What the actual f*ck is happening at OpenAI?

All the OG board members quit and the whole executive team decided to take some time off (coincidentally), but Sam wrote a “how crazy is it that we turn sand into computers” and “the future is going to be great” blog post… so, I guess… we’re good?

This is that post if you want to take a look for yourself. There’s no new information though so also feel free to skip it. Classic “smile and wave” tactic.

I think everyone is being way way too soft about the whole OpenAI situation and I have a hard time imagining it ends well. It’s starting to smell like FTX and it’s crazy to me that it doesn’t get brought up more. By no means is that a likely outcome or even something that I’d bet on, but that literally just happened a second ago. Shouldn’t we be a bit careful when a new tech god emerges?

Obviously, what they have accomplished is impressive and they have made big contributions to AI, but if OpenAI goes away tomorrow - what really happens? Wouldn’t Anthropic and/or the open source models pick up the slack? Wouldn’t all the researchers just go work somewhere else? Wouldn’t we all just use Claude or Perplexity? Wouldn’t Microsoft still be Microsoft?

That doesn’t sound like the next big public tech behemoth set to rule the next 50 years. It doesn’t even sound like the next SpaceX if we’re going to keep it in private markets.

If you have other options - which most real AI devs do - how could you keep working at OpenAI with all this leadership turmoil?

Trick question!

The money. They stay for the money.

The amount of money that has been pumped into this thing in a short amount of time is insane. The paper wealth. The actual wealth via tenders. The fees.

”The fees!” - Whispered on my death bed Apocalypse Now style.

On the massive equity investor side, there’s a great saying in lending that I think applies here: “When you borrow $1M from the bank and your deal goes sideways - it’s your problem. When you borrow $100 from the bank and your deal goes sideways - it’s the bank’s problem.”

Anyways, the whole thing seems a bit fishy and I think it needs to be talked about more.

Disclaimer: I have no inside knowledge besides the fact that OpenAI shares are definitely more available than they used to be. Also I’m biased because I’m a Anthropic investor.

On to the YC side of things! Much more fun.

We invested in 10 companies that I’m super excited about and I’ll share a more detailed breakdown of the group next week when I’m not on a flight. A couple of teasers though:

TaxGPT, which Garry Tan called the next Uber even though it has nothing to do with cars. I’m hoping he meant from an equity value increase perspective.

On the totally other end of the spectrum, Kopra Bio is creating genetically engineered viruses that teach your immune system to kill cancer. So that would be great for everyone.

While I was at YC, I talked about YC a lot. The new 4 batch schedule. Founder quality. Partner burnout.

One bit of inside info is that not all partners will work every batch, which is smart considering the concern I brought up about Partner burnout. It also brings up a new idea of Partner quality and preferences given not all YC partners are created equal. Bigger subject for a different day.

The main point I wanted to share though is that YC is only accelerator that matters because there’s no reason I can think of that you’d go to another accelerator instead. This is very different from college rankings/choices, which I think is the easiest comparison to make / framework most people use.

YC is not a college. If you get into Harvard and Standford, you have a choice to make around a number of factors like departments, culture, and more personal aspects like proximity to family. For startups, it’s a lot different. It’s just more niche and a lot of the Seed stage best practices are very similar across most areas. There are exceptions of course and Seed investing outside the accelerator ecosystems is a separate subject. However, if you’re considering an accelerator in the first place I can’t think of a situation where you would choose another accelerator over YC.

Always impressed after a visited to keep investing there.

Sandhill Exclusive Content 

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• ​Cole Krumbholz, Founder and Head of Product at @ Formspree, a front-end form builder tool. Before this, he spent 4 years in product roles at Square. X → colevscode

• ​Tongbo Huang, Founder @ Sidr Tax, a tool to help automate your sales tax returns. He also spent over 6+ years of experience at some top technology startups like Amplitude, Pinterest, and Google. X → tongboh

​​​This event is brought to by Sacra and Sandhill Markets.

ICYMI: A Chat About Thesis-Driven Investing

If you haven’t had the chance, we highly recommend you check out our July conversation with Justin Smith.

We talked about Recharge, thesis-driven investing, and how their Cayman hold companies function as operating companies. This talk is filled with interesting topics and great advice. Justin himself has spent years in the venture space and has led over 150+ venture transactions.

Check it out below.

Talk soon,
Adam

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