Speaker 1: From Mark hard of We're Innovation, Money and Power Collie
Speaker 1: in Silicon Valley, NBR. This is Bloomberg Technology with Caroline
Speaker 1: Hide and Ed Ludlow. I'm Caroline Hide of Bloomberg's World
Speaker 1: read Quarters in New York, and I'med Ludlow in San Francisco.
Speaker 1: This is Bloomberg Technology coming up. The banking chaos continues
Speaker 1: SVB Financial files for Chapter eleven bankruptcy as First Republic
Speaker 1: sees its worst we ever on record. Will bring you
Speaker 1: the updates as they cross, and we'll look at how
Speaker 1: this is playing out in the market. Silvia Jablonsky of
Speaker 1: Defiance CTS joins us with her take on bitcoin, which
Speaker 1: is flirting with its biggest weekly gain in almost two years,
Speaker 1: plus how the crisis is playing out in the c suite.
Speaker 1: We speak with the CEOs of Mercury of Rippling for
Speaker 1: their take, and we get the venture capital outlook for
Speaker 1: the co founder of Cozon Adventures. All that so much
Speaker 1: more coming up. Let's get first to an extraordinary week
Speaker 1: on the markets that finishes with an extraordinary day. We're
Speaker 1: off by one percent on the NASTAC, but remember this
Speaker 1: index is actually higher to the tune of four percent
Speaker 1: on the week as actually the big tech still outperforms
Speaker 1: when we're worried about small tech. And of course for
Speaker 1: the banks, the KBW bank condects another sink by fifteen
Speaker 1: percent on the week. We're down by five percent on
Speaker 1: the day. We are down by the most on the month.
Speaker 1: Since March of twenty twenty twenty eight percent of value
Speaker 1: of the KBW bank connects has been extinguished two year yields.
Speaker 1: We fly to safety once again. We're off by twenty
Speaker 1: four basis points. This as we see inflation expectations from
Speaker 1: the consumer from the humish data coming down. Let's move
Speaker 1: it on. Let's look at what's happening. What was once
Speaker 1: inflation hedge at the moment, is it some sort of
Speaker 1: well safety portrayed at the moment as well? Up twenty
Speaker 1: three percent in the last five days for bitcoin age extraordinary.
Speaker 1: Dig into some of the micro moves, well, the mentality
Speaker 1: the market's really interesting. You can name like Microsoft up
Speaker 1: half a percentage point, where most names on the NASDAC
Speaker 1: one hundred of down. There's a debate whether that's a
Speaker 1: move to safety or if it's a feel good from
Speaker 1: all their AI announcements this week and video pushing higher
Speaker 1: one percent, Morgan Stanley calling this a mega trend in
Speaker 1: AI and video, of course, has been talked about for
Speaker 1: a few days now as one of the main beneficiaries.
Speaker 1: Interesting to look at the streamers. Disney down nine tenths
Speaker 1: one percent, Netflix down pretty significantly. Third party data out
Speaker 1: Friday showed that actually Disney's ad supported tier of Disney
Speaker 1: Plus is outperforming the ad supported tiers of some of
Speaker 1: its piers, not translating through to the stock. First Republic,
Speaker 1: We've had holts, we've had volatility. All told, this stock
Speaker 1: is down seventy percent over a five day basis. It's
Speaker 1: worst week on record, the stock trading at its lowest
Speaker 1: level since twenty eleven. We are still waiting for definitive
Speaker 1: answers in this banking sector. What we know is that
Speaker 1: Biden's paying very close attention to this carrot, as we
Speaker 1: all are. And let's just talk a little bit about
Speaker 1: the step by step take with SVB, the company filing
Speaker 1: for Chapter eleven bankruptcy earlier today, with us now to
Speaker 1: break it all down as she has done every single
Speaker 1: day of the week and the weekend before. Bloomberg's Chenali
Speaker 1: bask And Sali. What does it mean for the parent
Speaker 1: company to follow a bankruptcy and who's involved? There are
Speaker 1: a lot of questions to be considered here. I've been
Speaker 1: following this closely. I've been asking all week why has
Speaker 1: there not been a bankruptcy filing? Now? What you'll have
Speaker 1: as creditors who will want a certain amount of money
Speaker 1: back number one. Number two, there are certain assets that
Speaker 1: will not be included a here, certain banking assets and
Speaker 1: including some of the assets tied to his venture portfolio
Speaker 1: year and its securities business as well. What I've been
Speaker 1: hearing throughout the entire week was the difficulty guys, it
Speaker 1: has been to sell assets to recoup value here. Now
Speaker 1: this is under the overseeing of a bankruptcy judge as well.
Speaker 1: The hohope here is that there is enough money that
Speaker 1: can be redeemed here by strategic options for some of
Speaker 1: these assets. I mean ed what's interesting, of course, Silicon
Speaker 1: Valley Bank, which is previously under SVB Financial, Well, it's
Speaker 1: still got a bridge bank, right, and it's got new executives. Yes,
Speaker 1: We've got to be really clear, it's financial that did
Speaker 1: the Chapter thirty SVB the Bridge Bank right, it continues
Speaker 1: to be a California chartered bank under the receiver ship
Speaker 1: of the FDIC, so it cannot fall into bankruptcy. That
Speaker 1: said Sinali. Astonishing reporting on the Bloomberg terminal that one
Speaker 1: year ago the San Francisco FED brought in a new
Speaker 1: assessment team quickly flagged issues at that bank and asked
Speaker 1: management to act on it. What have we reported? This
Speaker 1: is a very complicated thing, and there's a lot of
Speaker 1: questions being asked, not just about how they lobbied for
Speaker 1: easiness when it came to how they operated. There's a
Speaker 1: lot of questions here about whether the system across the
Speaker 1: United States is not equal to begin with. One example
Speaker 1: that you pointed out, Frankly Head is that that the
Speaker 1: rollback and rules really helped catapult the expansion here of
Speaker 1: Silicon Valley Bank in the most recent years. I would
Speaker 1: also say that when it comes to the way they
Speaker 1: lent to businesses, they had different rules and some of
Speaker 1: the largest banks that are occ Charter, that is the
Speaker 1: Office of the Control of Currency Charter, they had really
Speaker 1: strict rules around leverage lending and lending to unprofitable venture
Speaker 1: backed companies, which is why now when you're seeing these
Speaker 1: firms trying to buy in circle assets around that venture
Speaker 1: backed loan portfolio. Even private equity in private capital firms
Speaker 1: are saying this is a no go because it's not
Speaker 1: how they were used to lending. So it's a complicated equation.
Speaker 1: It doesn't mean things won't get sold. People are definitely
Speaker 1: looking at the pieces of the pie in the assets here.
Speaker 1: But to your point here regulation the lack thereof the
Speaker 1: process and kind of pushing for lighter regulations, that won't
Speaker 1: just be looked at for this firm, guys, it will
Speaker 1: be looked at for a lot of the smaller firms
Speaker 1: that have done the exact same thing. Well, we talk
Speaker 1: about seven days since Silicon Valley Bank failed Caroline, and
Speaker 1: I think the question we're going to answer out this
Speaker 1: program is about accountability. In other words, who is responsible
Speaker 1: for what happened to We actually do not have a
Speaker 1: clear answer on that yet and it's something Shannali that
Speaker 1: Joe Biden, President Joe Biden is looking into accountability. We
Speaker 1: still have yet ships to fall with other regional lenders.
Speaker 1: We certainly do. I think we have to look at
Speaker 1: that drop off in the stock price as well as
Speaker 1: the easing of the bonds as well, when you look
Speaker 1: at First Republic, just how much in value this company
Speaker 1: has lost this week a loan. It's now less than
Speaker 1: a five billion dollar company by market value. We look
Speaker 1: at what has to then at SVB, we've been talking
Speaker 1: about this. My sources were saying, this is a bank
Speaker 1: you could have maybe bought on Thursday night before that
Speaker 1: forty billion, forty two billion dollars deposit flight. But things
Speaker 1: deteriorated quickly. They're trying not to make this happen for
Speaker 1: First Republic. First Republic still has a lot of amazing assets.
Speaker 1: By the way, for the California community. You talk to
Speaker 1: banks across the country. First Republic really dove in in
Speaker 1: a way that a lot of big banks were not
Speaker 1: on top of as quickly as they were when it
Speaker 1: came to catering to the elite of California certainly the
Speaker 1: country big wealth manager, big mortgage lender for example. And
Speaker 1: so a lot of questions about the future First Republic
Speaker 1: as well, both for the California community as well as
Speaker 1: the rest of the country, and whether this is a
Speaker 1: bank that can be sold ultimately, and that is something
Speaker 1: that market is watching for very closely. Bloomberg Snali Basset.
Speaker 1: You have been everywhere this week. Thank you for your reporting.
Speaker 1: Happy Friday. I want to stick with the markets and
Speaker 1: the market impact of what's playing out across asset and
Speaker 1: bringing Sylvia Jablonsky Defiance ETFs CEO and CIO and Sylvia.
Speaker 1: Caroline made a really good point at the top of
Speaker 1: the show. You look at the NAZAC one hundred, for example,
Speaker 1: headed for its best weeks since November, despite sort of
Speaker 1: the broad risk off sentiment that we've seen throughout this
Speaker 1: week driven by headlines. Yeah, great to be here, and yes,
Speaker 1: it was a great point made at the top of
Speaker 1: the show. And actually it's something that I've been talking
Speaker 1: about and thinking about for weeks prior to the banking
Speaker 1: crisis here. So in my mind, even if you take
Speaker 1: away the banking crisis, some of the top fang companies
Speaker 1: out there are the top tech names, especially are on
Speaker 1: the precipice of innovation with chat GYBT. We all sort
Speaker 1: of know AI and how we expect that to play out.
Speaker 1: So there's a good reason to invest for that reason alone.
Speaker 1: But then on top of it, they are battered last year,
Speaker 1: but look where they are. They still sit with very
Speaker 1: strong balance sheet and you have a macro you know
Speaker 1: overhang here of a hawkish FED that is now shifting
Speaker 1: regardless of the banking crisis. So now throw an SVB.
Speaker 1: You have some you know, deflationary pressures. You have a
Speaker 1: FED that is likely to think about pausing and sort
Speaker 1: of stopping on the rates. And who does that benefit
Speaker 1: that if it's you know, tech companies, their costs to
Speaker 1: borrow becomes cheaper, they can do the RD and just
Speaker 1: to jump in on the FED. Do you think that
Speaker 1: they won't be hiking the will come next week? Oh?
Speaker 1: I think that the FEDER will likely you know, I
Speaker 1: don't know what the FEDER will do, but in my opinion,
Speaker 1: I think, you know, twenty five pips is likely to
Speaker 1: be on the table with a long explanation that is
Speaker 1: not as hawkish around the idea that they're going to
Speaker 1: pause and and you know, taking the environ and see
Speaker 1: what happens. Because I think there's this massive need now
Speaker 1: to reinstall confidence in the banking system and a shock
Speaker 1: like that and a scare like that actually does have
Speaker 1: an impact on consumers and investors and makes investors want
Speaker 1: to sit on the sideline, makes consumers not want to
Speaker 1: spend because they're worried about that recession, you know, and
Speaker 1: so on. So I do think that beyond this next
Speaker 1: rate hike, it's going to be a much different story
Speaker 1: than it was a month ago. So when you're looking
Speaker 1: at allocating money, have you been this week and into wold?
Speaker 1: You know? I have not yesterday when the market was rallying.
Speaker 1: But I you know, I look at the long term
Speaker 1: as an investor, and the things that I like in
Speaker 1: the long term are that Fourth Industrial Revolution trade, right,
Speaker 1: but with the quantum of machine learning and the AI,
Speaker 1: I continue to allocate there. So when we have these
Speaker 1: pullbacks days like today's names, I like to look at
Speaker 1: a basket of stocks that represents those teams, whether it's
Speaker 1: semi conductors, the big tech companies, and you know, in
Speaker 1: my mind, I'm going to hold those for the next
Speaker 1: three to five years and that'll pay off. And then
Speaker 1: I diversify too, right. I like defensive portfolios. I like
Speaker 1: alternative energy things like hydrogen, you know, the way of
Speaker 1: the future of how we'll sort of power our cars
Speaker 1: at homes and things like that. That's a growing trend
Speaker 1: and all of these names are battered along with the
Speaker 1: rest of the market. This week. So in general, though,
Speaker 1: if you're an investor, you know, I think even index
Speaker 1: exposures to pick up at these levels when we get
Speaker 1: pullbacks like today. When I think of defiance, of course, ed,
Speaker 1: I think of the ETFs that are related to crypto
Speaker 1: and not just an announced that a boy, what a
Speaker 1: week for crypto. Well, I guess, Sylvia. My question would
Speaker 1: be that there is this high degree of bullishness around
Speaker 1: crypto or digital assets, right yet the world around that industry,
Speaker 1: the startups, the companies are under quite severe dress. How
Speaker 1: do you square that? Yeah, so you know, the going
Speaker 1: back to you know, Caroline, I think we square it
Speaker 1: by creating a short fund. So we're actually sort of
Speaker 1: worried about some of that risk, and we think that
Speaker 1: a lot of investors in the short term will be bearish.
Speaker 1: But you know that, Beans said, I think it depends
Speaker 1: on what type of crypto we're talking about. So if
Speaker 1: you look at bitcoin, you know, bitcoin is almost like
Speaker 1: the SMP five hundred of of of crypto, right It's
Speaker 1: it's sort of it's the least risky of crypto assets.
Speaker 1: And I think that with the bank blow up, a
Speaker 1: lot of investors have viewed that as a good alternative
Speaker 1: to not have exposure essentially to both government and bank
Speaker 1: failures and things like that. So it's essentially catching a bid.
Speaker 1: But I think if you look at the overall crypto economy,
Speaker 1: it's the same situation as you have with you know, high,
Speaker 1: highly leveraged growth companies that are you know, not the
Speaker 1: friends necessarily, but they're highly impacted by rates, They're highly
Speaker 1: impacted by inflation, They're very volatile, and when you have
Speaker 1: to get a bank collapse and you have an uncertain
Speaker 1: macro backdrop of recession or not, you're unlikely have investors
Speaker 1: piling into those types of names. In my opinion, I
Speaker 1: think they'll stick with bitcoin. You know, maybe they'll look
Speaker 1: at ethereum, but but I think, you know, the smaller
Speaker 1: names are probably not going to catch a bid. See
Speaker 1: names that I show you the top of the show
Speaker 1: where Nvidio and Microsoft and artificial intelligence. Despite all of
Speaker 1: the chaos and the banking sector is continued to be
Speaker 1: a theme. At least that's what cell side is are
Speaker 1: writing about. How are you positioning to kind of take
Speaker 1: advantage of momentum in that space. Yeah, at our company,
Speaker 1: they're actually to the top holdings in our in our
Speaker 1: quantum basket, which is the machine learning and AI trade there.
Speaker 1: And I think what we're looking for is is just
Speaker 1: the build out. You know, there's an expected cager of
Speaker 1: about thirty seven percent in the next five years strictly
Speaker 1: off of AI. If you think about how it's going
Speaker 1: to impact every sector from you know, retail, Amazon being
Speaker 1: able to target ads and you know, kind of put
Speaker 1: things package your basket more accurately, healthcare, connecting doctors, you know, robots, research,
Speaker 1: all of these types of things that we've we've talked
Speaker 1: about before. Defense, you know, more precise targeting. All of
Speaker 1: this depends on AI. We know that that's growing out
Speaker 1: and you know, Microsoft just really put themselves in the
Speaker 1: front of the pack there in terms of our d
Speaker 1: an investment in the space. Another discussion of a compound
Speaker 1: annual growth rate. We love at Sylvia Tavlovsky, CEO and
Speaker 1: CIO of Defiancyts. We wish you were a RESTful weekend. Yeah,
Speaker 1: I think we all need one carros Staying in the
Speaker 1: world of crypto, though, a clash involving disgruntled coin based
Speaker 1: customers will give the US Supreme Court its first taste
Speaker 1: of the world of cryptocurrencies, foreshadowing future cases that could
Speaker 1: help define the industry. Next week, justices will hear arguments
Speaker 1: stemming from coin bases efforts to push two lawsuits into arbitration,
Speaker 1: so a procedural battle rather than a crypto specific matter
Speaker 1: coin based. Once court proceeding stopped when an appeal is
Speaker 1: filed seeking to compel arbitration. The joint case comes as
Speaker 1: high stakes fights involving the likes of Ripple and Grayscale
Speaker 1: work their way toward the court, shaping the rights of
Speaker 1: customers and companies alike in the fledgling industry. We're going
Speaker 1: to keep across that in the coming weeks. Let's say
Speaker 1: the thadhand stepped up today in Silicon valid bank Field
Speaker 1: and like a whole bunch of startups lost their venture dialers.
Speaker 1: That would that would have been and that would have
Speaker 1: been an event that I think would have been way
Speaker 1: worse than oh one like that would have been catastrophic.
Speaker 1: That was a long time venture capitalist. Bill Gurley was
Speaker 1: some of his thoughts on the banking crisis in its ramifications.
Speaker 1: It's been seven days since Silicon Valley Banks collapsed, the
Speaker 1: biggest US lender to fail in more than a decade,
Speaker 1: many tech startups and venture catalysts, the same industries by
Speaker 1: the way that fueled spob's rise, scrambled to pull their
Speaker 1: money out, and amid the exodus, tech companies diversified away
Speaker 1: from one single bank to a mix top tier names
Speaker 1: but also fintech startups that technically aren't banks at all.
Speaker 1: One of those Mercury, and in the past week, the
Speaker 1: startup has onboarded thousands of new customers. Mercury's co founder
Speaker 1: and CEO, Immadachan joins us, Now, you are not a bank, Yes,
Speaker 1: your banking services are provided by Choice Financial and Evolved Bank.
Speaker 1: So explain how you've been able to benefit this week
Speaker 1: from SBB situation. Yeah, so you know, you can go
Speaker 1: to Mercury dot com and get a bank account. We
Speaker 1: work with two partner banks, Choice and Evolve, but we've
Speaker 1: provide a full kind of suite of banking services. You
Speaker 1: can go check account wires, debit card, credit card, venture debt.
Speaker 1: We've been you know, we launched about four years ago.
Speaker 1: We've been kind of successfully doing this. We have a
Speaker 1: four hundred thousand businesses I use Mercury. It is nine
Speaker 1: seventeen local time on Friday, twelve seventeen in New York
Speaker 1: at this moment, give me a dollar value for the
Speaker 1: business that you've brought in this week. Oh, it's been
Speaker 1: above two billions so far, and then that equates to
Speaker 1: deposits or yes, and deposits. Okay, you've explained of course
Speaker 1: versuscinctly there your business and the partner banks that in
Speaker 1: particular you lend a pond or use. I'm just interested
Speaker 1: is to now insurance. Everyone must be coming too, saying
Speaker 1: am I FDIC insured? And when you go to the website,
Speaker 1: it shows that actually you can be insured up to
Speaker 1: five million in terms of deposits. Understand for our audience,
Speaker 1: how this is protected in particular? Yeah, so yeah, we're
Speaker 1: not a bank, so we don't take these deposits and
Speaker 1: lend them out. We work with our partner banks and
Speaker 1: they have a network of sweep banks underneath them. So
Speaker 1: in order to provide five million an FDIC insurance that
Speaker 1: split between twenty banks. You know what we heard Actually
Speaker 1: last week we had about a million dollars in FDIC insurance.
Speaker 1: So we've increased it by five x, and that's obviously
Speaker 1: twenty x bigger than what you would get at one bank. Yeah,
Speaker 1: you know, we heard people are really concerned about, you know,
Speaker 1: what's happening and is their money safe at Mercury, And
Speaker 1: obviously I can say it's safe. Providing that extra insurance
Speaker 1: with FDIC insurance on their deposits helps a lot. I
Speaker 1: think the main point you and I have discussed a
Speaker 1: week right is that diversifying a was something no one
Speaker 1: had thought about early enough that there were benefits to
Speaker 1: going to traditional banks and some startups that offer different
Speaker 1: things to the traditional banks. And to that point, you
Speaker 1: are offering actually access to money market funds, but they're
Speaker 1: not your money market funds. It's Vanguards for example. You're offering, therefore,
Speaker 1: to split up people's deposits and spread them across well
Speaker 1: and a range of other lenders. Why come to a middleman,
Speaker 1: Why come to a Mercury when you're worried about the
Speaker 1: security of all these vendors. Yeah, so Mercury there's a
Speaker 1: software provider. I mean, at the end of the day,
Speaker 1: if you're buying a Vanguard fund, you can obviously go
Speaker 1: to Vanguard, or you can go to e Trade, or
Speaker 1: you can come to Mercury to do it. We just
Speaker 1: make it very simple, you know, these business owners have
Speaker 1: a lot on their mind. They just want to build
Speaker 1: their business. They don't want to be thinking about where's
Speaker 1: my money. We can do things like automatically set up
Speaker 1: rules so when you're when you need more operations normal
Speaker 1: account of money, it automatically sweeps between the Vanguard fund
Speaker 1: to your normal operational fund. So we make it very
Speaker 1: simple and easy, and Mercury is actually not in the
Speaker 1: money flow at all. We're not a custodian, we're not
Speaker 1: a bank. We're an enabled to do these companies and
Speaker 1: do the kind of financial institutions behind the scene. You're
Speaker 1: backed by CRV andresen Qua two. You raised at a
Speaker 1: one point six billion dollar valuation twenty twenty one. Yeah
Speaker 1: you're raising now. No, we're profitable. We're making money every month,
Speaker 1: so we're able want to write you a check? How
Speaker 1: we're knocking on that. I've had lots of VC's reach
Speaker 1: out this week, but you know, it's just been so busy.
Speaker 1: I'm like, this is yeah, this is not the right
Speaker 1: time to trying to talk to me. Emad. We thank
Speaker 1: you for coming on for being so clear with us.
Speaker 1: All I'm making time amid well the flood of interest
Speaker 1: of Mercury. Thank you. Coming up, well, we'll turn to
Speaker 1: artificial intelligence that is buid surges after brokerages tested and approved.
Speaker 1: The companies just unveiled CHATCHBT like service more next and
Speaker 1: talking tech and sticking with artificial intelligence. We're watching in video.
Speaker 1: Shares just upgraded to overweight from equal wait at Morgan
Speaker 1: Stanley Analysts, saying that the development of generational AI, it's
Speaker 1: too much of a mega trend to get distracted by
Speaker 1: tactical concerns. We're going to currently up one percent, offer
Speaker 1: as high as other day from New York, from San Francisco,
Speaker 1: the subringberg on a market neutral basis, the quality factors
Speaker 1: at a new high. So the market perceives these companies,
Speaker 1: the Apples and the Microsofts of worlds is quality and
Speaker 1: safe haven. And that's kind of what kept the smp aflow.
Speaker 1: It's that pushbat the financials getting crushed, but then the
Speaker 1: tech pawn it. Once the markets start thinking and feeling
Speaker 1: that on even Apple's that's safe, then the s and
Speaker 1: people could actually roll over. Kept the mats that higher too.
Speaker 1: John Colivers, their head of technical strategy at Macro Risk Advisors.
Speaker 1: Now it's time for talking tech by DO surging one
Speaker 1: than fourteen percent to day after brokerages including Citigroup tested
Speaker 1: the company's just unveiled chatboart service granted it that their
Speaker 1: preliminary approval by Do's link reverse that six percent loss.
Speaker 1: On Thursday, after the founder you see here, Robin Lee,
Speaker 1: debut the new artificial intelligent technology via a recorded video
Speaker 1: speaking of AI. Data analytics firm pre State II opened
Speaker 1: in Aberdabi G forty two drew orders worth twenty five
Speaker 1: point eight billion IS four hundred ninety six million initial
Speaker 1: share offering and then later signed a strong demand for
Speaker 1: Middle Eastern offerings, and Microsoft handed in formal antitrust commitments
Speaker 1: to the EU watch dogs. Of course, they're probing the
Speaker 1: sixty nine billion dollar planned to buy Activision Bizzards. This
Speaker 1: action now puts the onus on Britain's Merger watchdog to
Speaker 1: deliver a potentially decisive ruling on the deal and pushes
Speaker 1: the EU's final deadline from March sixteenth to May twenty. Second,
Speaker 1: and the CEO of Amazon's Twitch game streaming platform is resigning.
Speaker 1: Emmett Shier will be replaced by Twitch president Dan Clancy.
Speaker 1: The departure marks the latest executive turnover over at Amazon,
Speaker 1: said Sidury's Scher, who has been at Twitch since it's
Speaker 1: very origins, said he's leaving to spend more time with
Speaker 1: his son d Welcome back to Bloomberg Technology. I'm Ed
Speaker 1: Ludlow in San Francisco. It's nine thirty am here on
Speaker 1: the West coast, but four thirty pm in London. European
Speaker 1: markets closing. This is the picture the stocks Europe six
Speaker 1: hundred down one point three percent, passing over economic data
Speaker 1: and also jitters of course in the banking sector. Euro
Speaker 1: continuing to strengthen against the dollar one oh six seven
Speaker 1: on euro dollar up around six tenths of one percent.
Speaker 1: We've seen some fluctuations in the currency market over the
Speaker 1: course of the week because of course central bank policy
Speaker 1: being a key fact at UCB, giving us that half
Speaker 1: point hype, but not a lot of guidance for what's
Speaker 1: to come in the months and years ahead. And you know,
Speaker 1: the bond markets, we're seeing some kind of advancement continue.
Speaker 1: German tenure burned off by sixteen basis points two point
Speaker 1: one two percent. The UK two year yield at the
Speaker 1: short end we're at three point two percent, down sixteen
Speaker 1: basis points as well. Inflation a big focus right now
Speaker 1: when it comes to the United Kingdom. Change the boards,
Speaker 1: and let's look over the course of the week, because
Speaker 1: the stock six hundred Europe in the equity space having
Speaker 1: its worst week since September, really feeling the impacts of
Speaker 1: that banking situation. Compare that with the picture here in
Speaker 1: the United States Caroline, and then as that one hundred. Yeah,
Speaker 1: certainly the ripple effects far and wide. Let's talk about
Speaker 1: how difficult the banking crisis has made it to raise
Speaker 1: capital for tech startups. Here's what Cleo Capital's co founder
Speaker 1: Sarah Kunst had to say about it earlier this week.
Speaker 1: It's going to be a hard quarter to pitch in,
Speaker 1: you know, getting net new capit a lot of vcs
Speaker 1: who don't already have an obligation to the money they've
Speaker 1: put with you is going to be harder than ever.
Speaker 1: And it doesn't mean it's totally dried up, and there
Speaker 1: will be tons of people starting great new companies, but
Speaker 1: this is going to be a much different fundraising environment
Speaker 1: than even a few months ago. For some the funding
Speaker 1: is still open. Let's bringing Parker Conrad for his take
Speaker 1: on all of the CEO Payroll service provider, Rippling, it's
Speaker 1: just raised five hundred million dollars in three days alone. Parker,
Speaker 1: this is all in many ways because of what occurred
Speaker 1: with Silicon Valley Bank. Can you talk us through the
Speaker 1: money that you've managed to raise and why. Yes. Rippling is,
Speaker 1: among other things, a payroll company. We make software for
Speaker 1: businesses to manage everything related to employees, so payroll, hr IT, finance, expense, reimbursements,
Speaker 1: and we think we can cut a lot of the
Speaker 1: administrative work involved in running those things out by doing
Speaker 1: it all in one place. And the way payroll works
Speaker 1: is companies send us money a few days ahead of
Speaker 1: pay day and then we send it along to their employees.
Speaker 1: And so when Silicon Valley Bank failed, they were previously
Speaker 1: the rails for our payroll service. We had to move
Speaker 1: in just a few hours over to JP Morgan Chase.
Speaker 1: But we also we knew on Friday when the bank
Speaker 1: failed there were fifty thousand people that we needed to
Speaker 1: make sure got paid whose companies had already sent us money.
Speaker 1: And so what we did is we actually took about
Speaker 1: one hundred and thirty million dollars of our own capital
Speaker 1: and sent it out the door to make sure that
Speaker 1: everybody got their paycheck on Friday and moved heaven and
Speaker 1: earth to do that. My colleague Katie Reef has just
Speaker 1: texted me, she's been writing about your situation this morning.
Speaker 1: Given now that the SVB situation is kind of more resolved,
Speaker 1: what are you going to do with that five hundred million? Yeah,
Speaker 1: So we raised the money to make sure that we'd
Speaker 1: be able even if the fdi C did nothing, that
Speaker 1: we'd be able to backstop our client funds. But as
Speaker 1: it turns out, you know, depositors were protected. So we
Speaker 1: now Ripley is incredibly well capitalized. We have, you know,
Speaker 1: almost a billion dollars on our balance sheet. What would
Speaker 1: you done if the deposits were not ensured. We wanted
Speaker 1: to make sure that any company that had sent us
Speaker 1: money we were going to get their employees paid. And
Speaker 1: so that was why we wanted to make sure we
Speaker 1: had this as a backup plan to a backup plan
Speaker 1: to a backup plan. Carroy, this is an amazing conversation
Speaker 1: because it's a snapshot of what happened in the moment.
Speaker 1: We're hearing so many founders sort of pretty dire about
Speaker 1: the long term impacts of SVV and being able to
Speaker 1: raise funds, and yet you have a company here that
Speaker 1: did it in three days. And also you luckily already
Speaker 1: had a banking provider other than SVB, which JP Morgan.
Speaker 1: But we went to our own audience said, how hard
Speaker 1: is it as a founder, as a fund even to
Speaker 1: diversify your banks? It's pretty hard. It's complicated, said forty
Speaker 1: four percent. To that point, Parker, was it complicated for
Speaker 1: you to rev up the JP Morgan? And also are
Speaker 1: you now more diversified even than that? It was? I mean, look,
Speaker 1: we have a number of different banking relationships, many different
Speaker 1: bank accounts across the world. But we always assumed that,
Speaker 1: you know, if something happened with SVB, which was the
Speaker 1: main rails for our payroll service, we'd have about two
Speaker 1: weeks to get something up and running. And then what
Speaker 1: happened is when the bank failed, we only had about
Speaker 1: three and a half hours, and so we put a
Speaker 1: team of fifteen of the best engineers in the company
Speaker 1: on getting this up and running in that time frame
Speaker 1: time frame, and then a much larger team over the
Speaker 1: weekend and the days to come, really just making sure
Speaker 1: that everything was solid, everything was well grooved and sort
Speaker 1: of compressed that timeline to make sure that nothing was
Speaker 1: interrupted for our clients. What's also so fascinating about your story, Parker,
Speaker 1: is the support of your venture capital supporters and in
Speaker 1: particular the realm that was led by Green Oaks Neil Meta.
Speaker 1: How important was it to have vcs on hand that
Speaker 1: would just rally the troops and give you money when
Speaker 1: you needed it. We're you know, we're incredibly fortunate that
Speaker 1: there are a bunch of investors that have been really
Speaker 1: supportive of for a plane that we've known for a
Speaker 1: long time, and that have you know, even as the
Speaker 1: funding environment for late stage startups has gotten shaky, have
Speaker 1: always really wanted to find ways to own more of Rippling,
Speaker 1: and so we were able to put together on very
Speaker 1: short notice around you know, at a really fair price,
Speaker 1: you know, at an eleven point two five billion dollar valuation,
Speaker 1: to get a bunch more capital in the business. And
Speaker 1: that's going to allow us, sort of, no matter what
Speaker 1: happens here, to focus on building the right products for
Speaker 1: our customers and growing our company. You kind of scrambled
Speaker 1: to take money from your balance sheet to help with
Speaker 1: payroll for others. Have you been made whole again after
Speaker 1: what's happened, and just reflecting on your customer base, is
Speaker 1: there still problems out there. Oh, there's still problems out
Speaker 1: there for people trying to make payroll to move money around.
Speaker 1: We on Monday morning when SVB reopened, we got all
Speaker 1: of the customer funds out of SVB, and so we've
Speaker 1: been made completely whole for all of this. And there
Speaker 1: are problems still in the ecosystem, not for us. I mean,
Speaker 1: our systems are as solid as ever, just with a
Speaker 1: different bank, with JP Morgan Chase. You know, I don't
Speaker 1: I don't know what's going to happen, you know, more
Speaker 1: broadly to the economy as a result of some of
Speaker 1: the shakiness in the banking sector. But we feel very
Speaker 1: good about about sort of our service we're billing. This
Speaker 1: five hundred million is an emergency fund raise, and I
Speaker 1: just wanted to ask how you felt about the terms
Speaker 1: of that raise. Were you happy? Was it a compromise?
Speaker 1: You know, I really disagree with the character characterization of
Speaker 1: it as an emergency. I think it came together very quickly.
Speaker 1: But look, this was great capital on attractive terms. I mean,
Speaker 1: there aren't a lot of late stage startups that can
Speaker 1: raise dat amount of capital and a very short period
Speaker 1: of time at these valuations. I thought it was a
Speaker 1: great deal for the company, and I feel really good
Speaker 1: about it. I had lyone currently says emergency funds will
Speaker 1: quickly maybe update that to new funds. Parker, Ultimately, what
Speaker 1: now do you expand do use a five hundred million
Speaker 1: to grow or can you in some way sort of
Speaker 1: give it back. We're going to focus. We We're going
Speaker 1: to use this money to sort of continue to invest
Speaker 1: in our product in research and development. Rippling has a
Speaker 1: really unusual commitment to r and D among SaaS tech companies.
Speaker 1: We spend an enormous amount in comparison to our revenue
Speaker 1: on developing new products, building new software, and we think
Speaker 1: it's what makes us have the best product on the market. Puka,
Speaker 1: you're a fintech. You understand financial plumbing better than most.
Speaker 1: Do you think at this moment, this single point of
Speaker 1: failure that you had avoided by having other banks, does
Speaker 1: it mean you worry about a centralized financial system as
Speaker 1: it stands? I mean, look, we have different banking relationships
Speaker 1: with a number of different banks, and we continue to
Speaker 1: sort of diversify sort of the rails that we have
Speaker 1: within the banking sector. I think in this case things
Speaker 1: worked out pretty well. We found out nine am on Friday,
Speaker 1: on the day that employees were supposed to get paid,
Speaker 1: that SVB was shut down and all of the funds
Speaker 1: that were supposed to arrive for payday on Friday were
Speaker 1: locked up, and we had three and a half hours
Speaker 1: to get things up and running with JP Morgan, and
Speaker 1: we were able to do that in three and a
Speaker 1: half hours and get people paid using our own capital.
Speaker 1: So I look at it as sort of a real
Speaker 1: success story about our ability to make sure that you know,
Speaker 1: fifty thousand ordinary Americans that were paid through Rippling got
Speaker 1: paid last Friday. Rippling CEO Parker Comrade, thank you for
Speaker 1: sharing that story with Caroline and I. Now coming up,
Speaker 1: we're going to be joined by vinod Kosla to talk
Speaker 1: all things VC after what was, let's be honest, Caroline,
Speaker 1: a crazy week in the world of banking, but also
Speaker 1: critically for technology. But look at the big tech benchmarks
Speaker 1: and maybe you'd be okay at thinking it wasn't as
Speaker 1: crazy as many felt. Four and a half percent higher
Speaker 1: on the NASTAC over the last five days, Big Tech
Speaker 1: still pretty being attractive this has been big time for
Speaker 1: a global VC roundup. Pt Teal has fifty million dollars
Speaker 1: or had fifty million dollars of his own money in
Speaker 1: Silicon Valley Bank when it went under, the Financial Times reports.
Speaker 1: Teal says he did not draw down from his own
Speaker 1: account because he believed the bank would not fail, even
Speaker 1: though his founders fund had warned its portfolio companies to
Speaker 1: move money away from the tech focus lender. Malaysia's Patronus
Speaker 1: plans to expand its corporate vcarm by up to two
Speaker 1: hundred million as early as April, according to Router's citing sources.
Speaker 1: The branch will focus on making innovation and technology investments
Speaker 1: across Asia Pacific, but the plan still being finalized. And finally,
Speaker 1: Walmarts is investing another two hundred million dollars in Indian
Speaker 1: payments arm Phone pay. The investment was done at a
Speaker 1: pre money valuation of twelve billion dollars and it's part
Speaker 1: of an ongoing financing effort to raise a total of
Speaker 1: up to one billion dollars for the startup Caroline and
Speaker 1: Let's dig in to the flow of money at the moment,
Speaker 1: particularly at around the impact the current banking crisis were
Speaker 1: still consumed in how it's unfolded, who it's tainted, who
Speaker 1: it's managed to highlight their strength. The VC world, of course,
Speaker 1: is one that we're going to focus on. The Silicon
Speaker 1: Valley Bank and others within the realm still being a concern.
Speaker 1: We've got a perfect voice, Finnode Cosal, a founder of
Speaker 1: Cosal Ventures with us, and I say we are not
Speaker 1: quite out the woods yet because First Republic Bank still struggling,
Speaker 1: still needing support from other banks in the system. Are
Speaker 1: we through the woods or do you think there's still
Speaker 1: more areas of concern for ode as we be for
Speaker 1: sure is completely safe today. It is ensured by the FDIC.
Speaker 1: So in fact it's the best place to money put
Speaker 1: money because it's yielding more better interest rates than treasury
Speaker 1: and it's very very safe or just as safe in
Speaker 1: many ways. You over the course of the crisis, we
Speaker 1: can wanted to make it safe for your own portfolio companies.
Speaker 1: Look at a tweet we're tweeting out on March twelve
Speaker 1: talking about how you we're not using LP money and
Speaker 1: you're trying to help your companies basically using through loans
Speaker 1: basically depending on your own personal wealth and known that
Speaker 1: has been reported. What made you decide to do this? Well,
Speaker 1: our companies needed help. We didn't want to and couldn't
Speaker 1: use LP money unless we were in ensuring great terms
Speaker 1: for our LPs. So we decide to use personal funds
Speaker 1: and at zero at the zero profit for us, but
Speaker 1: provide launch to our companies directly from our personal lenders
Speaker 1: to the companies. You know, I understand next week you
Speaker 1: will be one of many traveling to Washington, DC for
Speaker 1: a summit of sorts. What is it that you'll be
Speaker 1: discussing with your industry peers and others. Well, next week's
Speaker 1: dinner that has been reported in various publications is about
Speaker 1: the influence of China in our technology race and economic
Speaker 1: war with China. So that's the topic of discussion. Have
Speaker 1: you the last week for some has been unthinkably hard.
Speaker 1: For others, you know, they moved quickly. My question is
Speaker 1: has this derailed all of the things that your firm
Speaker 1: and the venture community were working on or does business
Speaker 1: now carry on as normal, the writing of checks, the
Speaker 1: focus on AI. I believe in a few months, three
Speaker 1: to six months, business will be back to normal. We
Speaker 1: of course encouraged our founders to leave everything but three
Speaker 1: months of money. Yeah, in Silicon Valley Bank have three
Speaker 1: months worth of cash outside, so we didn't want to
Speaker 1: cause a bank run. Unfortunately, all our peers didn't do
Speaker 1: the same, so we saw the phenomena that we saw.
Speaker 1: At this point, FDIC money is safe. We're encouraging our
Speaker 1: founders to put money back in SVB, so we are
Speaker 1: in pretty good shape now. I think the interest in
Speaker 1: AI is driven by fundamentals, not by hype. I believe,
Speaker 1: though there is plenty of hype too. I'm pretty excited
Speaker 1: about where AI and some other technologies can lead us. Caroline,
Speaker 1: I think that the key unanswered question, and it may
Speaker 1: take time, is who's accountable for what happened? Right we're
Speaker 1: still asking how this happened, but who let it happen?
Speaker 1: And no, do you have a perspective on that because
Speaker 1: some look at the VC community itself and say, kind
Speaker 1: of added fuel to the fire. Well, the VC community
Speaker 1: added purely to the fire by being a little irresponsible
Speaker 1: at the last minute. I believe what SPV was doing
Speaker 1: was running a hedge fund based on interest rates inside
Speaker 1: a bank, and that was where the fourth lies. I believe,
Speaker 1: to the best of the information I have and that
Speaker 1: is such should be subject to regulation. Meanwhile, of course,
Speaker 1: the VC community comes together once again as you just
Speaker 1: articulated a dinner in Washington, thinking about relationships between the
Speaker 1: US and China. We think of the tiktoksy of course,
Speaker 1: going in front of Congress next week. What is the
Speaker 1: status between China and the US in terms of technology
Speaker 1: at the moment. Well, the dinner was set up long
Speaker 1: before either the current or TikTok events. It's not really
Speaker 1: related to TikTok. It's related to the larger technological race
Speaker 1: we have for global technology power and hence economic power globally,
Speaker 1: and I think many of us feel the US and
Speaker 1: the Western world should in general investing technology and continue
Speaker 1: to be part of that winning strategy. I hope venture
Speaker 1: capital has been a big part of GDP growth in
Speaker 1: the US. It's been a big part of innovation, and
Speaker 1: I hope it continues to be and it's critically important
Speaker 1: for the Western world. That happened. Then, TikTok and AI
Speaker 1: are two fields that seems to be increasingly at the
Speaker 1: center of the relationship between the United States and China.
Speaker 1: Let's start with TikTok Bloomberg's reported that US officials are
Speaker 1: essentially saying to bite, dance, sell your interests in TikTok,
Speaker 1: or it will be and from the United States as
Speaker 1: a long time name in the world of technology in
Speaker 1: this country. What do you make of that? Well, they've
Speaker 1: kick in the position they have. I think in general
Speaker 1: TikTok has been used for spying on US citizens. So
Speaker 1: if that's true, and I don't have as much information
Speaker 1: as the administration does, then we clearly should penalize that
Speaker 1: kind of behavior. As to the AI battle, it's a
Speaker 1: much more critical battle than the TikTok battle, and a
Speaker 1: general race for technological superiority and AI and hence all
Speaker 1: the areas of effects which in twenty twenty five years
Speaker 1: will be almost all of the kind of Then, Caroline
Speaker 1: and I have been talking a lot about artificial intelligence
Speaker 1: for weeks and months, and we joke that at the
Speaker 1: beginning of this week the air went out of the
Speaker 1: room for AI, but actually it started to creep back
Speaker 1: in in recent days. Is that an area you're still
Speaker 1: focused on and will you be writing checks for AI
Speaker 1: related startups? Absolutely? Remember we invested in AI in Open
Speaker 1: AI five years ago. You were the first venture invested
Speaker 1: in open air, and the trend is long term and consistent,
Speaker 1: and I've been writing about it for the last ten years.
Speaker 1: AI It's implications for the economy, it's implications for cyber war,
Speaker 1: for war both defense and non defense uses. It's a
Speaker 1: very important technology. I think small time perturbations like we
Speaker 1: saw and it was significant but still temporary perturbation will
Speaker 1: not affect the trend in AI and our investing interest
Speaker 1: in AI. It does want to take all open AI.
Speaker 1: GPT four really seemed to impress I do didn't initially
Speaker 1: and now it seems to be getting some applaud with
Speaker 1: its chat GPT like Ernie. Can there be space for
Speaker 1: many really additive startups in this space. I do believe
Speaker 1: there'll be multiple platforms. Google has a very good play
Speaker 1: in Microsoft has embraced open the Eye, Bailou will of
Speaker 1: course with backing from the Chinese government's try and win.
Speaker 1: I do think there's room for more than one platform.
Speaker 1: I do think number of applications and TARPA these platforms
Speaker 1: will be very very large and very very robust area
Speaker 1: for investment for no Cosla fascinating to talk to you
Speaker 1: through the ramifications of this last week. From a banking perspective,
Speaker 1: from an investing perspective, from an AI perspective, Fan ro
Speaker 1: Cosla Ventures, we thank you stay well. Look, aside from
Speaker 1: bank collapses, it's what everyone else has been talking about.
Speaker 1: The March Madness bracket, the manners that was of course
Speaker 1: for many, all the planning preparation going into brackets. It's
Speaker 1: been brown out. Number fifteen seed Princeton's shock victory against
Speaker 1: the number two seeded Arizona. Now we at Bloomberg were
Speaker 1: like numbers, we like estimates, and we are some of
Speaker 1: the wealthiest to Wall Street on CEOs of technology companies
Speaker 1: to join this year's at Bloomberg brackets for a cause fundraiser.
Speaker 1: The entrance donate twenty thousand, and they select a charity
Speaker 1: that receives the funds if they're in the top three finisher.
Speaker 1: And the men's and women's brackets the results nearly forty
Speaker 1: percent of the roughly fifty participants seemed to be choosing
Speaker 1: Alabama to win the men's NCAA basketball tournament in Alabama,
Speaker 1: which will play against Alburn on Saturday. Ed whining Wolf
Speaker 1: heard she came second last year. Yeah, look, I married
Speaker 1: into a Brewin's household and I don't really have a
Speaker 1: strong opinion on it either way, but I know our
Speaker 1: terminal audience does and the world is watching on social
Speaker 1: It is all about university basketball, folks. Meanwhile, that does
Speaker 1: it for this edition of Blomberg Technology. Follow us on Twitter.
Speaker 1: Top of the hour. We're going to have a Twitter
Speaker 1: spaces ed big conversation coming up on the week. This
Speaker 1: is Bloomberg