What the Epstein files reveal about EV startups and Silicon Valley

After the Justice Department released a trove of new documents tied to infamous sex offender Jeffrey Epstein, journalists digging through them have found extensive connections to Silicon Valley.

TechCrunch’s Sean O’Kane examined how a mysterious businessman named David Stern built a relationship with Epstein and pitched him investments in multiple electric vehicle startups, including Faraday Future, Lucid Motors, and Canoo.

On the latest episode of the Equity podcast, Kirsten Korosec and I talk to Sean about what he learned, and we discuss whether the Epstein revelations will lead to broader fallout in Silicon Valley.

You can read a preview of our conversation, edited for length and clarity, in the transcript below.

Sean: There are always people at the edges who don’t necessarily want to be front and center in the investment scene. And that was why I started looking through these files, in part because a long time ago, flashback 10 years ago on my beat especially, there was just a ton of Chinese investment in the space. 

This was before even the rush of EV startups in China that we see today […] In autonomous vehicles, but electric vehicles especially, there was this moment where Chinese investors and Chinese companies, state-owned automakers, all they wanted to do was to be looked at like Silicon Valley startups. So they came here and they invested in companies and helped get them off the ground, or in some cases even set up offices in Silicon Valley.

And it was in that environment that a lot of the companies that I’ve covered for a long time popped up. There was just never a full picture of how a lot of them were funded. 

One in particular, this company called Canoo, which is now bankrupt and out of business, had maybe the most mysterious set of investors of all of them. They really were not upfront about it when they first sort of came out of stealth in early 2018. And it frankly took until there was a lawsuit between some people who ran the company near the top that the investors were revealed. 

At the time, it was this businessman in China who was relatively close, the son-in-law of the former sort of like the fourth most senior CCP official under the previous leader of China and a giant electronics magnate from Taiwan. And then there was this really strange guy named David Stern, who was the third founding investor. And there was so little information about this guy.

I could tell, back then, that he was some sort of German businessman, that he had some connections to China, but it wasn’t really clear how he had gotten involved. The only thing I really remember hearing at the time was that he was close with Prince Andrew, which I just thought was very strange, this idea that someone had even told me a long time ago, probably in 2018 or 2019, that Prince Andrew was involved with this company Canoo in some way, maybe not invested, but advising or something.

It was something that stuck in my head for a very long time, clearly, because I went looking for that information as more of these files came out, assuming that proximity to Prince Andrew means proximity to someone like Epstein.

And that was the case here, more so than I could have imagined, because this guy Stern turned from an enigma or a ghost into someone who was present through all this dealmaking 10 years ago, where we see him pitching, in the span of about a year and a half, investments in Faraday Future, trying to convince Epstein to maybe throw a couple hundred million dollars into that company, trying to buy the 30% stake that Faraday Future’s founder had bought or acquired in Lucid Motors arrival at the time, which I feel is an overlooked dynamic [in] how those companies grew around then — and then also in Canoo.

Epstein never invested in any of those companies despite that proximity, but it was just such a revealing thing. And I get into it in the story that I wrote last week, but we get this sweep of a decade of relationship that Stern had with Epstein from approaching him initially in 2008, kind of hat in hand, and introducing himself and saying, “Hey, I want to invest in China. Will you throw in some money?” to being someone who was seemingly very close to him by the end. 

Kirsten: The whole thing is really interesting, and it goes back to my initial comments about how sometimes when you get a chance to look back at with new information at how deals were unfolding, it really just changes your perception and perspective of the time.

And for those who didn’t follow quote-unquote “mobility,” think of it as how we’re thinking about physical AI these days. Everyone was talking about it. Every automaker wanted to have a piece of quote-unquote “the future of transportation” or “mobility.” And so it makes a lot of sense that some of these more secretive types were also jumping in. 

Sean, one of the points you made to me as I was working on the story with you, in terms of editing it, you were [saying], it was very clear that Epstein and David Stern weren’t really about investing and building companies. It was all about how to make the most money the fastest. And that, I think, is really historically important and interesting and gives you a little bit of an insight into — in addition to all the horrible, horrifying, terrible things he did to human beings, [Epstein] was a complete operator as well, in order to make money as quickly as possible. And you see that in these emails and exchanges between David Stern and Epstein.

Sean: Yeah, to both of those points really, I open the story with a moment in time where Lucid Motors […] they had been basically a battery supplier for a long time and then they pivoted into the passenger vehicle startup that we know them as today, but they were really struggling to raise their Series D at the time, and they really needed that money to start production of their first electric sedan. 

They were struggling, behind the scenes in large part because the founder of Arrival quietly amassed this major stake and was kind of pushing people away and making it look like an uninvestable company in some ways, but the hype around all of that at the time was creating opportunities for people like Stern and Epstein, and we see them talk in these emails about, you know, Stern comes to Epstein and basically says, “I heard that they’re raising. Can you get information from Morgan Stanley?”

Epstein turns around and passes that information back, and then you see this discussion about, okay, well, Morgan Stanley says Ford — which was reported at the time — had kind of an investment offer, potential acquisition offer, on the table for Lucid Motors [and] was going to come in in that Series D. And they’re chopping up — do we invest in this and maybe get a big return down the road? Or is it something that we sell as Ford comes in a couple months later, if we can get this stake now at fire sale prices?

Ultimately, they didn’t go through with that, but Stern did eventually invest in Canoo and help get that company off the ground.

Anthony: One thing — maybe pulling back a little bit from the specific industries or investments — that’s also an important piece of context that generally gets mentioned in any of these stories about Epstein in Silicon Valley, but is worth repeating here, is that he [pleaded] guilty to soliciting prostitution from a minor in 2008.

Almost all the emails that we’re talking about with these stories [and] in pretty much any other story about Epstein in Silicon Valley comes after that. So it’s also partly a story about how people get comfortable with the idea that, okay, this guy has a pretty shady past already. He wasn’t the infamous criminal that he eventually [became], but there were things that were already known about him, and because he was a source of connections to power, to famous names, to money, a lot of people were just willing to look past that.