Plus: This AI Founder’s Audacious Plan To Buy Out His Own VCs |
Good morning,
President Donald Trump’s tariffs could make cheap goods from China more expensive, but not just because of the levy itself.Trump imposed a 10% tariff on Chinese goods today—prompting China to retaliate with a plan for additional taxes on the U.S.—while 25% tariffs on Mexican and Canadian imports will be delayed for one month. But also targeted in the import taxes is the “de minimis” trade provision, which allows companies to send packages valued at $800 or less to the U.S. without being taxed. Low-cost retailers like Temu and Shein rely on this exemption, and the U.S. processed more than 1.3 billion de minimis shipments in 2024. As of late 2023, there was bipartisan support in Congress to overhaul the tax break, which critics say gives such companies an unfair advantage, and former President Joe Biden’s Administration proposed closing the loophole.
Let’s get into the headlines, |
|
| The American Federation of Government Employees and other unions sued the Treasury Department on Monday, seeking to cut the Department of Government Efficiency’s access to data after Treasury Secretary Scott Bessent reportedly greenlit a plan to provide department data to the Elon Musk-led agency last weekend. The New York Times reported the Treasury’s payment systems have been “closely held,” citing the personal data held within them, including that of Americans who receive tax refunds, Social Security checks and other federal government payments. The Trump Administration threw higher education officials into a panic last week when the Office of Management and Budget issued a memo ordering federal agencies to halt outgoing grants and loans—effectively cutting off colleges and universities from billions in research and administrative funding (though the freeze has since been stalled). For some schools, even a temporary pause in this revenue stream could wreak havoc on their research apparatuses, but the universities with giant endowments are well-equipped to handle a freeze. MORE: U.S. District Judge Loren L. AliKhan said the federal government must tell agencies not to implement Trump’s federal funding freeze, with Monday’s move marking the third time the judge has ruled against the freeze. |
|
| | | This AI Founder’s Audacious Plan To Buy Out His Own VCs |
| |
|
|
| AI training has quickly become a crowded field with clickworker factories like Scale, Surge and Turing vying for the same jobs. But while Scale, living up to its name, raised $1 billion at a $14 billion valuation last year on $1 billion of annualized revenue, Francis Pedraza is deliberately plotting a different path for his company Invisible. The firm raised only $23 million from investors, a drop in the bucket given the ongoing AI frenzy. And rather than selling off chunks of equity to more VCs, Invisible has been buying back its shares. “We could not be more different,” says Pedraza, who retains an estimated 10% stake in the business, which was last valued at $500 million in 2023. Pedraza has borrowed $20 million over the last three years to buy out his early investors. “I believed that our equity would 10x in value, so it was an amazing arbitrage,” he says. Pedraza thinks it’s a win-win. He gets more control. His early VCs—who long ago probably wrote their investments down to zero—get a clean exit. As he slowly reestablishes himself (and his employees) as the sole owners of Invisible, he has suitably ambitious plans. Target one: Accenture and its fat $245 billion market cap. Pedraza is betting that his clickworkers are not only smarter and cheaper, but that Invisible’s inside track on AI training will help him automate tasks faster than Accenture. |
|
|
| It’s a bold move, and unusual among VC-backed startups. Is paying interest the best use of Invisible’s limited funds? “You’d have to be confident to put on a big stack of debt just to lower people’s dilutions,” says David Wanek, CEO of one of Silicon Valley’s oldest debt funds, Western Technology. |
|
|
 | | Photo by Michael M. Santiago/Getty Images |
|
| The stock market tumbled Monday morning as Wall Street digested President Donald Trump’s tariffs set to go into effect Tuesday, then recovered some after Mexican levies were paused. The companies hardest hit by the tariff slide largely fell into four buckets: alcoholic beverage purveyors, automakers, multinational technology firms with heavy China exposure and cryptocurrency-focused companies. MORE: As the stock market reacted to the tariffs, nobody lost more money Monday than the world’s richest person and Trump backer Elon Musk, as Tesla stock fell 5%. The dip knocked $11.8 billion off Musk’s net worth, according to Forbes’ real-time billionaires list, by far the biggest loss of any billionaire. |
|
| WEALTH + ENTREPRENEURSHIP |
|
| Fernando De Leon has one of the more unusual backstories of those on the Forbes Billionaires list—though he grew up in Mexico, he was born a U.S. citizen after his mother crossed into Texas to give birth. He recently told Forbes some of the secrets to his success, which include building businesses that improve lives, immersing yourself in many cultures and studying the competition to exploit their weaknesses. During her first stint in the White House, First Lady Melania Trump showed little interest in profiting from politics. But this time, she’s taking a page out of her husband’s book, releasing a memoir as well as her digital memecoin, the latter of which could have made her $400 million or more. |
|
| Tesla’s fourth-quarter earnings were worse than expected, its near-term outlook is murky and Elon Musk is more distracted than ever. But with ever-loyal shareholders and a cowed board, he’s not going anywhere. “If you buy the stock, you have to accept that it’s not going to be like a regular company. It’s Elon’s private company that is public for some reason,” said one wealth manager. As the battle for AI supremacy heats up, the European Union is writing a $56 million check for researchers to build a large language model to rival its American and Chinese competitors. The investment, while just a tiny fraction of the money pouring into leading American AI labs like OpenAI, will fund top researchers from a handful of companies and universities across EU countries as they develop an open source LLM that can work with the trading bloc’s 30 languages. |
|
 | | Photo by STR/NurPhoto via Getty Images |
|
| Even as Elon Musk has said his Department of Government Efficiency (DOGE) has been given permission to shut down USAID, he’s also done business with it. Over the last four years, the U.S. government’s humanitarian and development arm has spent $500,000 on SpaceX’s Starlink terminals bringing them to Zimbabwe and South Africa, the country where Musk was born. USAID also worked with SpaceX to send 5,000 Starlink terminals, worth some $3 million, to Ukraine in 2022. President Donald Trump signed an executive order Monday establishing a sovereign wealth fund for the United States, a state-owned fund that can invest in assets like stocks, real estate and bonds to insulate the government from economic stressors. The U.S. has traditionally not needed a sovereign wealth fund, as the Federal Reserve and U.S. Treasury are capable of managing similar long-term investments. |
|
| El Salvador’s President Nayib Bukele offered to house criminals from any nationality deported from the U.S.—including “dangerous criminals” who are American citizens—in his country’s jails, Secretary of State Marco Rubio said Monday. Rubio added that no country has “ever made an offer of friendship such as this” and hailed it as the “most unprecedented and extraordinary migratory agreement anywhere in the world.” |
|
| In response to the threat of U.S. tariffs, Canadian Prime Minister Justin Trudeau |
|
|
