>>> US After Hours Summary: Busy earnings session; SNAP -19.5%, INTC -19.3%, AMZ

After Hours Summary: Busy earnings session; SNAP -19.5%, INTC -19.3%, AMZN -6.3%, BKNG -5.3% among the big names heading lower; TNDM +24%, DASH +12.9%, TWLO +6.7%, SQ +5.5%, ROKU +4.8% trading higher

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: TNDM +24%, IAS +16.3%, ARDX +13.3%, DASH +12.9%, MELI +12.5%, NET +11.6%, WLDN +10.4%, SIGA +9.4%, MPWR +7.1%, TWLO +6.7%, GDDY +6.5%, RARE +6.5%, AAON +5.9%, MTZ +5.7%, SQ +5.5%, CIVI +5.1% (also to sell its Cab Structures business), RLJ +4.9%, ROKU +4.8%, CLX +4.4%, MSTR +4.3% (also files Class A common stock offering), BFAM +4%, DORM +3.5%, VIR +3.1% (also enters into license agreement with SNY), COIN +2.8%, MATX +2.7%, LOCO +2.3%, RGNX +2%, TVTX +1.9%, VCTR +1.9%, DKNG +1.6% (also authorizes new $1 bln share repurchase program), PRCT +1.6%, RNG +1.6%, SNCY +1.5%, RGA +1.4%, SAND +1.2%, AAPL +0.9%, FND +0.9%, SKT +0.9%, EOG +0.8%, SNDX +0.8%, BBAI +0.7%, MIR +0.5%, AXNX +0.5%, MARA +0.4%, CABO +0.2%, BIO +0.1%, HTGC +0.1%

Companies trading higher in after hours in reaction to news: CRUS +4.8% (in sympathy with AAPL earnings), CLLS +4.2% (FDA grants Orphan Drug Designation to CLLS52), VIGL +2.7% (publication reports new data on CSF1R gene variants), PHIN +2.5% (increase share repurchase auth by $250 mln), WMG +2.2% (announces reorganization of Recorded Music ops), TVTX +1.9% (files mixed shelf securities offering), BANC +1.6% (Warburg Pincus amends 13D disclosing 9.88% active stake), BCC +1.2% (increases dividend), LZM +1% (files $250 mln stock offering, relates to warrants; also files for offering by selling shareholders), AVGO +1% (in sympathy with AAPL earnings), ZYME +0.9% (authorizes new $60 mln share repurchase program), LIND +0.6% (stock offering by selling shareholder), CSL +0.5% (increases dividend), SNY +0.4% (enters into license agreement with VIR)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: PCOR -19.7%, SNAP -19.5%, INTC -19.3% (also suspends dividend; announces $10 bln cost reduction plan, including headcount reduction greater than 15%), XPOF -17.6%, FOXF -13.2%, TEAM -13.2%, LXRX -11.9%, TPC -10.2%, CTOS -8.8%, OPEN -8.5%, CC -7.8%, BECN -6.4%, AMZN -6.3%, NXT -5.9%, BKNG -5.3%, VREX -5.3%, IRTC -5% (also CFO to step down, names new CFO), AL -4.9%, OLED -4.8%, WSC -4.8%, LMAT -4.7%, ADPT -4.5%, CWST -4.2% (also acquires two solid waste businesses), CE -4%, CRSR -3.4%, MP -3%, TROX -2.9%, OEC -2.6%, BZH -2.2%, SPT -2.1%, ACA -1.9% (also to acquire the construction materials business of Stavola for $1.2 bln), OHI -1.6%, SIMO -1.5%, SPXC -1.5%, X -1.5%, HCC -1.4%, SWN -1.3%, ALHC -1.2%, CUBE -1.2%, DRQ -1.2%, RYAN -0.9% (also to acquire US Assure Services of Florida), WK -0.9% (also announces inaugural $100 mln share repurchase program ), RKT -0.7%, CTRA -0.6%, GEN -0.6%, LEG -0.5%, ALTR -0.4%, ACCO -0.2%, POST -0.1%, PRU -0.1%, VTR -0.1%

Companies trading lower in after hours in reaction to news: SUPN -4.8% (resubmits its NDA for SPN-830), ABNB -2.4% (in sympathy with BKNG earnings), PINS -2% (in sympathy with weak SNAP earnings), EXPE -1.3% (in sympathy with BKNG earnings), GOOG -1.1% (in sympathy with weak SNAP earnings), DLNG -0.3% (files $350 mln mixed shelf offering; also files for 15,595,000 common units by selling unitholder), WBA -0.3% (WBA sells $1.1 bln of COR shares), ETN -0.2% (files mixed shelf securities offering), ROAD -0.1% (acquires Robinson Paving)

>>> Notable earnings/guidance movers: TNDM +22.1%, DASH +13.9%, MELI +10.8%, MPW

Notable earnings/guidance movers: TNDM +22.1%, DASH +13.9%, MELI +10.8%, MPWR +6.7%, ROKU +6.7%, TWLO +6.2%, COIN +2.8% higher on earnings; INTC -19.1%, SNAP -17.6%, XPOF -14.2%, TEAM -12.3%, AMZN -4.3%, BKNG -3.6% lower on earnings
  • Earnings/guidance gainers: TNDM +22.1%, DASH +13.9%, ARDX +11.6%, MELI +10.8%, IAS +8.9%, RARE +8.2%, NET +7.9%, MPWR +6.7%, ROKU +6.7%, ALHC +6.6%, TWLO +6.2%, MTZ +5.7%, RGNX +5.1%, LOCO +4.8%, CLX +4.6%, SQ +4.2%, RGA +4.1%, AAON +3.7%, DORM +3.5%, VIR +3.3%, GEN +3%, COIN +2.8%, MATX +2.7%, PRCT +1.7%, BFAM +1.6%, RNG +1.6%, PCTY +1.3%
  • Earnings/guidance losers: BIO -20%, INTC -19.1%, SNAP -17.6%, XPOF -14.2%, TEAM -12.3%, FOXF -11.2%, BECN -8.4%, VREX -7.1%, OPEN -5.6%, CE -5.3%, IRTC -5%, MCHP -4.8%, PCOR -4.8%, CRSR -4.7%, AMZN -4.3%, CC -4%, BKNG -3.6%, CTOS -3.4%, SPT -3.4%, AES -3.1%, ALTR -2.7%, RKT -2.7%, OEC -2.3%, BZH -2.2%, CWST -2.2%, TROX -2%, ACA -1.9%, CTRA -1.8%, MP -1.8%, NXT -1.7%

>>> US Close Dow -1.21% S&P -1.37% NAsdaq -2.30% Russell -3.03%

Closing Stock Market Summary
The stock market settled near session lows, leaving the major indices with solid declines. The Dow Jones Industrial Average finished 1.2% lower, the S&P 500 logged a 1.4% loss, the Nasdaq Composite fell 2.3%, and the Russell 2000 sank 3.0%.

The downside bias was driven by growth concerns following some disappointing economic data this morning.

Weekly initial jobless claims -- a leading economic indicator -- increased to 249,000 (Briefing.com consensus 233,000) from 235,000 last week, reflecting some softening in the labor market that may weaken discretionary spending. The ISM Manufacturing Index showed weakening in the manufacturing sector, dropping further into contraction territory to 46.8% in July (Briefing.com consensus 48.5%) from 48.5% in June.

This morning's data wasn't all disappointing, though. The lineup also featured a welcome combination of higher-than-expected preliminary Q2 productivity growth (actual 2.3%; Briefing.com consensus 1.7%) and smaller-than-expected unit labor cost growth (actual 0.9%; Briefing.com consensus 1.7%).

Still, growth concerns steered price action in the bond and equity markets. The 10-yr note yield settled below 4.00%, down 13 basis points to 3.98%. The 2-yr note yield settled 18 basis points lower at 4.16%.

The drop in yields boosted rate sensitive areas of the market like the real estate (+1.6%) and utilities (+1.9%) sectors. The communication services sector also outperformed the index, jumping 0.9% due to gains in shares of Meta Platforms (META 497.74, +22.91, +4.8%).

The heavily-weighted information technology sector registered the largest decline, dropping 3.4%. Weakness in the semiconductor space weighed on the info tech sector and led the PHLX Semiconductor Index (SOX) to close 7.1% lower.

Market participants will be focused on the July Employment Situation report tomorrow, which is released at 8:30 ET, and implications for Fed policy.
  • Nasdaq Composite:+14.5% YTD
  • S&P 500: +14.2% YTD
  • S&P Midcap 400: +9.0% YTD
  • Russell 2000: +7.9% YTD
  • Dow Jones Industrial Average: +7.1% YTD

Reviewing today's economic data:
  • Weekly Initial Claims 249K (consensus 233K); Prior 235K; Weekly Continuing Claims 1.877 mln; Prior was revised to 1.844 mln from 1.851 mln
    • The key takeaway from the report is the rising level of initial claims -- a leading indicator -- which connotes some softening in the labor market that is expected to curtail discretionary spending activity.
  • Q2 Productivity-Prel 2.3% (consensus 1.6%); Prior was revised to 0.4% from 0.2%; Q2 Unit Labor Costs-Prel 0.9% (consensus 1.7%); Prior was revised to 3.8% from 4.0%
    • The key takeaway from the report was the moderation in unit labor costs, which the Fed is eyeing closely. Unit labor costs increased 0.5% over the last four quarters, which is the lowest rate since the third quarter of 2019.
  • July S&P Global US Manufacturing PMI - Final 49.6; Prior 49.5
  • June Construction Spending -0.3% (consensus 0.1%); Prior was revised to -0.4% from -0.1%
    • The key takeaway from the report was that construction spending was soft across both the private and public sectors, reflecting weaker demand patterns that are part of a softening economy.
  • July ISM Manufacturing Index 46.8% (consensus 48.5%); Prior 48.5%
    • The key takeaway from the report is that it conveys clear weakness in the manufacturing sector that is a byproduct of subdued demand.

Looking ahead to Friday, the July Employment Situation report will be released at 8:30 ET. Other data include June Factory Orders at 10:00 ET.

>>> Apple beats by $0.06, beats on revs

Apple beats by $0.06, beats on revs (218.36 -3.72)
  • Reports Q3 (Jun) earnings of $1.40 per share, excluding non-recurring items, $0.06 better than the FactSet Consensus of $1.34; revenues rose 4.9% year/year to $85.78 bln vs the $84.43 bln FactSet Consensus.
  • Apple reports Q3 iPhone revenue of $39.3 bln vs. $38.8 bln ests and $39.7 bln last year.
  • Apple reports Q3 Services revenue of $24.2 bln vs. $24.1 bln ests and $21.2 bln last year.
  • Co reported Q3 Greater China revenue -6.5% yr/yr $14.73 bln.
  • Co reported Q3 gross margin of 46.3%
  • "Today Apple is reporting a new June quarter revenue record of $85.8 billion, up 5 percent from a year ago," said Tim Cook, Apple's CEO. "During the quarter, we were excited to announce incredible updates to our software platforms at our Worldwide Developers Conference, including Apple Intelligence, a breakthrough personal intelligence system that puts powerful, private generative AI models at the core of iPhone, iPad, and Mac. We very much look forward to sharing these tools with our users, and we continue to invest significantly in the innovations that will enrich our customers' lives, while leading with the values that drive our work."
  • Apple CEO Tim Cook told CNBC that the company redeployed employees onto AI that previously worked on the now cancelled Apple Car. CapEx increased this quarter. Working on AI in China. He said the company will have to wait until AI launches to tell if demand for phones will increase.
Co typically provides Q4 (Sep) quarterly guidance on the conference call, which starts at 17:00 ET.

CrunchBase : The 10 Biggest Rounds Of July: Skild AI And Element Biosciences Lea

The 10 Biggest Rounds Of July: Skild AI And Element Biosciences Lead Hot Month

July saw its fair share of big rounds — and then some. Startups needed to raise $200 million or more to make this list. While we saw a lot of the regular sectors like biotech and financial services represented, we also saw some big deals involving supply chain and automotive startups.

1. Skild AI, $300M, robotics: The good year for robotics startups continued. Skild AI became the latest such startup to raise big, locking in a $300 million Series A led by Coatue, Lightspeed Venture Partners, SoftBank Group and Jeff Bezos, through his Bezos Expeditions. The funding brings the company to a valuation of $1.5 billion. The Pittsburgh-based startup isn’t building robots, however, it’s building robot brains. The theory is that those brain models can then be used in a variety of robots and for different tasks — instead of just having one application. It seems a lot of big-name investors agree with that strategy.

2. Element Biosciences, $277M, biotech: Every month there seems to be big biotech raises, and this one’s no different. Element Biosciences raised more than $277 million in a Series D led by Wellington Management. The San Diego-based biotech startup is focused on developing DNA sequencing and multiomics technology for research markets. Founded in 2017, the company has raised $678 million, per Crunchbase.

3. Cardurion Pharmaceuticals, $260M, biotech: Cardurion Pharmaceuticals raised a $260 million Series B financing led by Ascenta Capital. The Burlington, Massachusetts-based biotech startup is focused on developing therapeutics for the treatment of cardiovascular diseases. Founded in 2017, the company has raised more than $600 million, per Crunchbase.

4. (tied) Cosm, $250M, entertainment: Entertainment and technology are intersecting more than ever — and Cosm is just the latest example. The sphere-like immersive tech and entertainment company locked up a raise of more than $250 million from the likes of Mirasol Capital and Baillie Gifford. The new round values the Dallas, Texas-based company at more than $1 billion. Cosm offers guests an immersive dome that allows a shared reality experience, usually with something regarding sports. The company already has a venue in Los Angeles and others planned for Dallas and Atlanta.

4. (tied) Regal, $250M, film: Regal, the second-largest movie theater chain in the U.S., makes the list this month after it secured $250 million to upgrade its locations. The Tennessee-based company is looking to add to its 425 theaters across the country — with enhancements that include luxury recliners and other amenities. Regal is owned by Cineworld, which emerged from bankruptcy with a financial restructuring process last year. Investors were not disclosed.

6. Human Interest, $242M, financial services: Retirement planning is big business and it also can apparently produce big valuations. San Francisco-based Human Interest offers small businesses the ability to more easily offer 401(k) plans to their employees. The company locked up a $267 million round led by investment firms Baillie Gifford and Marshall Wace that values the company at $1.3 billion. The round included $25 million of debt. The company said it recently surpassed $100 million in annual recurring revenue. Founded in 2015, Human Interest says it has raised more than $700 million in total primary and secondary financings.

7. (tied) Earned Wealth, $200M, financial services: Wealth tech startup Earned Wealth raised a $200 million investment led by Silversmith Capital Partners and Summit Partners. The company offers medical professionals financial planning, tax planning and investment advice on one platform. The new cash is expected to go toward acquisitions. Founded in 2021, the New York-based company has raised $212 million, per Crunchbase.

7. (tied) HarmonyCares, $200M, healthcare: HarmonyCares, a provider of in-home primary care, raised one of the biggest rounds of the month to expand its operations. The Troy, Michigan-based healthcare company closed a $200 million round led by General Catalyst, McKesson Ventures and a large unnamed national payor. The firm operates home-based primary care practices in 15 states — offering services such as home health, hospice, radiology and laboratory — and will look to grow its geographical reach across the U.S.

7. (tied) Altana AI, $200M, supply chain management: Altana AI, a supply chain management startup, locked up a $200 million Series C investment led by the US Innovative Technology Fund that values the company at $1 billion. The New York-based startup’s supply chain management platform gives customers deep insights and visibility into managing their global value chains — from the sourcing of raw materials to production to sale. Such oversight has become necessary as governments and organizations have introduced new trade restrictions, climate, national security and other policies. Much like most startups that raise big money in the current environment, Altana has an AI play. The company’s platform uses AI to analyze data points through the supply chain to spot anomalies and risks. Founded in 2018, the company has raised $322 million, per Crunchbase. Before the new round, it last raised a $100 million Series B led by Activate Capital Partners in 2022.

7. (tied) Astranis, $200M, space: Space startup Astranis raised a fresh $200 million round to build out its Omega satellite program. The new round was co-led by Andreessen Horowitz and Bam Elevate. The San Francisco-based startup develops small broadband communications satellites for telecoms, and plans to have more than 100 of its first-generation satellites operating in orbit by 2030. While Astranis did not release a valuation number, the company raised a $200 million round at a $1.6 billion valuation in April 2023, per a Bloomberg report in a deal also led by Andreessen Horowitz. Space startups have done well this year as satellite and communication companies continue to attract new investment. So far in 2024, space-related startups have raised more than $3.7 billion, per Crunchbase data. Such startups raised about $5.9 billion through all of last year — putting this year’s venture funding ahead of that pace. Founded in 2015, Astranis has raised more than $750 million, per the company.

7. (tied) Tekion, $200M, automotive: Providing a software platform to the retail automotive industry may not be the sexiest of technology plays, but it obviously can make a valuable company. Pleasanton, California-based Tekion, whose software connects manufacturers, retailers and others, raised a $200 million growth equity round from Dragoneer Investment Group that values the company at more than $4 billion. Bloomberg reported that the startup now has between $100 million and $200 million in revenue. Founded in 2016, the company has raised $635 million, per Crunchbase.

TechCrunch : Microsoft now lists OpenAI as a competitor in AI and search

Microsoft now lists OpenAI as a competitor in AI and search

Microsoft has a long and tangled history with OpenAI, having invested a reported $13 billion in the ChatGPT maker as part of a long term partnership. As part of the deal, Microsoft runs OpenAI’s models across its enterprise and consumer products, and is OpenAI’s exclusive cloud provider.

However, the tech giant called the startup a “competitor” for the first time in an SEC filing on Tuesday.

In Microsoft’s annual 10K, OpenAI joined long list of competitors in AI, alongside Anthropic, Amazon, and Meta. OpenAI was also listed alongside Google as a competitor to Microsoft in search, thanks to OpenAI’s new SearchGPT feature announced last week.

It’s possible Microsoft is trying to change the narrative on its relationship with OpenAI in light of antitrust concerns — the FTC is currently looking into the relationship, alongside similar cloud provider investments into AI startups. Microsoft recently agreed to give up its board observer seat at the startup — a seat it gained after a kerfuffle last fall in which OpenAI’s board briefly fired CEO Sam Altman, prompting Microsoft CEO Satya Nadella to offer him and other top execs jobs at Microsoft.

However, SEC filings like this are often places where corporations throw out hyper-cautious warnings to investors.

Partners and competitors are certainly not mutually exclusive titles in Silicon Valley. In the year 2000, the dominant search engine at the time, Yahoo, announced an agreement to let Google’s search results appear on its webpage. The two companies were partners for a few years, until Google ate Yahoo’s lunch in search and became the unofficial, but dominant, doorstep to the internet. The two companies were partners, but were still threats to each other. (Yahoo is the owner of TechCrunch.)

There’s enough history of this kind of power-switch in tech that it’s at least conceivable that Microsoft and OpenAI’s relationship will take a similar route.

Regardless, Microsoft is not putting all its eggs in one basket.

In March, Microsoft hired the cofounders of a billion-dollar AI startup, Inflection AI’s Mustafa Suleyman and Karén Simonyan, to lead its new Microsoft AI division. The cloud provider is investing heavily into Microsoft Copilot, and building out an AI future that’s entirely separate from OpenAI.

The Information : Musk’s xAI Has Considered Buying Character.AI

Musk’s xAI Has Considered Buying Character.AI
XAI has considered an acquisition of chatbot maker Character as Elon Musk’s AI startup hunts for talent and more ways to test its AI models.

The Takeaway
• Leaders of Musk’s xAI have considered buying Character AI
• xAI would get AI researchers and more ways to test its models
• More AI startups are likely to consider sales as competition, costs rise

XAI, Elon Musk’s one-year-old artificial intelligence startup, has considered acquiring chatbot maker Character.AI as it looks for more ways to test its Grok AI models, according to a person who spoke with xAI leadership about the deal.

The discussion may not result in a deal. But the internal debate at xAI points to the types of pairings that are likely to become more common as smaller AI startups such as Character face the steep costs of training and running their models while competing against deep-pocketed rivals.

Other conversational AI startups such as Adept and Inflection have effectively sold themselves to Amazon and Microsoft, respectively, despite having raised considerable capital in the past two years.

XAI has raised more than $6 billion and Musk has told investors he intends to raise more money in the future. Musk plans to use much of that money to expand xAI’s compute capacity, but he could look at consumer AI startups other than Character for potential acquisitions, the individual who spoke to xAI leaders said.

A spokesperson for Character declined to comment. Musk did not respond to email requests for comment. After this article was initially published, Musk posted on X, formerly Twitter, that “xAI is not considering an acquisition of Character AI.”

Character, which was privately valued at $1 billion in a March 2023 financing, runs an app that lets individuals message AI versions of anime characters, TV personalities and historical figures in hyperrealistic role-play. It makes money from a subscription plan that costs $9.99 per month.

It has raised more than $150 million from investors including Andreessen Horowitz and Greycroft. Google, which also provides Character with cloud computing services and access to Google’s advanced chips, has provided additional financing via a convertible note, The Information previously reported.

XAI leaders considered an acquisition after Character discussed a possible research partnership with xAI, as well as with Meta Platforms and Google. Such deals, earlier reported by The Information, could allow the chatbot maker to access the partnering company’s computing resources in exchange for sharing some of Character’s intellectual property.

Character’s leaders said in July that no partnership or acquisition deal was happening with Meta, according to a Character employee. Meta declined to comment.

With an acquisition of Character, xAI would gain technical talent in the form of dozens of AI researchers, a number of whom hail from Meta and Google. Musk in July said xAI was “definitely looking to increase our human talent advantage, so please apply at xAI.”

XAI could also use Character’s chatbots to get feedback on and improve its Grok models, adding to the data it collects through Musk’s X, formerly known as Twitter. Rivals including Meta are improving their models using interactions from their consumer apps, such as WhatsApp.

Character has engaged in partnership discussions as more tech companies have developed competing products, though these offerings have had varying degrees of success. Meta scrapped chatbots modeled after celebrities such as Tom Brady after less than a year, The Information reported. The company has since introduced a feature that allows creators and others to make customized chatbots.

Google has also been developing a product for creating and conversing with customizable chatbots, which could launch as soon as this year.

An offer from xAI, should one materialize, would end months of uncertainty over Character’s next steps. Although it isn’t at risk of running out of cash soon, it hasn’t raised a new round of venture funding in more than a year, a contrast with the rapid funding pace of many AI startups.

Character in recent weeks has sought to cut costs and has instituted new processes for approving budgets and head counts, according to an employee. It generates revenue through its premium plan, which has fewer than 100,000 subscribers—a small fraction of its more than 6 million daily active users in July, that person said.

Two former Google researchers—Noam Shazeer, now Character’s CEO, and Daniel De Freitas, its president—founded Character in November 2021. Shazeer, one of the authors of a foundational generative AI research paper, and De Freitas left Google in part due to frustration with the company’s bureaucracy.

The Information : An Eric Schmidt Investment Firm Crumbles After Mismanagement,

An Eric Schmidt Investment Firm Crumbles After Mismanagement, Soured Romance
The former Google CEO once said Steel Perlot, founded by his then-girlfriend Michelle Ritter, could become a new kind of Y Combinator. Now Ritter blames Schmidt for the firm’s unraveling, while former employees point to Ritter’s erratic management.

Michelle Ritter felt stuck. She knew it was an odd thing to say last month, as she sat on the living-room carpet of the 13-bedroom Bel Air mansion—previously owned by the Hilton family—that she currently lives in.

The owner of the mansion is Eric Schmidt, the 69-year-old former Google CEO, whom Ritter, 30, began dating in 2020 when she was an ambitious third-year student at Columbia University’s law school. The business Ritter had started with funding from Schmidt, a startup incubator and asset manager called Steel Perlot, was out of cash. Several of the fledgling companies it had launched had shut down.

And she and Schmidt, Steel Perlot’s only funding source, had broken up earlier this year. This spring, Schmidt said he would stop funding the firm, Ritter wrote to Steel Perlot employees last month. While Ritter blamed her frayed personal relationship with Schmidt for the business separation, Schmidt had found evidence that Ritter had asked employees to exaggerate the success of the business so it would be more likely to get additional funding from him, a person close to Schmidt said.

The Takeaway
In an interview, Michelle Ritter says her ex-boyfriend—former Google CEO Eric Schmidt—was responsible for the crumbling of an investment firm she founded with funding from him. But former employees of the firm said Ritter has a history of mismanagement and questionable choices.
In recent months, Schmidt, Ritter and their respective lawyers have been locked in a contentious battle over how to disentangle their business interests. She is trying to cut a deal with Schmidt that would ensure she would still share in the proceeds of potential profits from startups Steel Perlot invested in under her watch, which includes blockchain startup Keeta and AI startups Hebbia and Pryon.

“I’m not giving up on my economics,” she said in a two-hour interview.

The messiness of their breakup, along with Ritter’s willingness to speak on the record about it, serves as a cautionary tale about the hazards of mixing business and personal relationships.

It also sheds further light on the degree to which Schmidt, one of the tech industry’s wealthiest and most respected leaders, has flouted that truism. Last month, The Information revealed how the entrepreneur hired an advisor who helped him resolve difficulties with ex-girlfriends by structuring investments on their behalf—some of which didn’t pan out.

In Ritter’s case, Schmidt used his money and clout—both attributes he had in spades—to go into business with her while they were in the midst of a whirlwind romance. He was at the top of Google during its meteoric rise, from 2001 to 2017, first as CEO and then as executive chairman.

Along the way he amassed a fortune Bloomberg currently estimates at $33 billion. In his post-Google career, he has made himself into a Washington, D.C., power broker, becoming a close ally of former president Barack Obama. And he recently penned several op-eds on the war in Ukraine and founded a military drone startup.

Hillspire—the family office of Schmidt and his wife, Wendy—pumped about $140 million into Steel Perlot over the last three years, a little more than half of which paid for the firm’s operating budget, financial documents reviewed by The Information show. The rest of the money is tied up in outside investments in startups and another venture capital fund, some of which could still generate cash returns.

Ritter wasn’t an obvious candidate to put in charge of an operation like Steel Perlot. While she had business and law degrees, she had little experience in building and investing in startups when she and Schmidt founded the firm.

It showed. Employees at Steel Perlot complained about her erratic management and questioned her professionalism. For example, she had a tendency to drink wine out of coffee mugs during business meetings and in many instances failed to show up to meetings she had set up with her employees, three former employees said.

She asked employees to buy prescription drugs for her without orders from a doctor, two former employees said. Some employees, in interviews, said they were afraid of her.

Under her leadership, Steel Perlot spent freely on high employee salaries, while bringing in meager revenues. Ritter had a $1 million annual salary, internal documents showed. Some startups that Steel Perlot incubated, like one to develop tools for social media creators, shut down soon after they started. She frequently told employees she had raised significant amounts of money from new investors that never appeared, former employees said.

Ritter concedes she isn’t blameless when it comes to Steel Perlot’s problems. “There are some things I've certainly done wrong. I think about it all the time: ‘What would you do differently?’” she said, adding that she tried to juggle too many business endeavors at once.

Still, she blamed Schmidt for most of Steel Perlot’s problems. She said he didn’t stay as involved in the company as he had promised and only supported the business initially as a way to get closer to her romantically.

“I think the best and worst champion I’ve had is Eric,” she said.

The relationship’s souring took extreme turns. Near the end of 2022, Ritter asked employees to hire private investigators to follow Schmidt, a former employee said. They declined her request. Ritter said she didn’t follow through with the request.

“It was a consideration raised by my legal counsel in response to a continual string of attempted security breaches at the businesses, particularly targeting me personally, shortly after Eric began retaliating against the venture as our relationship worsened,” she said in an email.

In happier times, Schmidt was an energetic hype man for Ritter and Steel Perlot. In a 2022 email to her, Schmidt wrote that the company would combine “the best of Blackstone and Google X and Y Combinator.” Several former top employees said they joined because they admired Schmidt’s pedigree and trusted that he would help the company succeed.

The former couple became Steel Perlot’s only two shareholders, with Ritter and Schmidt owning 51% and 49%, respectively.

Now their relationship is in tatters. In recent months, Schmidt changed the locks on one of his homes in Manhattan so that Ritter couldn’t enter, and has pressured her to leave his Bel Air home and for her parents to do the same from another property he owns next to it, she said.

Last month, in an email to Steel Perlot’s staff, Ritter said talks broke down with the company’s “business partner and sole funder”—Schmidt—to continue funding the business. She directed employees of the firm—now a skeleton staff, down from 90 at its peak—to send questions about the company’s future to his family office.

“The former collaboration and transparency needed for our success has dwindled due to unrelated personal matters,” she wrote.

Last week, Schmidt’s lawyer, Craig Marcus, wrote to employees that the family office, Hillspire, was “in the dark” about Steel Perlot’s plans and said Ritter hadn’t responded to “several offers of assistance to ensure a smooth transition for all employees.”

Matthew Hiltzik, a spokesperson for Schmidt, said: “While Eric was optimistic about the prospects for this investment and is disappointed that it hasn’t worked out, he is grateful for the efforts of the very talented [Steel Perlot] team and will continue to support them as they transition out of the company and they identify new opportunities.”

‘She’s the One’

Ritter and Schmidt’s relationship first became tabloid fodder in 2021, when she was seen with him at billionaire Richard Branson’s space launch in New Mexico. Despite being married to Wendy since 1980, Schmidt had long dated other women and brought them with him to social and business events.

The two met in September 2020, when one of Ritter’s Columbia law professors introduced her to a business associate of Schmidt. At the time, Ritter was more interested in entrepreneurship than she was in becoming a lawyer and was looking for help getting a startup off the ground—an online platform for sports fans called StarX. Ritter, Schmidt’s associate and Schmidt himself had dinner together in New York.

A few months later, Schmidt and Ritter began dating. Schmidt told friends that he was drawn to Ritter’s charisma and intellect, according to text messages viewed by The Information.

He told Ritter he wanted to have children with her and planned to divorce Wendy, Ritter said to an employee and people close to her, although some of those people told her they doubted he would follow through. “I think anyone would have believed, in my position, he would actually get divorced,” she said.

Within a few months of the start of their relationship, Ritter and Schmidt began picking out houses together in Los Angeles, Malibu and the Hamptons, which Schmidt ended up purchasing, said Ritter.

Soon, Ritter became a fixture in Schmidt’s circle of high-powered friends and business contacts, including OpenAI’s Sam Altman, Scale AI’s Alexandr Wang and former U.S. Secretary of State Henry Kissinger. She attended Fanatics CEO Michael Rubin’s White Party—an annual bash in the Hamptons that attracts celebrities and sports stars.

“It moved so fast,” she added.

Schmidt met Ritter’s parents, Terry and Shamim, who grew to like him. The Ritters had faced legal and financial difficulties in the past, including a court battle with JP Morgan after they struggled to keep up with mortgage payments following the 2008 recession. The bank later forced the sale of their home.

But after they entered Schmidt’s orbit, their fortunes improved. Schmidt paid for her parents’ medical bills. Ritter’s parents lived in and cared for the $5 million home next to his Bel Air mansion.

Schmidt also hired Ritter’s father to help with architectural design on Schmidt’s homes, including one of his passion projects—the construction of a mini-railroad on Schmidt’s property in upstate New York, which was previously owned by early 20th century real estate magnate John Jacob Astor IV.

According to Shamim Ritter, Schmidt did not hide his intentions regarding her daughter. “He did tell us: ‘She’s the one,’” she said. “We basically believed in everything he said to us.”

A Great Journey Ahead

After they met in 2020, Ritter and Schmidt began discussing big ideas about business strategy, Ritter said. Eventually, Ritter arrived at her vision for Steel Perlot—a new kind of hedge fund that used advanced trading strategies and also incubated startups involved in payments, crypto, AI and the creator economy, former executives said.

In 2021, Ritter and Schmidt created Steel Perlot as a limited liability corporation, without a board of directors. She named Schmidt as chairman. Schmidt initially owned 5% of the company (the next year, he successfully pushed Ritter to up Hillspire’s stake to 49% after he agreed to commit more funding). Ritter, who owned the rest, was chief executive.

The two of them signed an operating agreement that largely prevented Schmidt from removing Ritter as CEO, a person with direct knowledge of the matter said. While Ritter didn’t tell most employees what the origin of the company’s name was, she told some people that steel was a reference to Schmidt’s “steel blue eyes,” a person who spoke to her said.

Ritter’s profile in tech and business began to grow. She spoke at a conference on the future of cryptocurrency regulation and joined an executive advisory board for an academic center run jointly by Columbia’s business and law schools. And she joined the board of Pryon, an AI startup valued most recently at $500 million by venture capital firms including the U.S. Innovative Technology Fund.

“She was a big thinker,” Igor Jablokov, Pryon’s CEO, said. “She was thinking about how we could grow as aggressively as possible.”

Steel Perlot got its funding in regular installments from Hillspire, the sprawling Silicon Valley-based family office that controls the fortune of Wendy and Eric Schmidt. The family office had hundreds of employees and oversaw high-profile philanthropic ventures like Schmidt Futures, which awards grants to scientists and entrepreneurs, along with money-making efforts like an investment in the hedge fund D.E. Shaw.

Former employees recalled Schmidt sometimes coming to Steel Perlot’s New York office and working with them in his Los Angeles home, but he largely abstained from day-to-day duties, leaving the startup’s management to Ritter. One of his pieces of advice was that she should focus on expanding the firm’s headcount, Ritter said.

“He would say, ‘Look, just get more people. What I've learned is at Google is you just have bodies around people and things just kind of happen. It kind of just comes together,’” she recalled him saying. “So that's what I did.”

By the end of 2022, Steel Perlot had about 90 employees and payroll expenses of $16 million for the year, internal documents show. In a more recent quarter, the average annual salary for the firm’s employees was more than $300,000, according to an analysis of the documents.

Other costs at Steel Perlot piled up. According to financial records for Steel Perlot, the startup leased offices near New York’s SoHo neighborhood and in Los Angeles that cost the company more than $160,000 a month.

Meanwhile, the romantic relationship between Schmidt and Ritter began to fray. Around the middle of 2022, Ritter accused Schmidt of sleeping and traveling with other women and she became increasingly frustrated that Schmidt remained married to Wendy, according to two people she spoke with.

During a 2022 employee trip to Saint Tropez, on the French Riviera, Ritter argued with Schmidt about not inviting her to meetings with people in his network, said a former employee. She also was angry that a news article featuring Steel Perlot’s startup Keeta mentioned Schmidt as an investor but not her company.

Mounting Losses

Steel Perlot made some fortunate decisions. In 2022, it pulled all of the money it had in an FTX account for crypto trading—about $100,000—before the exchange collapsed, a former employee said.

But other Steel Perlot bets ran into problems. One of its biggest projects was called Knox Networks, which was developing software that would allow banks to settle transactions at higher speeds than they could at the time.

But in August 2022, Knox fired and sued the executive it hired to develop the software, Ryan Tate, in a dispute over the ownership of the intellectual property behind the software, according to documents filed in the U.S. District Court for the Northern District of California.

The parties later settled the dispute after it went to arbitration, according to people with knowledge of the dispute. Several other engineers left Knox after the company fired Tate, according to former Steel Perlot employees.

After the Knox lawsuit, Ritter became more suspicious about employees working against her. In 2023, Ritter told others at the company she thought some of the traders at Steel Perlot were trying to build a competitor on the side.

In 2023, Ritter worked to cut more of Steel Perlot’s costs and told employees about how she was seeking to raise cash for the company from outside investors, including sovereign wealth funds and venture capital firms. The outside money never came through, though, financial records show, even though she told employees she had raised it.

“The joke in the office was that Michelle had raised $15 billion 15 different times,” a former employee said.

Meanwhile, some of its investments quickly misfired. Steel Perlot invested nearly $1 million in Hachi—a creator services platform that aimed to “revolutionize the content creation landscape,” according to Ritter. Hachi shut down in May, less than six months after it publicly launched.

Between its inception in 2021 and February 2024, Steel Perlot had $61 million in operating losses and generated less than $200,000 in revenue, financial documents show.

Packing Up

Last fall, Schmidt’s relationship with Ritter began attracting more public scrutiny, including in a Forbes story last October that first reported their business ties. Ritter told Forbes that Steel Perlot had multiple backers beyond Schmidt.

That wasn’t true, as Ritter’s recent email to staff about her inability to raise outside funding showed.

Early this year, Ritter and other executives sought additional funding from Schmidt’s Hillspire to fund operations, contingent on the startup hitting business milestones and raising outside funding, said a former executive. Hillspire declined, citing lagging business progress.

In May, the New York Post published photos of Schmidt at a social event with his wife and reported that he and Ritter were “on the outs.” Schmidt and his wife were together in Mallorca last month, vacationing with Barack and Michelle Obama and others, and last weekend were in Italy for Wendy Schmidt’s birthday, a person close to Schmidt said.

In an email to Steel Perlot employees earlier this month, Ritter blamed her souring romantic relationship with Schmidt for Hillspire’s lack of continued financial support. She told them she was proud of what they had built, which she called “an innovation engine where big tech meets big finance” and said the firm had generated “impressive returns” from its small early-stage VC fund, including investments in AI startups Hebbia and Pryon.

While sitting in the living room of Schmidt’s Bel Air mansion last month, Ritter said she was taking the next logical step to separate her life from Schmidt’s by preparing to move out of the Georgian colonial home, with its old Hollywood touches including a sweeping staircase, marble coffee table and well-tended gardens, complete with a koi pond.

During her time living there, Ritter had added some more modern features to the home, including a red couch in the shape of a pair of lips and a glass case holding her guitars. Outside, a large rainbow-colored “Love” sign that a friend of Schmidt’s created for one of their trips to Burning Man, the annual arts festival and bacchanal in the Nevada desert, stood near a wrought-iron gate at the end of the home’s driveway.

“I realize that some might just chock all of this up to the messy complications of mixing a personal and professional relationship, but I never pursued him in any way, nor did I expect anything from him other than to simply uphold the promises he continued to make in his efforts to convince me of a supposed future together,” Ritter said.