23andMe BANKRUPT, Saylor Still Buying Bitcoin, + Founder Interviews | E2102

Key Concepts

• Bankruptcy: A legal process for individuals or businesses that cannot repay their debts.
• SPAC (Special Purpose Acquisition Company): A "blank check" company that raises capital through an IPO with the purpose of acquiring an existing company.
• Bitcoin: A decentralized digital currency.
• Hodling: A strategy of holding onto cryptocurrency for the long term, regardless of market fluctuations.
• M&A (Mergers and Acquisitions): The process of combining two or more companies.
• SAS (Software as a Service): A software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.
• AI Agents: Software programs that can autonomously perform tasks on behalf of users.
• LLM (Large Language Model): A type of artificial intelligence model that is trained on a large amount of text data.
• Transformers: A type of neural network architecture that is particularly well-suited for natural language processing tasks.
• ASIC (Application-Specific Integrated Circuit): A chip designed for a specific purpose.
• Inference: The process of using a trained AI model to make predictions on new data.
• PII (Personally Identifiable Information): Any information that can be used to identify an individual.
• Polymorphic Encryption: A type of encryption that changes the encryption key each time data is accessed.
• Drug Diversion: The transfer of a controlled substance from a legitimate source to an illicit one.

23andMe Bankruptcy

• Main Topic: 23andMe, the at-home DNA testing company, has filed for Chapter 11 bankruptcy.
• Key Points:
  • The company's revenue declined by 12% year-over-year to $44 million in the second quarter of fiscal year 2025.
  • Operating costs were reduced by 17% to $84 million.
  • The company posted a GAAP loss of $59 million.
  • A special committee was formed to sell the company, but offers from CEO Wjitsky were unsuccessful.
  • The company went public via SPAC.
• Arguments:
  • The company failed to create recurring revenue streams after the initial DNA test purchase.
  • SPACs are often used to take out the trash.
• Takeaways:
  • Recurring revenue is essential for long-term business success.
  • Going public via SPAC can be risky.

MicroStrategy's Bitcoin Holdings

• Main Topic: MicroStrategy has increased its Bitcoin holdings to over 500,000.
• Key Points:
  • The company sold 2 million shares to generate $600 million in revenue.
  • The company bought 7,000 additional Bitcoin.
  • Michael Saylor has purchased $33.7 billion worth of Bitcoin at an average price of $66.6K per coin.
• Arguments:
  • MicroStrategy's strategy of buying more Bitcoin to increase its value resembles a pyramid scheme.
  • Hodling reduces the number of Bitcoin available for sale, driving scarcity.
• Takeaways:
  • The market was assigning a premium to MicroStrategy's shares.

Startup M&A Activity

• Main Topic: There has been a significant increase in startup M&A activity in Q1 2024.
• Key Points:
  • There have been 11 startup sales worth more than $1 billion in Q1 2024, totaling $54.5 billion.
  • In Q1 2023, there were only two startup acquisitions worth more than $1 billion, totaling $3.2 billion.
  • The Wiz acquisition accounted for $32 billion of the $54.5 billion total.
• Arguments:
  • The increase in M&A activity is due to a change in administration and regulatory expectations.
  • Market momentum and "vibes" also play a role.
• Takeaways:
  • CEOs and investors react to market trends and act in concert with others.

Browser Use Seed Round

• Main Topic: Browser Use, a company that renders the visual web into a text format for AI agents, raised a $17 million seed round.
• Key Points:
  • The company was part of the latest Y Combinator batch.
  • The technology is used by Manis, an AI agent.
  • The round was led by Altimeter, with participation from A Capital and Nexus Venture Partners.
• Arguments:
  • There is a huge opportunity for companies that can facilitate communication between AI and various devices and platforms.
• Takeaways:
  • Agentic AI is expected to be a big deal.

Seed and Pre-Seed Funding Concerns

• Main Topic: There is concern about the frothiness of the seed and pre-seed VC market.
• Key Points:
  • Liz Wessle of First Round tweeted that the seed and pre-seed market is the frothiest she has seen in her tech lifetime.
  • Kurt Trader predicts that many companies will hit the Series A wall hard in a couple of years.
• Arguments:
  • Companies may be raising too much money too early, leading to challenges in meeting growth expectations.
  • Raising a large early round can be akin to taking on lots of private debt.
• Takeaways:
  • Companies should be cautious about raising too much money too early.

Etched Interview

• Main Topic: Etched is building transformer-specific ASICs that outperform general-purpose chips in transformer inference.
• Key Points:
  • Etched's chip is not programmable and only runs transformer inference.
  • The chip offers 10x higher throughput and better time to first token latency than Nvidia's Blackwell GPUs.
  • The company raised a $120 million round in June of last year.
  • The system is called Sohoo.
  • Etched is working with TSMC's emerging businesses group for manufacturing.
• Technical Terms:
  • FP16 Flops: Floating-point operations per second, a measure of computing power.
  • Multiply Accumulate: A common math operation in AI models (A * B + C).
  • Process Node: An assembly line for making semiconductors (e.g., 2nm, 3nm).
  • HBM (High Bandwidth Memory): A type of memory that is used in AI data centers.
• Arguments:
  • Transformers are the bedrock of most AI models.
  • Moore's Law is slowing down, making it harder to improve chip performance.
  • Etched's chip has a much higher yield on flops than general-purpose chips.
  • The economics of big AI chips are dominated by the cost of the chips themselves.
• Notable Quotes:
  • "Scale is all you need for super intelligence."
• Takeaways:
  • Don't be afraid of hardware.
  • Deep knowledge of the market and competitors is essential for success.

Skyflow Interview

• Main Topic: Skyflow is a company that helps companies keep PII private and safe, and also helps companies keep their data secure in an AI context.
• Key Points:
  • The company started by building a "vault" for personal information.
  • The company's early customers were fast-growing companies that understood the importance of security.
  • The company's ACV has increased significantly over time.
  • The company has partnered with Visa and ServiceNow.
  • The company's gross retention is very close to 100%.
• Technical Terms:
  • ACV (Annual Contract Value): The average amount of revenue generated by a customer per year.
  • Gross Retention: The percentage of revenue retained from existing customers.
• Arguments:
  • AI and data are the same platform.
  • The more other layers get commoditized, the more unique companies and unique assets become valuable.
• Takeaways:
  • Trust is essential in the security and cyber security market.
  • Every company wants to use their data inside of AI.

Medserve Interview

• Main Topic: Medserve is building secure cabinets for medications to prevent drug dispensing and drug diversion.
• Key Points:
  • The company is based in Milwaukee, Wisconsin.
  • The company's cabinets are designed for outpatient clinics, surgery centers, dentist offices, and other facilities that do not have the budget for hospital-grade security.
  • The legacy solution for storing medications is often a kitchen cabinet with a lock.
  • The company's cabinets cost $8,000, while the software costs $150 to $600 per month.
  • The company's cabinets use two-factor authentication and require a second person to restock the cabinet.
• Technical Terms:
  • Drug Diversion: The transfer of a controlled substance from a legitimate source to an illicit one.
• Arguments:
  • There is a growing problem of drug diversion in healthcare.
  • Healthcare providers are at risk of substance abuse.
• Takeaways:
  • Don't be afraid of hardware.
  • It's great to see people out there building great companies everywhere.

Synthesis/Conclusion

The podcast episode covers a range of topics, from the bankruptcy of 23andMe to the rise of AI and the companies that are building the infrastructure to support it. The interviews with the founders of Etched, Skyflow, and Medserve provide valuable insights into the challenges and opportunities of building a startup in today's market. The episode also highlights the importance of recurring revenue, the risks of going public via SPAC, and the need for companies to be cautious about raising too much money too early.