Speaker 1: We're from Mahard where innovation, money and power. Collie in
Speaker 1: Silicon Vallet NBN. This is Bloomberg Technology with Caroline Hyde
Speaker 1: and Ed Ludlow.
Speaker 2: Amed Ludlow in San Francisco carries off on assignment.
Speaker 3: This is Bloomberg Technology.
Speaker 2: Coming up, We're going to talk earnings as Oracle posts
Speaker 2: its biggest gain in two years amid a spiking bookings
Speaker 2: in its cloud computing business. Details ahead, plus Bitcoin continuing
Speaker 2: its record breaking run as two point seven billion dollars
Speaker 2: flowed into crypto assets last week. We'll discuss with the
Speaker 2: Delta Blockchain Fund CEO, and legislation that would force TikTok's
Speaker 2: parent company to sell it or face a ban in
Speaker 2: the US is picking up speed in Congress. We'll discuss
Speaker 2: that and so much more throughout the hour. Let's get
Speaker 2: right to market. Said it was a hotter than expected
Speaker 2: CPI print that drove the narrative this morning. Actually in
Speaker 2: the equity space, it was kind of a negative reaction
Speaker 2: at first. We haven't really changed our mind about the
Speaker 2: idea that if a rate cut is coming from the
Speaker 2: Federal Reserve, it isn't coming till June. But actually look
Speaker 2: at the Nazak one hundred. We're now up by more
Speaker 2: than a percentage point. A lot of the legwork coming
Speaker 2: from some of the earning story that we're going to
Speaker 2: get into. Semiconductors also higher, outperforming one point four percent, even.
Speaker 3: As you do see rates creep high.
Speaker 2: US ten y yield was up about five basis points
Speaker 2: four point one four percent, and now Bitcoin is down
Speaker 2: one point three six percent at this moment in time,
Speaker 2: just below or above sorry, seventy one thousand US dollars
Speaker 2: per token. I talked about the kind of upside inequities
Speaker 2: Nazak one hundred. It's probably Oracle that accounts for a
Speaker 2: lot of that. At one point in the session, on
Speaker 2: course for its biggest jump since the end of December
Speaker 2: twenty twenty one, the story twenty five percent top line
Speaker 2: growth in its cloud business. If you look at all
Speaker 2: of the analyst notes, there is an AI tailwind here
Speaker 2: is Oracle tries to compete with the hyperscalers. Let's get
Speaker 2: right to that conversation and bring in Bloomberg's Brody Ford,
Speaker 2: the Oracle whisperer in chief.
Speaker 3: I mean that for me was the story right, you know.
Speaker 2: Overall top line growth seven percent matched estimates, but that
Speaker 2: performance in the cloud unit that was pretty good.
Speaker 4: Yeah, they booked a lot more business than anybody expected.
Speaker 4: And the executives attributed that to the cloud business, saying
Speaker 4: that right now everybody needs more cloud computing power. Era
Speaker 4: of AI training models plus just mass digitization means that
Speaker 4: there's not enough computing power to go around. And a
Speaker 4: lot of folks are signing that piece of paper with
Speaker 4: Oracle and we should see that turned into revenue in
Speaker 4: the coming quarters.
Speaker 2: Brody, one of the great things about you is you
Speaker 2: can take any technology company that on paper, I'm saying
Speaker 2: on paper can be a bit dry, right. They used
Speaker 2: all this jargon that we don't fully understand. In Oracles case,
Speaker 2: remaining performance obligation. If anyone phones you up and said
Speaker 2: that you'd hang up, you fall asleep. But actually, in
Speaker 2: Oracles case, this is a mighty impressive backlog of business,
Speaker 2: and the street's really paying attention.
Speaker 4: Yeah, absolutely, it is the backlog, as you said, right,
Speaker 4: it's business that's been signed. And what's interesting about that
Speaker 4: is the reason it's a backlog is because they don't
Speaker 4: have the physical space, right, I mean, the cloud isn't
Speaker 4: this infinite thing in the Sky. It's data centers in Virginia, right,
Speaker 4: and they need to build more of them. They said
Speaker 4: that in the next year they're going to spend ten
Speaker 4: billion dollars building out their data center presence around the country.
Speaker 4: And think about that capex compared to a couple of
Speaker 4: years ago, it was two billion. I mean, this is
Speaker 4: a huge increase and that's what's giving investors confidence that
Speaker 4: they truly are building out their footprint in response to
Speaker 4: customer demand.
Speaker 2: So I talked about the AI tailwind. That is what
Speaker 2: the bulls see here. These Oracles AI story, Where did
Speaker 2: they fit in and everything that's going on.
Speaker 4: Yeah, I mean every software company wants to say that
Speaker 4: any outperformance is due to AI Oracles no different. It's
Speaker 4: hard to exactly parts how much is coming from it.
Speaker 4: But there is some real third party voices here saying
Speaker 4: that Oracle's cloud is particularly good for training and influencing
Speaker 4: these AI models, which are notoriously resource intensive, right, And
Speaker 4: so we've heard of a lot of folks going to
Speaker 4: Oracle to train their models, and yeah, so that has
Speaker 4: been fueling some of this demand, but there is some skepticism, right.
Speaker 4: Brent phil was on here yesterday saying that the actual
Speaker 4: current amount of revenue coming from AI workloads is not massive,
Speaker 4: but the idea is that in the coming quarters, in
Speaker 4: the coming year, as AI becomes a more mainstream part
Speaker 4: of the tech stack, that that will increase.
Speaker 2: All right, Bloomberg's Brady Ford and as we talked about earlier,
Speaker 2: Oracle a real kind of contribute to to the upside
Speaker 2: we see in ectees, particularly in the tech sector.
Speaker 3: This morning. Good Seamate.
Speaker 2: Now let's turn to another top story we've been tracking
Speaker 2: for about a week, latest in Elon Musk's lawsuit against
Speaker 2: open ai and Sam Outman. Open Ai saying in a
Speaker 2: court filing that the billionaires claims quote rest on convoluted,
Speaker 2: often incoherent, factual premises. Let's bring in Bloomberg's AI reporter
Speaker 2: Rachel Metz. What is it that open ai is trying
Speaker 2: to say here in normal people speak.
Speaker 5: Rachel, Open ai is actually echoing in this corre filing
Speaker 5: a number of the things that they said previously in
Speaker 5: a blog post that they put up that had a
Speaker 5: lot of juicy emails. This was last week, and also
Speaker 5: some internal memos that we got a hold of recently. Basically,
Speaker 5: they're saying there was no agreement for us to do
Speaker 5: what you said, what you're saying is incorrect, and you
Speaker 5: know a few other tidbits of just saying as you
Speaker 5: say said, your argument is incoherent. And what's funny about
Speaker 5: this is it is a procedural filing that they were
Speaker 5: putting in this filing to say that we want this
Speaker 5: court case to be classified as what's known as a
Speaker 5: complex case in California and then I'll give it a
Speaker 5: tiny bit of treatment in a different way by a
Speaker 5: judge who you know can understand this stuff and also
Speaker 5: like get things done quickly.
Speaker 3: Well, there's also a reason why.
Speaker 2: So Vinode Koestler, who is one of the early open
Speaker 2: ai investors, was on the show yesterday and one of
Speaker 2: the things that he was arguing for was that, you know,
Speaker 2: open ai is critically important from a national security context,
Speaker 2: right if America wants to be competitive in AI, then
Speaker 2: we need to support open ai in doing that. And
Speaker 2: I my understanding is that one of the things open
Speaker 2: ai did with this filing is basically to say, hey,
Speaker 2: if we go through with this lawsuit, the discovery process
Speaker 2: will give away all our secrets in the context of AI.
Speaker 3: Yeah.
Speaker 5: See, they did argue that although to be fair.
Speaker 3: One could argue that.
Speaker 5: Any discovery process might have a risk of bringing up
Speaker 5: things that you don't watch over at the public grade.
Speaker 5: I mean, that's part of what makes it just interesting
Speaker 5: to the rest of us. Right, What comes out in
Speaker 5: the discovery process can be very interesting. That could be,
Speaker 5: But hopefully we'll get some interesting information and some of
Speaker 5: the things that they are hoping to keep a prietary
Speaker 5: will beget proprietary.
Speaker 1: All right.
Speaker 2: Bloombers Rachel Metz covering a story that we've been covering
Speaker 2: almost daily for a week now, and we will continue
Speaker 2: to do so. Another big story in the world of
Speaker 2: technology and video and Data Bricks are facing copyright infringement
Speaker 2: lawsuits from a group of authors alleging the company's respective
Speaker 2: AI models are trained on their books without permission. The
Speaker 2: pair of proposed class actions, filed in San Francisco Federal court,
Speaker 2: alleged Nvidia and Data Bricks built their models on a
Speaker 2: library of pirated digital e books known as Books three.
Speaker 2: The suits were filed in March eighth, and they joined
Speaker 2: dozens of authors and copyright owners around the country suing
Speaker 2: top AI companies, and those include open ai and Meta
Speaker 2: all Right. Coming up on Bloomberg Technology Bitcoin hovers near
Speaker 2: that all time high. Can the cryptocurrency run be sustained?
Speaker 2: Seventy one six nine two dollars per token right now,
Speaker 2: we're also taking a look at shares of ARM, the
Speaker 2: chip design firm.
Speaker 3: 'tis a story as old as time.
Speaker 2: The lockup is ending, and the concern from shareholders is
Speaker 2: that those insiders that are now free to sell shares
Speaker 2: will do so. Of course, it's a story that happens
Speaker 2: for many in the immediate post IPO and aftermath. And
Speaker 2: think about the number of technius that have listed in
Speaker 2: the last six months or so. Continue tracking that soft
Speaker 2: three tens to one percent on on. This is Bloomberg
Speaker 2: Technology Bitcoin's record breaking run, showing few signs of slowing,
Speaker 2: with large amounts of capital inflows strong demand for the cryptocurrencies,
Speaker 2: so it reached an all time high of seventy two,
Speaker 2: eight hundred and eighty one dollars on Monday, with some
Speaker 2: investors eyeing a target of eighty thousand US dollars in
Speaker 2: the medium term. Meanwhile, Gray Scale Investments is looking to
Speaker 2: launch a clone of the world's largest bitcoin fund after
Speaker 2: it saw more than eleven billion dollars of outflows from
Speaker 2: its GBTC fund, the analysis from Cavita Gupta, Delta Blockchain
Speaker 2: fun founder and general partner. So there's something going on
Speaker 2: in the short term, and then there's the debate about
Speaker 2: what's going on in the long term. Let's start with
Speaker 2: the short term. The flows data seems to imply sustained
Speaker 2: momentum behind at least institutional interest right in bitcoin. Just
Speaker 2: give me your assessment of the hear in the now.
Speaker 6: So if I look at the short term, ed I
Speaker 6: really see that the Bitcoin ETF demand has surpassed a
Speaker 6: lot of people's expectations. I mean, traditionally we have always
Speaker 6: expected that before bitcoin having the prices always goes up.
Speaker 6: But even when we see the sell pressure from the market,
Speaker 6: people who have been through the beer had actually hold it,
Speaker 6: we see the buy is just too much. So it's
Speaker 6: been a very interesting cycle for bitcoin.
Speaker 2: Something that I've been bringing up on air in the
Speaker 2: last few days, if not weeks, is that there is
Speaker 2: a scenario where those that are bullish from cryptocurrencies, particularly bitcoin,
Speaker 2: and those that are bearish on bitcoin, seem to agree
Speaker 2: on one thing. That is, from where we are now,
Speaker 2: it is likely Bitcoin goes to a higher milestone we
Speaker 2: just talked about eighty thousand as a medium term call.
Speaker 2: I've also seen one hundred thousand, but there are many
Speaker 2: that agree that it will then pull back. What's your
Speaker 2: understand the why behind that?
Speaker 6: I think combination of things. The first thing is after
Speaker 6: the bitcoin having we always see some sort of a
Speaker 6: plateau or ten to twenty percent pull in squeeze. We
Speaker 6: are also expecting a lot of people in the market
Speaker 6: are expecting interest rate to be cut down before elections,
Speaker 6: and I think the elections being this year in the
Speaker 6: United States going to really define how the political roadmap,
Speaker 6: whether pro crypto or not that much procrypto, going to define.
Speaker 6: But beyond bitcoin, we have already started seeing the technology rally,
Speaker 6: which is with et and Polygon and Solana, so I
Speaker 6: think that's also going to define this roadmap of bitcoin prices.
Speaker 2: There is an interesting news story this very morning where
Speaker 2: the Risbank governor, a central banker, gave his opinion that
Speaker 2: he wanted to minimize bitcoins I guess influence presence in
Speaker 2: the financial sector. He said, I want as little bitcoin
Speaker 2: as possible in the Swedish financial system. What do you
Speaker 2: make of the central bank governor weighing in like that.
Speaker 6: I mean, we have seen that again and again every
Speaker 6: bull cycle. We see some country or some influential Web
Speaker 6: two world institution coming and saying this could be a problem,
Speaker 6: and then in the bear market they're like, we told
Speaker 6: you it's a problem. And then more institutional adoption, more
Speaker 6: retail adoption, and then more and more states and countries
Speaker 6: started using it. I mean, so it's not new said that.
Speaker 6: I think it's beyond any particular state, city, country at
Speaker 6: this point of time, all the way to us where
Speaker 6: now we do have bitcoin ETFs. We are only three
Speaker 6: years back, the question was bitcoin will be even legal
Speaker 6: or will it exist or not?
Speaker 3: Back in twenty one twenty.
Speaker 2: Two itself, the central bank governor's argument was that it's
Speaker 2: not a threat to financial stability, but he's worried about
Speaker 2: the impact on consumers that may or may choose to hold.
Speaker 3: That as a risk asset.
Speaker 2: What is the big picture that's happening here beyond bitcoin?
Speaker 2: Where what is the state of industry and right now
Speaker 2: for Cryptakeovita, I.
Speaker 6: Think it's all about technology. We usually it like you
Speaker 6: and me have talked about this before. We always talked
Speaker 6: about just the bitcoin and the prices, Like even when
Speaker 6: we talk about anything in this space, we always talk
Speaker 6: about whatever has caught height, like oh, NFT is done by.
Speaker 3: Some Hollywood actor.
Speaker 6: But the real thing out here is the technology, the
Speaker 6: decentralization of things, which are now used by some of
Speaker 6: the biggest companies, some of the biggest institutions globally, and
Speaker 6: that's why you see ethereum rally as the second biggest
Speaker 6: asset currency.
Speaker 3: Then you're seeing.
Speaker 6: All coins which I want to call technology tokens. Actually,
Speaker 6: whether it's Polygon, whether it's Solana, whether it's arbitrum. Optimism
Speaker 6: is doing very well, which is letting the transaction per
Speaker 6: second to be way much more scalable and much less
Speaker 6: cost So I think it is about the technology that
Speaker 6: which is not just Web three native, but adoption and
Speaker 6: supply chains, adoption in international remittances, adoption and stable coin yields.
Speaker 6: And I think we need to start talking in the
Speaker 6: mainstream media more about the underlining tech than just the
Speaker 6: price movement. It's really amazing when we have trillion dollars
Speaker 6: to talk about, but I think the technology should start
Speaker 6: making the highlights now.
Speaker 2: On the technology and the long term there seems to
Speaker 2: be bipartisan not support, but probably acknowledgment of what's happening
Speaker 2: with cryptocurrencies and the underlying blockchain technologies. Do you agree
Speaker 2: with that that that's what's happening in DC in particular.
Speaker 6: Yeah, but I also feel like DC is much more
Speaker 6: informed today than what it was five years or four
Speaker 6: years back. But at the same time, we should look
Speaker 6: at blockchain as a more of a trusted technology than
Speaker 6: just oh, whether it's a cash currency bitcoin. So just
Speaker 6: to give you a quick example, because you were just
Speaker 6: talking about open AI today, you can scrap data from anywhere,
Speaker 6: but doing the verification of that data has always been
Speaker 6: a problem with the social media and the AI chat
Speaker 6: GPT process, and that's what gives you on blockchain, the
Speaker 6: verification of the data, the ownership of that content and
Speaker 6: whom to give it back to if it's their an
Speaker 6: ip right associated with it. Very similar to what New
Speaker 6: York Times and a lot of news media actually tried
Speaker 6: to blame and see open GPT. I think we are
Speaker 6: forgetting that at the end of the day, whether it's ethereum,
Speaker 6: where it's blockchain, any of those things. Bitcoin, we are
Speaker 6: talking about the underlining traceability, verification, decentralization technology, and I
Speaker 6: think going back to DC. More and more people are
Speaker 6: getting informed about it, but just the charm of talking
Speaker 6: about INDK Bitcoin prices are just too difficult to get
Speaker 6: away from.
Speaker 2: We didn't get to Ethereum, but I would note that
Speaker 2: there are lots of headlines about investment into the Ethereum ecosystem,
Speaker 2: which you'd point out Cavita, Gitta, the Delta blockchain. Find
Speaker 2: great to have.
Speaker 3: You on the show.
Speaker 2: Okay, it's time for talking tech and first up, Jamie
Speaker 2: Diamond has once again hailed artificial intelligence, pointing to the
Speaker 2: technologies quote unbelievable potential for the banking industry. The JP
Speaker 2: Morgan CEO says ais use across functions like risk, fraud, marketing,
Speaker 2: customer relations has caused it to grow in importance within
Speaker 2: the company. And Jaomi, a Beijing based electronics firm best
Speaker 2: known for its smartphones, had its biggest intra day share
Speaker 2: gain in more than a year after the company announced
Speaker 2: it will start selling its long awaited electric.
Speaker 3: Vehicles this month.
Speaker 2: The company's multi billion dollar bet marks its entry into
Speaker 2: a red hot contest in China's EV market, which is led,
Speaker 2: of course by Tesla and BYD plus. Legislation that would
Speaker 2: force TikTok's Chinese parent to sell itself. All face of
Speaker 2: ban in the US is picking up speeding Congress, posing
Speaker 2: a dilemma for Republican lawmakers after former President Donald Trump
Speaker 2: reversed his previous stance and suggested the app should not
Speaker 2: be banned, after saying all young TikTok users would quote
Speaker 2: go crazy without it. Let's stick with TikTok, and let's
Speaker 2: turn to its current place in the political landscape. Every
Speaker 2: election cycle, one social media platform emerges ahead of the
Speaker 2: rest as a means of connecting with young voters. In
Speaker 2: this cycle, all signs point to TikTok, but is campaigning
Speaker 2: on TikTok even worth it. Bloomberg's Alex Barrinka has done
Speaker 2: the hands on and scientific reporting of examining Katie Porter's
Speaker 2: campaign for a run for the Senate seat right here
Speaker 2: in California, which did rely heavily on TikTok.
Speaker 3: Explain your epidology, Alex.
Speaker 7: Yeah, So, I looked at Katie Porter and opponent Adam Shift,
Speaker 7: who was the front market runner, and their performance on TikTok.
Speaker 7: Porter is known as kind of a below of TikToker.
Speaker 7: Her engagement rates are better than even the best influencers,
Speaker 7: so I wanted to see how that played out in
Speaker 7: the open race for the Senate primary, which goes to
Speaker 7: the top two vote getters regardless of party. While on TikTok,
Speaker 7: Katie Porter well outperformed out of shift. She posted half
Speaker 7: as many videos but had twice as many views total.
Speaker 7: Her engagement rates were stellar, and going into the primary
Speaker 7: in early March, she was pulling incredibly well with young voters.
Speaker 7: The vast majority of voters under thirty preferred Porter. The
Speaker 7: problem with campaigning on social media was laid bare though
Speaker 7: with the results. Porter came in third, which means she
Speaker 7: will not be on the ballot in November. Why ed, Well,
Speaker 7: those young people on TikTok didn't show up to the polls.
Speaker 7: Only ten percent of voters were under the age of
Speaker 7: thirty in the primary, forty seven percent were over the
Speaker 7: age of sixty five, And Ed, I just don't know
Speaker 7: if those folks are spending a lot of their time
Speaker 7: on TikTok.
Speaker 2: I go from being the host of the technology shows
Speaker 2: being the one time political reporter, and I was up
Speaker 2: on Super Tuesday. Hear at the desk covering California.
Speaker 3: Is so right?
Speaker 2: There are the same number of voters in California over
Speaker 2: age sixty five as under thirty five. The difference is
Speaker 2: the under thirty fives didn't show up, and in Katie
Speaker 2: Porter's case, TikTok didn't work. But clearly it has a
Speaker 2: place in this election, right And I think there's about
Speaker 2: one hundred and seventy million US users of TikTok. I
Speaker 2: think I'm right in saying Alex So just put that
Speaker 2: into perspective here in the context of this bill that's
Speaker 2: playing out in DC.
Speaker 7: There are and it really kind of this this primary
Speaker 7: lays bear also a pain point of the Democrats. They
Speaker 7: really need young voters to show up. They showed up
Speaker 7: in hordes for Biden. They showed up in the midterms
Speaker 7: and the last cycle and stopped that prophesized red wave.
Speaker 7: So for those one hundred and seventy million Americans, forty
Speaker 7: three percent of them say they often get their news
Speaker 7: on TikTok. So this is certainly a place for politicians
Speaker 7: to spend their time because those traditional TV AD dollars,
Speaker 7: they're looking away from those to reach younger voters. I
Speaker 7: think the important thing in November, particularly for a camp
Speaker 7: like Biden who's now on TikTok with a campaign account
Speaker 7: is not only reaching them, not only speaking the Internet
Speaker 7: language like Katie Porter was so good at with memes
Speaker 7: and references to pop culture, but also getting those folks
Speaker 7: to not just agitate online but get them into the polls.
Speaker 7: Bridging that gap is what political experts and digital strategists
Speaker 7: told me is going to be the absolute hardest thing,
Speaker 7: And for Biden in particular, as he battles some of
Speaker 7: the narrative around his age, TikTok seems to be a
Speaker 7: place where he can kind of be relatable, be authentic,
Speaker 7: be a candidate.
Speaker 3: For those voters.
Speaker 7: Again, he's going to have to clear some of the
Speaker 7: bars to get them to not just vote with their fingers,
Speaker 7: with their likes and comments, but to get on their
Speaker 7: feet and head out to the polls.
Speaker 3: Bloomberg A xiety's for Rinkov.
Speaker 2: I really recommend you read that reporting on Katie Porter
Speaker 2: on Bloomberg.
Speaker 3: Coming up on the show, we're going to.
Speaker 2: Take the pulse of the IPO market and Reddit with
Speaker 2: Raymaker Securities Greg Martin.
Speaker 3: Let's check a look of the markets.
Speaker 2: These are your major indices that we're looking at, and
Speaker 2: I think the story is after we got that hot
Speaker 2: CPI print markets and traders were braced for the worst
Speaker 2: case scenario, but in reality, nothing's really changed. The market
Speaker 2: is still betting that a first rate cut would come
Speaker 2: in June, if at all. And you look at the
Speaker 2: NASDAK one hundreds of example slight outperformance relative d S
Speaker 2: and P five hundred. A big part of that, as
Speaker 2: we know, is Oracle and it's strong earnings. This is
Speaker 2: Bloomberg Technology. Welcome back to Bloomberg Technology, Ed Ludlow here
Speaker 2: in San Francisco, Okay. Reddit's IPO is still the talk
Speaker 2: of well Reddit. Last night the company posted an ama
Speaker 2: or in this case and our ask me almost anything,
Speaker 2: and in it, reddit admins invited redditors to ask questions
Speaker 2: to the CEO, COO, and CFO through the end of
Speaker 2: March twelfth. Reddit then plans to take a selection of
Speaker 2: the highest up voted posts and respond to them on
Speaker 2: March eighteenth in a video, because legally it can't respond
Speaker 2: to them in the comments section.
Speaker 3: Here's the thing.
Speaker 2: As of this morning, the most upvoted post by redditors
Speaker 2: posed this question quote the general consensus vibe among Reddit
Speaker 2: users about the IPO and what it portends for the
Speaker 2: future of the site seems to be extremely negative.
Speaker 3: Why do you think that is? Question mark?
Speaker 2: It speaks to the historically combative relationship redditors have on
Speaker 2: the site. And remember, redditors are going to be able
Speaker 2: to claim eight percent of the shares on offer in
Speaker 2: reddits IPO. Let's talk about the listing with Greg Martin,
Speaker 2: co founder and managing director of Rainmaker Securities.
Speaker 3: Let's start with.
Speaker 2: Ba greg reaction to the idea that this social media
Speaker 2: company is trying to market eight percent of the offering
Speaker 2: to redditors who don't seem to like the company offering them.
Speaker 8: Well, thank you for having me ed and good to
Speaker 8: see again. You know it's smart. Clearly, there's a risk
Speaker 8: that Reddit sees with you know, just being a commercial
Speaker 8: enterprise at all, and now you know, selling themselves, you know,
Speaker 8: as a public company and you know, trying to maximize
Speaker 8: for profits.
Speaker 1: It's kind of.
Speaker 8: Violates, you know, the relationship that they have with their users,
Speaker 8: who contribute a vast amount of content for free, and
Speaker 8: now they're potentially you know, the commercialization becomes a risk factor.
Speaker 8: And so how do they mitigate that risk. They make
Speaker 8: their users and their content generators part of the company.
Speaker 1: They give them an economic incentive to say, you.
Speaker 8: Know, positive things about Reddit, because you know, now they're
Speaker 8: hopefully going to be i PO share owners, and they're
Speaker 8: going to be motivated to you know, speak well of Reddit.
Speaker 1: So I think it's smart in what they're doing.
Speaker 8: But there's still a risk that that the Reddit backlash,
Speaker 8: you know, from people who don't own shares, or are
Speaker 8: people who you know, shirk the opportunity to own shares
Speaker 8: because they want to remain on this you know, bohemian community.
Speaker 8: There's still that risk. But I think it's smart what
Speaker 8: Reddit is doing.
Speaker 2: I've been reflecting in the last twenty four forty eight
Speaker 2: hours on the timing of all of this. Now, I
Speaker 2: remember back in twenty twenty one when they confidentially filed.
Speaker 2: Twenty twenty one was like the banner year for the
Speaker 2: USIPO market, and I just wonder how you frame the
Speaker 2: timing of whether they missed the boat or actually they
Speaker 2: were right to wait until this point.
Speaker 1: Yeah.
Speaker 8: Well, I mean, listen, it would have been it would
Speaker 8: have been great if they could have gone out, you know,
Speaker 8: maybe in twenty nineteen, twenty twenty, and you know, had
Speaker 8: a few years of the zero interest rate environment that
Speaker 8: we had and and sort of you know, shored things up,
Speaker 8: short up their after market performance. But I think going
Speaker 8: public at the end of twenty one would have been
Speaker 8: a big mistake. Obviously twenty twenty two was a significant
Speaker 8: down year. I think their value would have been hammered.
Speaker 8: They would have lost all of the halo effect of
Speaker 8: being a new public company. They were clearly, you know,
Speaker 8: way behind in terms of revenues at that point. They
Speaker 8: didn't have an AI story like they're trying to really
Speaker 8: tell now to beep up their valuation. So I think
Speaker 8: it's a good thing that they didn't go public.
Speaker 1: Then.
Speaker 8: I think the markets are more favorable now for more
Speaker 8: of a long term successful story, and I think they're
Speaker 8: going to price their IPO at a much more reasonable
Speaker 8: valuation now than they would have in twenty twenty one.
Speaker 2: I want to talk about the valuation, but I also
Speaker 2: do want to talk about AI. You said that they're
Speaker 2: now telling the story. That story is essentially what we
Speaker 2: could do is license the content to those who want
Speaker 2: the data to train large language models or foundation models.
Speaker 2: How does that sell to somebody deciding whether or not
Speaker 2: to buy into an IPO.
Speaker 1: Well, that's the million dollar question.
Speaker 8: There's there's no doubt that the company today is ninety
Speaker 8: eight percent revenue advertising revenue. So it's a media company
Speaker 8: and it should trade more like a pinterest or a Snapchat,
Speaker 8: but they are trying to trying to push the narrative
Speaker 8: to sell more like an AI data company. They do
Speaker 8: have a lot of proprietary data that's this user generated
Speaker 8: content around various interest groups, whether it's stocks or cars
Speaker 8: or all kinds of interest groups, so that they do
Speaker 8: have a lot of content that their users are generating
Speaker 8: and it's proprietary. And so they've done deals already with Google.
Speaker 8: They've talked about you know, two hundred million of sort
Speaker 8: of this data revenue over the next three years, including
Speaker 8: us you know, around a sixty million dollar deal with Google.
Speaker 8: So they do have actual revenue associated with this you
Speaker 8: know AI training, you know model, you know the AI
Speaker 8: coming onto their site, you know, crawling through their data
Speaker 8: and training itself. So there is a there is a
Speaker 8: story there, but it also again runs the risk of
Speaker 8: inflaving their users who are like, hey, you're selling my data, You're.
Speaker 1: Having an AI train on me, and I'm not getting
Speaker 1: paid for it.
Speaker 8: So there's there's a risk of that strategy as well,
Speaker 8: But I think they're trying to get away from the
Speaker 8: just being a pure advertising revenue narrative, and I think
Speaker 8: it's a good strategy if they want to lift their valuation.
Speaker 2: Okay, so valuation at the upper end of the range
Speaker 2: thirty four dollars a share on a diluted basis, taking
Speaker 2: into account RSUs and whatnot. Six point four billion. How
Speaker 2: marketable is that? You know, people pay a lot of
Speaker 2: attention to a headline figure on valuation.
Speaker 1: Yeah.
Speaker 8: Well, the company did about eight hundred million of revenue
Speaker 8: last year, grew about twenty percent, so you know, kind
Speaker 8: of pedestrian growth. Ninety eight percent of that revenue is advertising.
Speaker 8: If you just were to apply a you know, five
Speaker 8: to seven x multiple to that, which is where their
Speaker 8: comps Pinterest and Snapchat, would you know, sort of trade
Speaker 8: in that range, you'd come up with a four to
Speaker 8: six billion dollar valuation. So six at the very high end,
Speaker 8: and frankly probably should be closer to five. We're seeing
Speaker 8: you know, trades on our platform, you know, at the
Speaker 8: four point eight to five billion rangeing on the private
Speaker 8: market before.
Speaker 1: They went hit the road this week.
Speaker 8: So I think that it's a stretch and again, I
Speaker 8: think it's a question of whether the market will buy
Speaker 8: into this emerging you know, data AI story that they're
Speaker 8: trying to tell. They do have some contracts, they do
Speaker 8: have some revenue, and in order to you know, push
Speaker 8: clear of a traditional social media multiple, that's what the
Speaker 8: market's going to have to believe. And that's why you know,
Speaker 8: they speak up of Sam Altman, you know, with his
Speaker 8: investment and him being involved with the company, and there's
Speaker 8: a lot around the AI story in order to push
Speaker 8: that multiple up. But I think it's going to be
Speaker 8: a challenge.
Speaker 2: I did note that I don't think there's a single
Speaker 2: mention of Alexis o'hanian, one of the other co founders
Speaker 2: in the S one, and when he's next on the show,
Speaker 2: I'm certainly going to ask him about that. Greg Martin,
Speaker 2: co founder managing director Raymaker Securities, always knows the pulse
Speaker 2: of what's going on in the ground. All right, let's
Speaker 2: get some news. Venture capital firm Excel is backing an
Speaker 2: AIS startup that's using the technology to kill finance paperwork, Nananetes,
Speaker 2: which uses artificial intelligence to help businesses square accounts and
Speaker 2: manage budgets, raised twenty nine million dollars in an early
Speaker 2: round led by Excel India, Y Combinator and Elevation Capital,
Speaker 2: and others took part in the Series B round, which
Speaker 2: brings the San Francisco based startups total funding to forty
Speaker 2: million dollars. Let's talk a little bit more about startups
Speaker 2: and venture with Selil Deshpande on today's VC Spotlight. He
Speaker 2: is the founder and general partner of Uncorrelated Ventures, which
Speaker 2: raised a new three hundred and fifteen million dollar fund
Speaker 2: just a few weeks ago to focus on software and crypto.
Speaker 2: And we'd point out that for a solo GP, that's
Speaker 2: a pretty big chunk of change. Two focuses software crypto,
Speaker 2: which is the bigger focus.
Speaker 9: Infrastructure software is a larger focus. That's eighty percent. Why
Speaker 9: crypto is twenty percent, Well, partly it's my background. It's
Speaker 9: all been in infrastructure software, and a lot of crypto
Speaker 9: is infrastructure software. Not all of it is, but portions
Speaker 9: of it are just decentralized infrastructure software.
Speaker 2: How much I don't know how to put this feel good?
Speaker 2: Does spaces like infrastructure software SaaS get from what's happening
Speaker 2: in AI? As far as I can tell, the very
Speaker 2: basic pitch for AI is that it is a value
Speaker 2: add to existing software platforms.
Speaker 1: Well.
Speaker 9: AI is a subset of infrastructure software, so it gets
Speaker 9: a lot of feel good value from AI. Infrastructure software
Speaker 9: is just software that is not application software. So AI
Speaker 9: is very, very mean friendly right now, it's the principally,
Speaker 9: it's the sentiment is too positive.
Speaker 1: It's a hot mess.
Speaker 9: Where I'd like to be investing is in the tools
Speaker 9: and tool chains layer, but they are just too many companies,
Speaker 9: it's too crowded, evaluations are high. The lower layer hardware
Speaker 9: is off limits to venture investors, right that's the realm
Speaker 9: of larger companies. The layer above that, the foundation models.
Speaker 9: Those are also tough to invest in because they're more
Speaker 9: like operating systems, which are tougher to monetize, than like databases,
Speaker 9: which are easier to monetize. So the third layer, tools
Speaker 9: and tool chains, is the best area for venture investors
Speaker 9: to be investing in, but it's a hot mess. The
Speaker 9: fourth layer, which is just using AI or leveraging AI,
Speaker 9: that's been so far a bit easier for me to invest.
Speaker 2: He keeps saying that it's a hot mess. Be an
Speaker 2: opportunity or a way for you to navigate the hot
Speaker 2: mess because you've raised a sizeable fund and the LPs
Speaker 2: must back your vision to invest in that layer.
Speaker 9: Yeah, there are a lot of great opportunities. There are
Speaker 9: just so many companies that it's tough to weed through
Speaker 9: all of them and find the right ones. And when
Speaker 9: you find the right ones, the valuations are very high,
Speaker 9: the rounds are very hot, they close fast, so it's
Speaker 9: just tougher to prosecute. I do have half a dozen
Speaker 9: or so seed investments in that area, but we'll see
Speaker 9: how well they do.
Speaker 3: But that's a good point.
Speaker 2: So my next question would have been, well, at what
Speaker 2: stage and where geographically are you finding my success?
Speaker 9: Initially seed Series A, small checks and Series B, and
Speaker 9: geographically US or world markets with an exception for India.
Speaker 2: The other focus of the fund is crypto, and I'm
Speaker 2: guessing crypto j and startups that they're working more likely
Speaker 2: on the underlying technology. Is that right, well as opposed
Speaker 2: to digital tokens themselves.
Speaker 9: Well, yes, although sometimes the only way to invest in
Speaker 9: the projects is to buy the token. Sometimes you buy
Speaker 9: equity right and eventually the equity converts to tokens. But yeah,
Speaker 9: to the extent that it is decentralized infrastructure. It's in
Speaker 9: scope for me. Not all of crypto is infrastructure, though.
Speaker 2: Three hundred and fifteen million dollars is a sizeable fund.
Speaker 2: And I'm really interested in this economic environment, in this
Speaker 2: rates environment, what the LPs look like. You know where
Speaker 2: you were able to raise those funds from and how
Speaker 2: quickly you were able to do it.
Speaker 9: They were mostly institutional, so seventy seventy five percent is institutional,
Speaker 9: and there's a long tail of family offices and individuals.
Speaker 9: For the rest. There are four sovereign wealth funds. There's
Speaker 9: one university endowment. The fundraising was not too bad, it
Speaker 9: was it was pretty smooth.
Speaker 3: Let's really quickly go back to AI.
Speaker 2: You expressed your concerns about AI valuations right now, or
Speaker 2: at least the impact of the interest in AI on valuations.
Speaker 2: Do you feel like that that is something that will
Speaker 2: continue throughout the year or investors have kind of had
Speaker 2: their fill of the high multiple AI names that they've
Speaker 2: gone into.
Speaker 9: AI is a huge long term opportunity, it's going to
Speaker 9: change everything. Everyone's going to leverage AI, and AI is
Speaker 9: available to everybody through an API call. But short term,
Speaker 9: I'm a little worried the positive sentiment makes me a
Speaker 9: little nervous and hoping for the trough of disillusionment to
Speaker 9: invest more. But I think beyond the traph of disillusionment,
Speaker 9: it'll it'll be you know, it'll be an upcrend again.
Speaker 2: An AI landscape that is a hot mess and underpinned
Speaker 2: by a trough of disillusionment. Salil Deshpande, founder and general
Speaker 2: partner of Uncorrelated Adventures, really appreciate that conversation.
Speaker 3: Let's get a quick update.
Speaker 2: Earlier in the show, we reported on open AI's court
Speaker 2: filing calling must suit against them incoherent. During the show,
Speaker 2: Musk emailed me his response to say, quote, open ai
Speaker 2: is a lie.
Speaker 3: And that's all that. His response to the story.
Speaker 2: Said, Rent the Runway, a platform where customers can subscribe
Speaker 2: rent items a la carte and shop resale from hundreds
Speaker 2: of designer brands, is gifting one million dollars in free
Speaker 2: subscriptions Throughout this Women's History Month, two women who have
Speaker 2: recently reached a new milestone in their careers, such as
Speaker 2: a promote job, successful launch, or new campaign.
Speaker 3: Here are the details.
Speaker 2: CEO Jennifer Hyman, and this is also a collaboration with
Speaker 2: LinkedIn on the platform side, just explain why you're doing it.
Speaker 3: Well.
Speaker 10: I recently had an experience where I had my third child,
Speaker 10: and it was fascinating because I received more personal congratulations
Speaker 10: and love than when I ipo'd Runt the Runway back
Speaker 10: in kind of twenty twenty one, and I started thinking
Speaker 10: about the fact that within the context of our culture,
Speaker 10: it is kind of part of the game that women
Speaker 10: feel more comfortable sharing their personal milestones and personal accomplishments
Speaker 10: than their professional ones. And given that we live in
Speaker 10: a world that the more senior you get in an organization,
Speaker 10: the more your ability to rise is based on your brand,
Speaker 10: the stories that you yourself tell about yourself, and the
Speaker 10: stories that others tell about you. This is a campaign
Speaker 10: to encourage more women to feel comfortable sharing their professional
Speaker 10: accomplishments on a platform like LinkedIn where it matters.
Speaker 2: Jen, as you know and as I've disclosed on this
Speaker 2: program before, we are a Rent the Runway household. My
Speaker 2: wife is a longtime subscriber, user, customer of Rent the Runway.
Speaker 2: But I think back to a year ago when you're
Speaker 2: on the show in particularly in the summer of twenty
Speaker 2: twenty three, you cut back on incentives and discounts like this,
Speaker 2: and the logic you outlined at the time was that
Speaker 2: those new users or subscribers that sign up in the
Speaker 2: face of lower discount are likely to stay longer. So
Speaker 2: what's the strategy here with this incentive in the context
Speaker 2: of subscriber growth.
Speaker 10: Our brand has always been known as really a power
Speaker 10: tool for working women. So one of the main reasons
Speaker 10: why someone signs up for rent the Runway is to
Speaker 10: feel empowered and confident every single day at work. So
Speaker 10: the fact now that women are going to be referring
Speaker 10: their colleagues, their peers, their friends for an accolade that
Speaker 10: they recently deserve in their career and to receive a
Speaker 10: Rent the Runway subscription, we feel that this is exactly
Speaker 10: how we want to bring our brand kind of back
Speaker 10: into the universe and create momentum around our brand being
Speaker 10: a brand that supports professional women.
Speaker 2: When I posted on social media you were coming on
Speaker 2: the show, a lot of people brought up a Newly
Speaker 2: and they point out that this is a younger platform,
Speaker 2: but it has more.
Speaker 3: Subscribers than Rent the Runway has, and they.
Speaker 2: Ask if you've learned any lessons from Newly and taken
Speaker 2: anything from their experience that you think you might now
Speaker 2: apply to Rent the Runway.
Speaker 10: I think that it's incredible that a market that we
Speaker 10: created around renting clothes is now a real market in
Speaker 10: the US, that millions of women per year are renting
Speaker 10: fashion subscribing to fashion, and there are different platforms and
Speaker 10: different choices that provide different kinds of designer brands and
Speaker 10: different aesthetics. Rent the Runway is about catering to a
Speaker 10: woman who is accelerating in her career, who also you know,
Speaker 10: wants to socialize, who is also traveling, who's trying to
Speaker 10: optimize her own time. So I think that really focusing
Speaker 10: in on who our core customer is this campaign being
Speaker 10: a exemplifier of who that customer is is a critical
Speaker 10: part of us continuing to grow and accelerate. I think
Speaker 10: Newly has done a really great job at targeting, you know,
Speaker 10: a significantly younger customer than Rent the Runway.
Speaker 3: Jim, what's the AI story. We've Rent the Runway.
Speaker 10: So AI is really an important part of how women
Speaker 10: search for product on our site. We launched AI enabled
Speaker 10: kind of search and styling earlier in the year that
Speaker 10: enable women to have a long tail use case like
Speaker 10: what should I wear to the tailors Swift concert and
Speaker 10: to get back a whole host of suggestions that.
Speaker 3: Are kind of tailor made for her.
Speaker 10: So you'll see us continuing to iterate on styling in
Speaker 10: general and search because part of our platform is about
Speaker 10: offering discovery and enabling women to wear things that they
Speaker 10: wouldn't otherwise buy. So AI is really a perfect compliment
Speaker 10: to that.
Speaker 2: Jen the final question from our audience, it's been tough
Speaker 2: for rent the wrong way. The shares have had a
Speaker 2: hard run. Would you consider taking the company private to
Speaker 2: go away and kind of go back to growth.
Speaker 10: So our focus is on driving the business to free
Speaker 10: cash flow, profitability, and on making the right long term
Speaker 10: decisions for this business. I think that what has really
Speaker 10: been proven out over the last few years is that
Speaker 10: Rendel is a real market. It is growing far quicker
Speaker 10: than the overall fashion industry. There's millions of women who
Speaker 10: now are comfortable and confident with signing up for a
Speaker 10: subscription to fashion that was not the case even five
Speaker 10: years ago. And so it's our responsibility to ensure that
Speaker 10: this is a profitable, sustainable business and that we take
Speaker 10: advantage of the market that we were a part in
Speaker 10: creating rend.
Speaker 2: The Runway CEO and founder Jennifer Hyman, great to have
Speaker 2: you on the program.
Speaker 3: Thank you.
Speaker 2: That does it for this edition of Bloomberg Technology.
Speaker 3: What a show it's been.
Speaker 2: Check out the pod where you get your podcasts from
Speaker 2: San Francisco.
Speaker 3: This is Bloomberg Technology.