Silicon Valley's Mount Rushmore, Zuck meets the Bogeyman, xAI vs. OpenAI; Marc Andreessen tells Joe Rogan how Elon manages, and more insider stuff…
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X (formerly known as Twitter) has gone bipartisan—Imagine that!
Silicon Valley insiders have long known that Elon got ripped off when he bought Twitter. Elon knew it, too, and that is why he tried to renegotiate the deal in the midnight hour. During the negotiations in May 2022, Elon tweeted that the deal was 'temporarily on hold' so he could dig deeper into Twitter management's claim that spam and fake accounts represented less than 5% of its users. Elon's tweet caused Twitter's share price to drop more than 9% in a single day.
Elon then commissioned a handful of independent data analysis firms, who estimated that the spam account numbers were somewhere between 12% and 14% rather than the 5% the clearly desperate Twitter management represented. Elon's internal investigation found the number to be closer to 33%. In the end, Elon conceded to the original offer price and closed the deal.
It shouldn't have surprised any Valley insider at the time that Twitter might be bull-shitting their numbers. The Twitter Files that Elon would later initiate showed that Twitter founder Jack Dorsey & Co. had broken one of the most precious Silicon Valley values by allowing the FBI and other malcontents to lead Twitter's illicit content censorship operations. The ‘citizen journalism’ activists turned into the Pigs on the Farm.
As a result of such antics, Twitter became a broken brand, with only a mere 28 percent of Twitter’s users saying they would be disappointed if the company disappeared. The day before Elon tweeted on April 1, 2022, that he had quietly acquired a 9% stake in Twitter, the social network was trading at 13% below its 2013 IPO stock price. By definition, Twitter was a failed company seeking a buyer.
After the acquisition, Elon and his investors (including Puff Daddy 😳) were punished for overpaying. While X investor Fidelity Investments marked up its equity stake by 32% last October, it is still down 72% from a year earlier, when the institution investor helped finance the $44 billion buyout of the site.
The good news for X investors is that Elon is making good on his promise last year to give the X shareholders a collective 25% stake in his 16-month-old AI startup xAI. With a reported valuation of $50 billion (based on a recent $5 billion funding round from Qatar Investment AuthoritySequoia Capital, Andreessen Horowitz & Valor Equity), xAI surpasses the $44 billion investors paid for Twitter.
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At the time, in spite of knowing that the old Twitter was a failed company and that Wall Street bankers were panning the deal as significantly overvalued, we had a contrarian view. First, we grew up with Elon in business and know him as one of the top three badass dudes to come out of Silicon Valley, along with Apple cofounder Steve Jobs and Intel cofounder and coinventor of the microprocessor Robert Noyce.
If our next rocket launch failed, SpaceX would have gone out of business. We were running on fumes at that point, we had virtually no money. A fourth failure would have been absolutely game over. Done. [SpaceX's fourth launch attempt of the Falcon 1 rocket in 2008 was successful after three previous failures.] Tesla almost went bankrupt ten times. So what! We closed our financing around 6 p.m. Christmas Eve 2008. It was the last hour of the last day that it was possible. [Elon invested all of his personal funds from his PayPal shares, approximately $180 million, into Tesla and SpaceX to provide funds in between some financings.]
Second, Elon is a very shrewd and brilliant entrepreneur, and we knew he would figure it out. We also boldly bet at the time that Elon's Twitter would 'one day be more valuable than Tesla and SpaceX.' (Today, we believe xAI will ultimately be Elon's most valuable asset.)
Shortly after the Twitter deal closed in October 2022, Wedbush Securities tech analyst Dan Ives said it would ‘go down as one of the most overpaid tech acquisitions in the history of M&A deals on the Street.’
Note to entrepreneurs: MBA spread sheet jockeys can’t forecast shit.
More recently, the wankers are starting to see Elon's acquisition as a 'bargain'—noting his closeness to the Boogeyman, whose election has already bubble-upped public stocks (up $6 trillion+) and cryptocurrencies (up $1 trillion+). In addition, analysts rightly note X will also get an AI boost via its partnership with xAI. Elon's plans are to integrate xAI's AI chatbot called Grok into X while maintaining it as a standalone app to compete with OpenAI's ChatGBT. Conversely, X will continue to be a lucrative source of training data for xAI.
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Ellen Keenan-O'Malley from the intellectual property law firm EIP recently told Business Insider that xAI's access to data is ‘the potential kryptonite to ChatGPT's edge’ as it provides xAI with a competitive advantage that other AI developers, including OpenAI, cannot easily replicate.
Elon rides into DOGE
Elon contributed a total of $132 million in political contributions for the 2024 presidential election cycle. He also made an unprecedented number of personal appearances at campaign events and rallies in support of Trump compared to any donor of his stature. Elon also stepped up his political posts on X, which increased from 4% in 2016 to more than 13% this year, says The Economist, including after posting 100 times a day to his 200 million+ followers.
Elon's political appointment as the co-head of DOGE, which he refers to as a 'threat to bureaucracy,' is calling for $2 trillion in federal spending cuts and slashing regulations. This effort will only fuel Elon's popular X posts and pump the value of xAI because AI-powered chatbots will invariably be deployed throughout as a primary tool to better serve US taxpayers, radically cut costs, and make the government more efficient.
Despite the early exodus of puritanical ad buyers and Twitter members, who mourned the loss of their 'progressive' platform to the evil free speech extremist Elon Musk, Elon and X's CEO Linda Yaccarino tightened up the ship. In the last two years, they cut overhead by a whopping 90%, stabilized viewership to 600 million unique users a month, and continued to diversify X's revenue model. Ms. Yaccarino recently reported that 90% of the top 100 advertisers have returned to the platform, and Elon launched a paid X Premium membership and created an ad revenue-sharing program to boost revenues.
According to a new Pew survey, 66% of the original Twitter members identified as Democrats or leaned Democratic, with only 36% Republican. Today, 48% of X users lean Democrat, and 47% lean Republican. These numbers almost precisely parallel the recent Presidential election, where Ms. Kamala Harris earned 48.3% of the vote versus the Boogeyman with 49.9%, demonstrating that X is now the most bipartisan social network on the planet. Despite what fearful Madison Avenue media buyers and cable 'news' talking heads might tell you, the same Pew study showed there's bipartisan agreement on X where 89% of Republicans and 86% of Democrats feel free to express their political views.
X has become a supreme example of how free speech and the free market can result in happy customers and successful businesses.
“Innovation is everything. When you're on the forefront, you can see what the next innovation needs to be. Optimism is the essential ingredient for innovation. How else can the individual welcome change over security, adventure over safe places?"
– Robert Noyce
“Everything around you that you call life was made up by people that were no smarter than you. You don’t have to accept things just because they are the way they are. You can change it, you can influence it, you can make it better, and build your own things that other people can use."
—Steve Jobs
We go on record to say that X and xAI are set to outpace their ideologically driven competitors (Threads & Bluesky for X and OpenAI for xAI). The moral of the story is that you need to trust your customers and not impose on them because, in the end, the customers always get what they want, not what you want.
—Anthony Perkins, founder & editor Cryptonite
Did you know?
(Overheard on the streets of the global Silicon Valley. Got any hot insider tips? Email us editor@cryptoniteventures.com)
VC Whispers
New funding for Cryptonite 300 companies during November is listed below. See more information about the Cryptonite 300 top Web3 private companies at the bottom of this post.
xAI raised $5 billion, valuing the company at $50 billion. Investors include the Qatar Investment Authority, Valor Equity Partners, Andreessen Horowitz, and Sequoia Capital.
Anthropic raises $4 billion from Amazon, doubling its investment in the gen-AI company to $8 billion.
Physical Intelligence raised $400 million led Lux Capital and Thrive Capital, giving the robotics company a $2 billion valuation.
Cyera raised $300 million led by Accel and Sapphire Ventures, doubling the AI/cybersecurity company's April funding value to $2.8 billion.
Writer raised $200 million and valued the enterprise-focused generative AI platform at $1.9 billion. Investors include Iconiq Growth, Premji Invest, and Radical Ventures.
DOGE Disruption (and other Bogeyman tales)
Department of Government Efficiency (DOGE) has reported that 'In 2023 alone, illegal immigration cost taxpayers $150.7 billion, representing approximately 2.4% to 2.6% of the federal government's $6.1 trillion in annual spending for the 2023 fiscal year.' 😳
President-elect Donald Trump has been recruiting several savvy, Web3-friendly technology players to fill key jobs, including the following two very critical posts.
SEC Chair nomination Paul Atkins was previously SEC Chair under George W. Bush and has since founded Patomak Global Partners, a consulting firm specializing in the financial services and cryptocurrency sectors. Mr. Atkins has a long history of advocacy for digital assets.
AI & Crypto Czar David Sacks is part of the Paypal Mafia, where he was the COO of one of the few companies that survived the Internet Bubble and thrived. At his VC fund, Craft Ventures, Mr. Sacks invested in over 20 unicorns, including Affirm, Airbnb, Facebook, Uber, and SpaceX.
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“In this important role, David Sacks will guide policy for the Administration in Artificial Intelligence and Cryptocurrency, two areas critical to the future of American competitiveness. He will safeguard Free Speech online and steer us away from Big Tech bias and censorship. He will work on a legal framework so the Crypto industry has the clarity it has been asking for and can thrive in the U.S.” 😎🤙🏼
—Donald Trump, president-elect, USA
Let’s remember, ladies and gents, that this movement is about the decentralization of power. We haven’t heard much talk about decentralizing campaign fundraising laws, like capping individual donations to $100 per candidate.
Zuck throws Biden under the bus
Mark Zuckerberg has recently admitted to several of Facebook’s censorship Mark Zuckerberg has recently admitted to several of Facebook's censorship activities that impacted the 2020 US presidential election. 'I believe the pressure to censor by the Biden administration in 2021 was wrong, and I regret that we were not more outspoken about it,' Zuck has expressed. This time around, Zuck remained 'neutral' in the presidential race.' He and his wife Priscilla Chan also didn't provide another $400 million (a.k.a. 'Zuck Bucks') in funding for 'election infrastructure' (i.e., Democrat registration efforts), as they did in 2020. Zuck's repentance earned him a Thanksgiving Eve invite to break bread with the Bogeyman at Mar-a-Lago.
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Zuck arrived at his meeting with the new president-elect with a bent knee with an ask to have an 'active role' in shaping tech policy and help maintain America's leadership position in global innovation. 'Mark was grateful for the invitation to join President Trump for dinner and the opportunity to meet with members of his team from the incoming Administration,' said Zuck's spokesperson.
“I’m actually very optimistic this time around. Trump seems to have a lot of energy around reducing regulation. If I can help him do that, I’m going to help him.'“
Jeff Bezos, founder of Amazon and Blue Origin, at the New York Times' DealBook Summit
Mr. Bezos added that he doesn’t expect new DOGE cochair Elon Musk to use his influence to hurt his Blue Origin project, which competes with Elon’s SpaceX. “I take what Elon has said at face value, which is that he is not going to use his political power to advantage his own companies or to disadvantage his competitors,’ says Mr. Bezos.
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AI Tracker
OpenAI CEO Sam Altman told The New York Times journalist and Dealbook Summit host Andrew Ross Sorkin that the Times suit against his company puts the Gray Lady 'on the wrong side of history.' The lawsuit, filed late last year, centers around the use of the Times' copyrighted content to train the AI models powering ChatGPT and Microsoft's Bing chatbot (also known as Copilot) without permission or licensing agreement. While LLMs don't retain specific articles, the New York Times complaint claims that OpenAI gave particular emphasis to content, which shows a preference that recognizes the value of those works.
The Times' copyright infringement lawsuit against OpenAI is one of many the company faces, including one filed by Game of Thrones author George R.R. Martin, author John Grisham, the Authors Guild, and comedian Sarah Silverman. From what we can tell, there is a lot of finger-pointing going on, including Mr. Altman's claim that the Times intentionally manipulated prompts, often including lengthy excerpts of articles, in order to get our model to regurgitate, which suggests they either instructed the model to regurgitate or cherry-picked their examples from many attempts.' 🤔
'We need to find new economic models where creators can have new revenue streams.' OK, Sam, let’s get it done so the people who create get paid, and you can stay out of trouble.
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The Rise of the Creator Economy
A core tenant of the Web3 revolution is to create ways for content creators of all persuasions to opt-out or earn micropayments from search and AI giants like OpenAI for including what they produce in their services. This new model empowers creators by leveraging blockchain technology and decentralized platforms to offer greater control, ownership, and financial opportunities to spur what is now fashionably referred to as 'The Creator Economy.’ As content creators, we are very passionate about making this new ecosystem of innovation thrive, and we will be regularly covering the companies and developments that are making it happen.
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Speaking of OpenAI’s growing number of lawsuits, in March of 2024, OpenAI cofounder Elon Musk sued the company, asking the court to stop OpenAI from converting to a for-profit enterprise because it violated the terms upon which Elon provided ‘tens of millions’ in funding. Further, Elon's suit made claims that OpenAI execs were interfering with fundraising efforts by xAI and other startups by telling investors during their October funding round not also to put money into rivals.
Why Elon started OpenAI
Elon: The reason OpenAI exists at all is because I used to be really close friends with Larry Page and stay at his house in Palo Alto. We would talk late in the night about AI safety, and my impression was that Larry wasn't taking AI safety seriously enough.
Tucker Carlson: What did he say about it?
Elon: He really seemed just focused on achieving digital superintelligence—essentially a Digital God, if you will, and as soon as possible. He has made many public statements over the years that the whole goal of Google is to create AGI or artificial general intelligence. I agree with him there is potential for good here, but there is also a potential for bad. It is not necessarily going to be bad, but it will be outside of human control. So if you have some radical new technology, you want to set standards that maximize the probability it will do good and minimize it will do bad things. You can't just barrel forward and hope for the best. So at one point, I said to Larry, we have to make sure humanity is okay here, and then he called me a speciesist. (chuckles).
Tucker: A speciesist? (howls) Did he use that term?
Elon: Yes. There were witnesses. I wasn't the only one there. So I say, yes, I am a speciesist. You got me. I am fully a speciesist. Busted. (laughs)
Follow the Crypto
Bitcoin hit the $100,000 milestone for the first time on Wednesday, adding half a trillion dollars to its market cap since the election. The total crypto market was valued at $2.35 trillion before the election. As of December 7, 2024, the total market cap is up 36% and now stands at $3.70 trillion.
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The biggest winner of the Trump Bump is Ripple cofounder Chris Larsen, who has seen his total stake in his company's related crypto, XRP, go up $6 billion since election day.
Space Shots
Jeff Bezos believes his space venture, Blue Origin, will one day be a more valuable company than Amazon. ‘I think it’s going to be the best business that I’ve ever been involved in, but it’s going to take a while,’ Mr. Bezos remarked at The New York Times’ DealBook Summit last week. Amazon, which he founded in 1994, has a market value of about $2.3 trillion today.
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Founded in 2000, Blue Origin builds rockets, spacecraft for space stations, and lunar landers. For years, the company has been flying tourists and researchers to the edge of space on short excursions, including Mr. Bezos, who went along for one ride.
Entrepreneurial Huddle
Marc Andreessen: Elon spent eighteen hours at the xAI interviewing every employee; each had a five-minute slot.
Joe Rogan: Wow! 🤯
Andreessen: So, think about what that meant. Every employee had 5 minutes to tell the Big Boss what they were working on and get recognized. Every employee got Elon's live feedback based on his comprehensive view of what Xai should be doing and how they should fit in. And there is no place to hide.
Joe Rogan: 😳
Join us at Silicon Valley '25—Where is Web3 taking the world? —33% off tickets until Jan. 1!
Silicon Valley ‘25 is a gathering where entrepreneurs and risk investors share how emerging Web3 innovation will create new prosperity and address the world’s most pressing issues. We also celebrate the Cryptonite 300 top Web3 companies in the world. See the current program and other SV ‘25 details here.
When and Where
—April 9th & 10th (Wednesday & Thursday)
—The Presidio Theatre Performing Arts Center (on the grounds of SanFrancisco’s Presidio National Park)—99 Moraga Ave., San Francisco, CA
Silicon Valley ‘25 is presented by Voting Block USA (VB USA), a 501 c3 non-profit, nonpartisan, grassroots project dedicated to educating the public on how Web3 innovation—including blockchain, AI, crypto, robotics, metaverse, and Greentech—can help create a more private, secure, efficient, and sustainable private and public sector.
Silicon Valley ‘25 is hosted and produced by Cryptonite Ventures and is supported by Silicon Valley OG Tim Draper, founder of Draper Associates and Draper University.
Introducing the Cryptonite 300 competition
Somewhere between the raw startups and the Unicorns are the blockchain, AI, and metaverse companies pioneering Web3 and offering the best equity investment ROI potential in the global Silicon Valley.
What you get behind the ‘paywall’ as a paid Cryptonite member
List and data profiles on 3,500 venture capital-backed AI/ML companies and blockchain/crypto companies, over 240 of which have made the C300 nomination list thus far.
List of the top Venture Capital funds invest in the top 300 private Web3 companies.
List of the top Web3 Influencers as ranked by top deal relationships.
The ability to nominate companies to the Cryptonite 300 competition for 2024!
Invitations to private Cryptonite events.