with Ronan and he said he spoke with Sam over a dozen times. Is that OpenAI knew this piece was coming and they're like, great, let's get all the bad shit out as fast as possible. So it doesn't look like it's a reaction to this piece. and then like like like it's like a rip the band-aid off like a lot of things are changing if that's going to happen have them change like all at once versus like a drip campaign or like can you imagine if this profile hit and then like two days later a bunch of execs were leaving like everyone would tie those two things right and so right i think it was at least smart that they like condensed this like crazy news window for the company and i mean who knows if there are other surprises around the corner or you're giving them too much credit.

19:50Alexia Bonatsos:It's one of the two, of course, right? And I was trying to think about like, if you are running comms, you know, usually comms have, I think of them as like this orchestra conductor. It's like, okay, now this, and then more of this. And it's like, you have this sort of command over all of the moving pieces. and two things. One, there are more moving pieces than ever, you know, glimps into our main topic for today. But also we're consistently living in two realities, right? So like, are you the open AI user, you know, ChatGPT user in the long term that we have to win and mostly surrounded by traditional media?

20:31Alexia Bonatsos:Or are you terminally online and following large meme accounts in many cases who are doing these sort of like hot takes and like have these insider insights and that are gaining steam. It's harder than ever, I imagine, to try to like navigate, but also prioritize like what world do you care about, especially if your CEO and maybe your investors live in one reality and not so much the other. I think so much of the discrediting of the mainstream media, like this is what is happening where people are choosing to opt out. Whereas before, I think there was this sort of like cheeky balance of like, yeah, I'm skeptical of it, but I need to still understand what the majority of people are reading.

21:19Alexia Bonatsos:And now it's like, no, that's why I canceled my New York Times subscription. I disagree. Like I've noticed a vibe shift in my like very online Twitter feed in the wake of the New Yorker piece where people in tech are like feel like they've been given permission to express very different beliefs about OpenAI and Sam specifically than they did before that piece, even before the exec departures, before, you know, any of the any of the recent news cycles. And but again, I think a lot of this is less that like all of a sudden mainstream media is credible and more that open AI flew really close to the sun and people are excited to knock it down a peg.

22:00But I think these like worlds are really feeding each other much more so than than maybe they they generally do. And then the other thing I'll say is I think very few people are actually going to read the open AI piece if they are not like in the tech industry. And so I still feel like this is maybe a more specific audience than we might imagine. The New Yorker? You don't think people read Ronan Farrow's? It's so long. I just think like the attention spans of everyone, not just people in tech, have become itty-bitty. And so I think it's going to be people who—

22:33Alexia Bonatsos:Actually, that's a good stat that I'm going to look up, like New Yorker subscriber demographics, because I would bet that tech is actually a really, really small slice of that. Sure, but story-dependent. I think people read certain headlines. A lot of people, New Yorker audience might be different, right? I think there are people who get the New Yorker every month and read it like cover to cover. But I'm not one of those people. I'm picking and choosing based on like the headlines I'm seeing and who's sharing them. And I think that's how like a lot of people come. So you're like a Twitter reader of the New Yorker.

23:06Or like a tech meme reader of the New Yorker. Or like a group chat reader of the New Yorker. I mean, I'm too poor to afford subscriptions to all of these publications. So, Alexi, one of the reasons why Helen and I invited you to join the chat this week is because before you started Dream Machine and your career chapter as an investor, you were in the media world. And we were joking, like TechCrunch used to be new media. You were there as a writer and then you were there as an editor. and this was a time when you know just to date all of us like early in our careers like blogs were like the new media format and the way that like podcasts and newsletters and like you know I guess whatever tbpn is has become sort of like the go-to formats for new media in our current era and so we thought it would be kind of fun to use the tbpn acquisition by open ai which I think was a surprise to a lot of people as like a jumping off point for talking about this new media landscape.

24:09Yeah, TechCrunch was old, is old new media. And like in the next cycle, it'll be old, old new media or older new media. Putting aside all the other open AI drama to the extent that that's possible, like what's everyone's take on, so that the reported like price tag for TBPN was low hundreds of millions, which is... AI is finally paying for content. It's just not in the way that a lot of people had hoped. No, I mean, it's an incredible outcome. TBPN is what, like 18 months old. And, you know, until fairly recently was just run by its two co-hosts and then they hired a business person and Dylan joined.

24:55But truly like a wild success story, the kind of what you don't normally see in like the media world, right? Like there are plenty of like startups that have this sort of fast path to acquisition technology startups. But this feels like a new era. I have read some of the chatter. I read on it yesterday. This doesn't make sense. Does any acquisition make sense? Like, look at the look at the just the patterns of acquisitions destroying values in the in the acquiree. So does it make sense? It's the you know, the market made it made sense. Do I think it was bought to be a mouthpiece for Sam? So to go back to the New Yorker piece, Sam is impressive in that he does talk to media.

25:41He's not dogmatic about that. Like, he's not one of the go-direct-only people. No. And so I don't think it's that, even though that was proposed. This idea of editorial independence on their part, like, I think people are very, I think this is a confusing time for media. I think the internet has brought us back to, like, the 19th century, where there was just, like, a plethora of publications. that were very competitive and biased. Like the idea of media being objective is a relatively novel concept that like was pegged to the fairness doctrine, which was eliminated in the 80s. After that, we not only had the elimination of regulation, but then the internet, which allowed for, you know, a cornucopia of points of view and bias.