Bytes: Week in Review - OpenAI's for-profit troubles, FTC sues Uber and how VCs are weathering Trump tariffs
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It's Friday, the last Friday in April, and it's time for Marketplace Tech Bytes Week in Review. This week, we'll talk about how the FTC is suing Uber over its subscription service, plus how the VC world is navigating the uncertainty created by the trade war. But first, a nonprofit pivot is facing some challenges.

OpenAI, the maker of ChatGPT, was founded about a decade ago as a nonprofit research lab. It's now looking to restructure as a for-profit, specifically a public benefit corporation. But that transformation is facing resistance. About 10 former OpenAI employees, along with several Nobel laureates and other experts, have written an open letter asking regulators in California and Delaware to block the change.

They argue that nonprofit control is crucial to OpenAI's mission, which is to, quote, ensure that artificial general intelligence benefits all of humanity. Jule Burke-Solomon, managing partner at Collab Capital, spoke with me about how unusual it is to see this kind of conversion.

We don't see very often a public conversation about whether or not a company should be a nonprofit or a for-profit. And definitely, we don't see so often letters being written to attorney generals to try to block a transfer in terms of the structure of a company. I think this is so important because...

you know, these folks who have previously worked at OpenAI, they have, they're raising really valid concerns around why OpenAI should remain a nonprofit and all of those concerns around what could happen if it is successful in moving over to a for-profit and the risks that

Yeah. I want to ask, you know, so OpenAI told the Associated Press that any changes to its existing structure would be in service of the broader public benefit. You know, what happens to an organization at its core when it becomes a for-profit company? How does that shift who it's accountable to? Yeah.

Yeah, it means it's accountable to the investors and the folks who are putting money in. And we've even seen that at OpenAI's last fundraise, there were some requirements around them being successful in transferring over to a for-profit. In fact, they are not going to be able to get all of the money that they are anticipating in that race. I think it's $40 billion altogether. They won't be able to get

$20 billion of that if they're not successful in the pivot to a for-profit. Just $20 billion? Yeah, just $20 billion, which they need because they're burning so much money every month. And so you understand that when a company raises capital, and this is the business that I'm in, when a company raises capital, they are accountable to the investors. And the investors have requirements in terms of what they have to do to get returns back to their investors.

So it really presents a whole new set of requirements for the company. And it's going to create tension in terms of them being able to fulfill their original mission in the way that they set out to do it originally. Yeah. I mean, if OpenAI doesn't make this turn and doesn't, you know, realize all of that funding, maybe doesn't realize future funding, what could that mean for the work that it's doing?

Well, maybe it means that the work slows down a bit. I think that some of the issues or concerns raised is that this move to a for-profit for open AI really just accelerates this AI arms race.

And it, you know, continues to push forward in a probably even faster fashion, artificial general intelligence, which is really, you know, seeing that the AI is as good or maybe even better at many tasks than humans.

And so with them, if they don't successfully move over to a for-profit, I would imagine that things slow down just a bit, which I don't think would be a problem for anyone. I think everyone probably would be okay. Majority of everyday people would be okay with things slowing down just a bit on this AI race.

You know, there are a lot of companies that are doing big, scary, important work. Why do you think that what OpenAI is doing in particular is creating such a stir? Well, I think they have been at the cutting edge for a long time and they're

really from a technology standpoint, because they kind of had an early start, have made some significant headway. And Sam Altman said it recently that he believes that AGI will be here in this administration. So within the next three to four years, which is a sooner estimate than I think we've heard before. So I think that

OpenAI has a significant lead on this AI race, and it's going to be really important to make sure that they're doing things in a way that fulfills that original mission for AI to be of service to all humanity and not just the folks who are invested in those few people.

So I think it's just really important and everyone's watching to make sure that this works out in a way that will be beneficial to everyone and not just the investors. We'll be right back.

You're listening to Marketplace Tech. I'm Stephanie Hughes. We're back with Jewel Burke-Solomon, managing partner at Collab Capital. So let's move to our next story. The FTC is suing Uber for allegedly deceiving customers. So the Federal Trade Commission filed a lawsuit this week against the ride share company Uber. It's over its Uber One subscription service, which provides discounts on some food delivery and rides.

The FTC is alleging that many consumers were enrolled without their consent. It also says that Uber overpromised on the savings that customers could realize and also that it's hard to cancel a subscription. In a statement to Marketplace, Uber denied all the accusations and said its sign up and cancellation processes are, quote, clear, simple and follow the letter and spirit of the law. So, Jewel, what does this case tell you about the direction we could see from this FTC under the Trump administration?

Yeah, I think this case is actually a little surprising because it follows some of what we were already seeing from the FTC prior to the Trump administration regarding the FTC really wanting to make sure that subscriptions are easy for people to cancel and that they really get clear understanding about how they got into those subscriptions in the first place and that they're signing up knowingly.

And so I think it's a little bit probably for Uber and some of the other tech companies. It's surprising that the FTC is still coming down on them about these types of subscriptions and how people get into them and get out of them. For me, reading this story, I was a little surprised to see it. Yeah. And as you say, so under the Biden administration, the FTC brought a lawsuit against Amazon over its prime subscription service. Why do you think we're seeing regulators take action around this issue in particular?

Well, I think that it's an issue that affects everyone and it comes down to everyone's pocket. And in this case in particular, I was like, let me see if I am subscribed to this Uber One. And it turns out that I was and I didn't even realize it. And I tested it to see how many clicks is it going to take me to cancel this membership? And it does take quite a few clicks to get out of it. How many clicks? It took like five or six clicks.

For me saying that I wanted to cancel and they're trying, you know, they want to make sure, are you sure you want to cancel? Can you pause it for one to two months? So they ask you three or four different questions before you can actually get to cancel. And that could be difficult, particularly for people who maybe aren't tech savvy. The text, the way that they do the buttons change.

it actually emphasizes the button that tells you to stay in the subscription. So there's all these little things that they do to keep people into these subscriptions. And I think the FTC probably realizes that there are so many people who are signing up for things

not really understanding what they're signing up for. And then when they realize it, having a hard time getting out of it, and that's not good for consumers. And so they're likely, you know, recognizing this, probably getting a ton of complaints and wanting to make sure that companies are not taking advantage of consumers.

Let's get to our last story, how the VC world is dealing with trade uncertainty. So this is going to hit close to home for you, Joel. So the Wall Street Journal reported this week that the Trump administration is considering lower tariffs on Chinese imports in an effort to de-escalate the trade war. The public markets have gone crazy over the last few weeks and not in the good crazy way as a result of the back and forth over tariffs imposed by the Trump administration, not just on China, but a lot of countries. And the

Julie, you work in the private capital markets. How is the uncertainty around tariffs affecting the work you do? Certainly affecting us and I think affecting anyone who's managing capital. You know, the VC funding industry has experienced significant drops.

in terms of allocation due to all of this uncertainty, which means that startup companies are likely having a much harder time raising capital for their businesses. And a lot of people are just kind of going pencils down until they understand what's happening.

And every week, it seems like there's really every day there's a new development as it relates to these tariffs. So it's difficult to know what to do just because of all of the uncertainty around this. Yeah. How are you advising startups that you're currently invested in?

Yeah, so we're asking our companies to come up with plan B, C, D, if they have any goods that they're bringing from overseas and selling those. We're asking them to think thoroughly about what they can do to mitigate any risk or any additions to their cost model.

as a result of the tariffs. We're also reminding them to really shore up their relationships with their current suppliers and customers. So spending a lot more time on getting their current customers

And employees and partners, everyone in their business being transparent about how the tariffs are impacting them. And we're really reminding our portfolio companies that that next round of funding may be more challenging than they anticipated. So they really need to focus on making sure that their costs are in check and they're expanding their runway to the extent that they can.

Yeah, the work could be harder and the funding could be harder. I've talked to other investors who say that there can actually be an upside for startups to public companies struggling. It could mean that workers who might have been happily employed at a tech giant might be more likely to go off and start their own companies, which could ostensibly lead to more innovation. I'm wondering

I'm wondering if that's something that you're seeing or even just keeping an eye out for. Yeah, for sure. We're seeing a ton of incredible founders that maybe would not have started companies had they not been laid off from their cushy corporate job and this kind of being the push that they needed to start something really incredible. So I think this is actually a great time for investors and people who angel invest even to get involved and write checks.

because there are a lot of really talented people who are starting companies and talented folks who are joining early stage companies as well, who may not otherwise have done so. That was Jewel Burke-Solomon, Managing Partner at Collab Capital. You can find the full video of this episode of Marketplace Tech Bytes Week in Review on our YouTube channel, Marketplace APM. And subscribe if you haven't already to watch us every Friday.

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