SED News: The NVIDIA-Hugging Face Deal, China’s Proxy Economy, the Open Weight Surge

0:11Gregor Vand:Hello and welcome to SED News. This is the monthly format of Software Engineering Daily where myself, Gregor, and we also have Sean Falconer. Hey, Gregor. Yeah, we have the two of us taking you through a spin of the main tech headlines. We then dive into a deeper topic in the middle. And then we finish up with Hacker News highlights, where we pick some of our favorites from the last couple of weeks as well. But yeah, both Sean and I have been super busy. So that's why this release is going out, I think, about a week later than it should. So apologies to anyone that was hoping to see one last week.

0:47Gregor Vand:But yeah, so yeah, Sean, what have you been up to? Other than the usual road warrior travel schedule, school started again for my kids. So my kids are back in that routine. So we're kind of back in the thick of it. And I'm a little bit nervous because my summer has been, there's been so much travel involved and we haven't even hit like conference season yet. I'm like, oh my gosh, I don't know what's going to happen at that point. But it has been a great time this summer. And I'm glad that we always figure out a way to make these sessions work, which I really enjoy. So despite us living on opposite sides of the world and sometimes having busy work schedules where you're able to find time to do this.

1:23Gregor Vand:Yeah, absolutely. For anyone interested, yeah, it's Sean's 4 p.m. right now, my 7 a.m. over in Singapore. Yeah, so yeah, but this seems to be the slot that works. Yeah, exactly. Yeah, no, on my side, yeah, talking of conferences, yes, we've got the Superbase conference coming up at the, I think, 2nd of October. So yeah, this is just crunch month, especially for that. Anyone that's maybe familiar inside a tech company that has their own conference, it becomes a pretty huge deal. Sort of all eyes on that. Unfortunately, though, there are always other things. Other things that come up. It's not like your day job stops.

1:58Gregor Vand:No, exactly. It's like conference crunch plus all the other things. Yeah, ours is coming up in two months too. So people are heads down on that right now as well. And they have been for months probably. Yeah, exactly. Exactly, yeah. So yeah, I did actually go to Stripe, do their, like a kind of, as a few companies do, they kind of have their headline conference at usually in the bay area or the us at least which striped it in may and then they do like a sort of world tour where they hit some of the bigger cities around the world like london for example but singapore does get them which is great like we sort of singapore tends to be the hub for asia for these kind of world tour conferences so went to stripes conference here and caught up with the folks there which was yeah pretty super interesting and some of our other team were like on the stage talking about things so yeah exciting times but yeah let's roll into the headlines we're doing a slightly different one this month which is sort of an end of summer special yeah i also feel like it's definitely end of summer just the sort of feeling of end of summer even though it's very still very hot in a lot of parts of the world and etc but end of summer special of sort of mna that's been going on so mergers and acquisitions there has been a lot there's been a lot of activity we didn't cover a ton of mna through the summer actually no that wasn't happening just we just didn't focus on it too much so yeah this is kind of fun yeah i think talked about any scale and scale oh yeah yeah and uh any scale and scale scale scale ai scale but no i don't think we're gonna touch on them today we've got far more things that we can touch on which is great yeah i think the as i was going to bed last night yeah the news was dropping that nvidia were definitely definite as it can be but definitely buying hugging face this this had been rumored, I think, last week.

3:41Gregor Vand:But yeah, it's been sort of announced for about 12.9 billion. So yeah, this is kind of interesting. I did just actually jump straight to the Hacker News comments on this one to begin with. And of course, a lot of, we'll get into in a second, what is hugging face? I mean, for anyone that doesn't know, etc. But I think a lot of the community comments were, oh, they're just gonna, they're doing this so that they can piss off the big frontier model people, basically. But I think that was a bit of a hot take from some of the hacker news yeah yeah i don't understand why in video would want to do that because they make a lot of money from those people in my mind like it's really i mean i guess if you don't know what hugging face is it's it's become really like the default hosting and distribution layer for sort of not open ai but open sort of ai models and they have a lot of developers there's almost like 20 million developers there and there's over 3 million models and there's data sets and all kinds of stuff on there and actually funny enough i had my first ever blog post published on hugging face this week so in some ways i give myself credit for you know this acquisition going through but you got out of the line that's basically what you're saying yeah i gotta i'm waiting to see my share of the 12.9 billion but but yeah i mean i think that potentially this is a way that they can own essentially distribution of the hardware that all these models are going to run on and And then they also are sort of owning the community layer.

5:03And I would think, you know, if you think of a company like Google, especially in the early days, you know, a lot of the moves that they made where sometimes they would give away particular pieces of software or they gave away like Android operating system. It's because it was in their best interest for more people to be on the Internet. Because the more people are going to be on the Internet, then being like the front door of the Internet at that time, it's more search, more ads, more revenue than it's like flywheel spin. So they could afford to give away stuff because in a lot of ways, it's like a customer acquisition channel for them.

5:33And I think you could kind of, you might be able to make a similar argument here where the more people who are building models, using models, running models is ultimately great for NVIDIA's business. Because the more that happens, essentially, the more money they make. So why not?

5:49Gregor Vand:Yeah, absolutely. And yeah, I mean, when I said sort of pissing off the big frontier models, I mean, that is a very hot take. it's more sort of a hedge really it's like which could be construed as pissing off but busy saying hey we don't that's what i think people are also looking at if they get too much completely interlocked with the circular financing and so on but there is a whole world out there that has nothing to do with the frontier model creators and that basically all most of it lives lives on hugging base so then it does make a lot of sense for nvidia to to be very much there and make sure it doesn't get i don't know bought by somebody else or because clearly they were open to acquisition so who else could have bought this probably quite a lot of people so yeah i mean it's probably a great landing for hugging face because i don't know i think the acquisition was really about buying essentially a community of users and it was you know buying a net new revenue stream or something like that right yeah yeah that also makes sense yeah let's see we did actually have hugging face on the podcast on an episode i think it was last year sometime so go check that out as well but yeah very very interesting huge huge move and slightly unexpected i think i think when it was rumored last week it definitely came as a surprise to people but yeah hopefully nvidia is a good home for them as opposed to any other company that could have come along and done this so yeah okay so moving on to another acquisition arise is that how you say it yeah that's right nice okay so yeah arise that's i think you've been covering this one sean yeah so dynatrace obviously signed an agreement and acquire a rise for a little bit under a billion dollars, so$915 million.

7:26And if you're unfamiliar with a rise, and which probably a lot of people are, although I see their billboards around the San Francisco Bay Area, they are in the AI observability and evaluation platform space. So if there's other companies in the space like Fiddler and Galileo, there's a whole host of them. But really, like some of the core capabilities around like tracing LM apps and agents, what they're actually doing at runtime, detecting hallucinations, scoring that output, monitoring model agent behavior and production. Like this is a huge space. Like it's very hard, especially when you're running agents or multi agent systems at scale and enterprise, like just having like visibility into what they're doing.

8:02And then if you're in a regulatory or regulated industry, you also need to know what they're doing to apply with certain regulations and so forth. So essentially they're in that space, but the acquisition makes a lot of sense. Like, I don't think there's a world where agent observability is like a separate category of product over traditional application observability. Like eventually these things are just going to merge because like a business, an enterprise doesn't want to have two different observability platforms that have to run for the software anyway. Like they much rather deal with one vendor.

8:32So Dynatrace is one of the well-known players in observability for applications and infrastructure services. So adding this to their that makes a lot of sense. And I think one of the things that will be interesting is part of Arise's differentiation was being kind of vendor neutral and being able to plug into any model or framework. And I think one of the concerns I've seen people raise is, will they continue to be neutral now that they're part of this larger entity of Dynatrace? And will that mean that they'll bring some of that stuff, be less essentially neutral in terms of the way that they work?

9:07I have no idea, but that's kind of like one of the concerns that was brought up. But I think we're going to see a lot more of this consolidation. Obviously, there's a huge amount of M &A activity going on right now. But I think there's a lot of sort of moment in time AI companies right now or genres of AI companies where they're solving an important problem, but it's hard to create like a really truly large business on a specific problem. So either they have to grow into something bigger, like more of like a bigger platform or they'll get absorbed essentially by existing platforms and from adjacent areas.

9:40Gregor Vand:How old did you say Arise was? They're pretty young. I think their last fundraise was in 2025. They did a Series C for like 70 million or something like that. So they haven't raised that much money. So pretty great. I'm sure they were, everybody that works there is probably pretty happy because they, I don't know exactly when they started, but I would imagine they're too old. I could probably look it up, but they probably haven't sunk that much time into something and they haven't raised that much money to get almost a billion dollar exit. Yeah. So they were officially founded in 2020. So yeah, especially in this space.

10:10Gregor Vand:Yeah. It probably would have been hard for them to kind of end up in some crazy multiple in the billions. So yeah, this does feel like a nice landing for them. Yeah. And I'm sure they were probably at a place where, I mean, I don't know. I'm just kind of guessing, but like the, given that their fundraise was over a year ago, they were probably at a place where do we go for another funding round, which would probably need to be a fairly large round. And then you're kind of cutting off an exit like this at that point. And you're signing up for potentially another like six years on this journey to get to like something really big.

10:44So you're cutting off a lot of the potential exits and landings. And then on top of that, you're signing up for another half decade commitment to the company. And sometimes that just maybe doesn't make sense. Like it might be overall like a better outcome for everybody. and I'm sure they'll still be able to continue to work on like the vision of what they're doing in the company just within a larger organization that can better support it yeah so yeah next one

11:07Gregor Vand:is Temporal so again that was you're covering that one Sean yeah so Temporal they've also been on SED I interviewed their CTO a couple years ago they might have been on multiple times even at this point but so this is not them being acquired but right now the rumor is that they are looking to raise$500 million at at least a$12 billion valuation. So nothing's closed yet. It could all, of course, change, but that's the rumor that's out there. And that's more than double the$5 billion valuation they had just six months ago where they raised$300 million Series C. So if you don't know Temporal, they are an open source, durable execution platform.

11:46They also have a cloud managed offering for this. But it lets essentially developers write long running multi-step workflows that automatically can survive crashes and retries and timeouts and failures without you having to do state management and retry logic all yourself. If you look at a lot of companies, they'll have some either hand-rolled or some version of durable execution. Sometimes it's temporal, something else. But they're originally really popular for things like payment processing or fulfillment pipelines where you don't want that thing to fail. But AI has been this huge tailwind in this space because AI agents are essentially inherently long-running multi-step processes that are also very failure prone.

12:29And you don't want to, every time it fails, have to start it all over again and then repay for those tokens. So having something like a temporal to be able to pick up basically where you left off and retry and handle all that logic for you without you having to do it yourself is really makes a lot of sense. I think this concept of durable agents has been a real tailwind for Temporal. And in a lot of ways, they've been at it for quite a long time. It's one of those companies where it's like overnight success, but 10 years in the making. They basically created, I think, this category of durable execution.

13:01They put in a lot of hard work to kind of grind. They did a really good job of getting into some of the big Bay Area digital native companies. And I think that they were successful there and essentially developers would leave and they would bring that technology to the next company and they got eventually they got enough word of mouth network effects where they just now actually kind of almost like getting this like viral growth from it because they have so many network effects of people being really happy

13:27Gregor Vand:with the product and taking it with them yeah they seem to have also this year i mean obviously i've been through this with super base now this year but they're sort of going from like c to d to e in one year basically so like they did series d temporal did series d in february of this year i think and so this would be not really even six months later they're looking at their next round at double i believe that's double the valuation so five billion on the last round and then or more than double and 12 billion on this round so yeah and i think that context is really interesting of yeah how temporal has been around a long time basically replacing state machines and this kind of thing step functions and yeah just like retry logic effectively that used to be just hand rolled I think by every company and then yeah and then now it's only this huge tailwind with AI for all the reasons you just mentioned so yeah I think super interesting yeah next one that crossed the radar was InstantDB so they are it's definitely more of an acri hire than acquisition at least that's how it's being yeah reported but yeah the team of InstantDB joining OpenAI so yeah InstantDB is yeah open source basically back end you got a database auth storage layer but the key thing here is like this is a very useful thing for agents basically being able to spin up that layer of infrastructure and yeah clearly open ai don't seem to be doing a lot of the building of that themselves at least not that we can see in public acquisitions seem to be or i could hires again in this case again seem to be how they're doing it this is interesting and and definitely one where there's a cloud offering they had a cloud offering which is i believe going to be mixed by open ai i think you know this is when developers get a little bit angsty when you know there's a product that they use and okay the team is going the team is going to go in-house with open ai but ultimately this product that they i believe they said they were handling like 400 000 apps i think this is a bit of a loss i guess for the ecosystem at the moment perhaps if by getting just sort of subsumed inside OpenAI.

15:33Gregor Vand:But we shall see if there's a better version of this. Yeah, I mean, it seems like with OpenAI, it might be some of these moves. Who knows what their actual intention is, but it seems like they're kind of trying to build their own agent infrastructure stack with some of these pieces that they're kind of assembling. And they've been making all kinds of different moves in agents for two years now. And I think part of that is like, how do you capture more of the AI value chain outside of the model itself and even outside of you know what they were originally really well known for which was like the consumer interface of chat dbt around their models yeah one of their investors was jeff dean so pretty big name and yeah we've got also some just sort of i think general general news on jeff dean is that right yeah so i mean the big news over the last month was that a little less than a month ago at the beginning of August, Jeff Dean announced he was leaving Google after 27 years.

16:29He's like employee number 30. He was most recently chief scientist. He's probably one of the most famous and world-renowned engineers in the world. You could probably make a fair argument that Google might not exist, at least in the form that it is today, if Jeff Dean hadn't been there with all the contributions he made to MapReduce, BigTable, Spanner, TensorFlow, Google Brain. He's just this godlike figure. The fun Jeff Dean facts that are these Chet Norris memes and stuff like that. I remember it was like, only Jeff Dean knows the final number of pi and crazy things like that. Jeff Dean doesn't get compiler errors.

17:09He tells the compiler that it's wrong and fixes it and just stuff like that. So it is quite the thing. I never thought that he would leave. I figured he would just eventually retire. But it looks like he's going off to start his own company. And he took three really heavyweight people with him as well. And they're now starting this company called Discovery Loop, which is, there's not, I don't think there's a ton of information out there, but they say it's a public benefit corporation aimed at using AI to automate and massively scale scientific experimentation. Definitely something interesting to pay attention to, see where they go.

17:42I would imagine them raising money is a very easy conversation. They probably just, here's my resume and slide across the blank check and have people just fill it out. But it'll be interesting to see what happens at Google coming out of this. Clearly, that's a pretty big loss. And Google did invest in Jeff Dean's company. And maybe there's a certain marketing angle to that to kind of save face and all this when you have such a high profile person leaving. But what do you think, Gregor?

18:08Gregor Vand:Yeah, no, I was sort of thinking, okay, what is the, you know, I love tipping points, right? What was the tipping point for Jeff Dean to leave Google? and I guess it's just like this is there has been no better time for someone of his stature and mind I guess where you are going to get the back if like if you actually want it you can probably have an amicable conversation and be backed still by Google and even bring people with you and not become some kind of rupture we've seen this a few times and yeah I think that's it really like there is there has been no better time that he could now step away from like the mothership and to do his own thing but i'm sure it will be very closely intertwined with things that google do anyway so yeah i think that's definitely life goals right there if you can give such a contribution through one company but then get like all the backing to then go and do your own thing from that company as well and be able to take some of the you know amazing talent that google still has like yeah amazing yeah yeah just one more fun jeff dean back before we we go off this is uh jeff dean proved that p equals np when he solved all np problems in polynomial time yeah there we go you're shipping faster than ever with ai coding agents but those agents don't vet the packages they pull in and they don't have security contacts built in ori by endor labs fixes that It plugs directly into your editor via MCP, catching vulnerabilities, blocking malicious packages, and flagging exposed secrets in real time.

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21:31Gregor Vand:So back to just, I guess we called it M &A and it's more just A &R, acquisitions and raises. So back to A &R. Yeah, this one is a little bit, maybe for some off the radar exactly, but that's why I wanted to bring it in is a company, Hidden Layer, who are a security startup and they make tools to protect AI models, agents and workflows. And obviously we have covered so many of these attacks that have happened involving some form of agent or whether it was intended or not. So it's very interesting that, yeah, they've managed to raise 100 million, which actually now for a security startup, that's pretty impressive.

22:07Gregor Vand:There was definitely seemed to be some, I would say, decline in the security company raising space. I haven't seen a lot of big raises from security companies, strangely, even though we keep hitting all these security problems. It just seems that unless the company is basically something AI and then they maybe weave security into it, but this is very much no, like they've been doing security the whole time. They're just, they've managed to, I think, pivot that story and the products well into the AI space. And they claim that they haven't given exact AR numbers, but they say that they're now in the AR is now the tens of millions.

22:44Gregor Vand:And like 90 % of that was driven by new customers signing in the past year. So again, that's tens of millions in ARR for a security company of their age. Impressive as well. It is still pretty challenging to get companies to pay for a quote, new security company. Well, I say nobody got fired for buying CrowdStrike. Maybe somebody did it at some point. But honestly, I still think nobody gets fired for buying CrowdStrike. That's just a classic case of, yeah, they had a bad month a couple of years ago, but then nobody seems to remember that anymore. so i think it's steep in security it's like a steep hill to climb because unless you're doing some sort of like you know maybe consumer related security but you know most of this is going to be like b2b and how do you get like a truly large enterprise to trust some smaller player in the market that's relatively new with something like security but i do think that given that trust and governance and security around models is like so top of mind for businesses right now i do think there's gonna be a lot of companies that kind of emerge out of this new companies that have raises and are addressing like real problems in the space because that's a big part i think of what needs to be there to unlock e2b enterprise ai which is you significantly wagging behind other areas of right now yeah and like i think it's interesting they want to be known as like an edr solution which is endpoint detection response but specifically for ai they do things like they scan models that you are using they actually scan the files to like make sure that you are using the model that you think you're using so again like having spoken about hugging face and we're gonna actually our main topic is a lot about the open weight slash quote open source ecosystem and so provenance which is do you know where this thing came from this very much weaves into that which is like do you know the model is the model the one that you really think that you're using you You know, is that we've seen, obviously we've seen all sorts of like package manager based attacks, you know, where someone can take over a name or something.

24:47Gregor Vand:On Hugging Face, I must say, I'm not fully, I don't go into Hugging Face a whole ton these days, but I remember when using it, it was still kind of confusing at least back, I don't know, a year and a half ago, two years. It was still maybe confusing, like, is this a model made by anyone reputable with data that I can trust or not? So enterprise has to be super careful now when they're pushing their developers to use AI and especially open the small amount of actually open source models like yeah great but do you know what's what's in them so anyway I think that's why we've seen this from hidden layer they've managed 100 million at series b which is yeah super impressive for a security based startup yeah just moving us along this one is super buzzy startup got coverage in wall street journal but instinct.ai i think buzzy i want to keep touching on that because this was a 250 million series b at 2.5 billion valuation honestly i'm sure if there's anyone listening out there knows this product that's great i'm still a bit confused what the why here or why why this feels more like the team you know you've got like noah shin is i believe the at least one of the co-founders so he was at sierra and yeah it's like youngish team like and it's sort of like an open claw but polished it's kind of my read on it yeah i'm curious like why the crazy valuation on such a young company but but yeah i don't know if this crossed your radar as a company sean or not but no i hadn't seen the news around this yeah but it's basically what i could tell kind of going after the personal assistant ai personal assistant market yeah and unless of like an open source completely vibe coded thing by a single individual and more more of a company approach I mean, I don't know.

26:32I'm assuming that they were able to get that valuation in part because of maybe who the founders were. And then also in combination with whatever growth they might be seeing. But I also would think that the total addressable market is massive. Maybe that helps justify some of it. But that does seem quite a large or a very high valuation. And also for$250 million Series B.

26:53Gregor Vand:Yeah. So I realized in our notes, I put the wrong URL. So there's instinct.ai, which is not them. what's fun though if you go to instinct.co which is them it is just a website that looks like it's from 1992 and it's yes it does it's a white background it's times new roman it just says instinct and then it says contact and then you've got san francisco and you've got you know the comms it's all written there's no there's no science comms at instinct.co yeah i'll just do a quick read it then just has one basically one about paragraph and it just says instinct is the personal assistant that understands what you're working on and what's important to you.

27:31Gregor Vand:It connects to your applications and devices, email, messaging, screen, audio location, and more. The interface is simple. There are no new interfaces. It's trained to use a phone and a computer. I'll pause there. There's more, but yeah, very sort of open clot-ish. But I mean, this is the ultimate, I'll just say it. This is the ultimate flex right here. You know, hey, we have a website that is just a white Times New Roman and we just raised 250 million, 2.5. So yeah, signing the times perhaps but it's they're going for agent readability on the website right yes that's definitely what they're doing you know agent doesn't need to know anything more than than this basically but yeah you know what i'm gonna if i can in singapore sometimes things are not available here yet so i'll try it out i was never an open claw person but maybe this can i definitely need some form of personal assistant executive assistant so i will try this out all right and then just a final one i just popped this in it was kind of interesting this is it's called owner.com and they basically just do kind of like back-end software for businesses like it sounds super boring unsexy effectively it's an eight-year-old company but i think it's kind of cool they've raised 240 million series d at 2.3 billion so actually kind of similar numbers just different round to instinct but yeah i think this is cool it's good to see like how companies if they really do keep moving themselves forward and taking advantage of like what ai can do then And you can still be raising on these like unsexy business models.

28:58Gregor Vand:So kind of almost the anti to instinct in this case. Yeah. That's a hard market to like selling into the long tail of restaurants. Like OpenTable was able to do it through a lot of just sheer will of beating the street with, you know, sales reps and stuff like that. And back then when OpenTable did it, they were actually putting like physical computers into the restaurants and things like that. But I think the thing is, is like if you can do it because it's hard, it's very sticky. And then you have this like mass amount of customers that probably part of it's like, okay, well, I've captured the interest of this customer.

29:31Like how can I, what are the other things I could sell into that same customer that helped them that also helped me by generating more revenue? Yeah.

29:38Gregor Vand:As you say, it's like, it's very restaurant back office or like, I say back office. Yeah. It's like they cover everything like point of sale, a branded restaurant app, marketing campaigns, online menu, when you say online menu, like literally a restaurant menu, a reviews engine, all this stuff. So they're kind of trying to cover every single base that a restaurant or any kind of food service, I guess, would be needing. So yeah, super verticalized in that sense. But nice to see just something that doesn't, of course, AI comes into it, but it's not just an AI company claiming to sort of solve all the world's problems.

30:09Gregor Vand:It's very specific for something I think we can all relate to restaurants. Yeah, it's encouraging for all those founders out there that might be listening that don't have a pure AI company. Like, yes, you can actually still build a business and raise money, despite what maybe all the headlines tell you. Yeah. If you want to raise money, not all do. But if you do want to raise money for something that seemed boring, definitely, definitely still possible. So, yeah, nice. Yeah. I mean, I guess just sort of we're going to get into our main topic in a couple of minutes. In terms of other news, I think it's just that we've seen an absolute deluge of new models coming in.