Speaker 1: Imed Lovelow in San Francisco. This is Bloomberg Technology coming up,
Speaker 1: Tech stocks taker Bruising, we'll discuss the sea of red
Speaker 1: in the stock market. Is investors brace for a more
Speaker 1: hawkish FED? Plus shop of five plunges. After earnings, we
Speaker 1: discussed the company's revenue outlook with President Harley Finkelstein, and
Speaker 1: bring you the latest on the CEO departure at YouTube
Speaker 1: and a look at artificial intelligence and investing in it.
Speaker 1: We speak with Greylock general partner song Butter Meddie. That's
Speaker 1: for more. Let's stick with these markets and the tech sector,
Speaker 1: bringing clear Bridge senior research analysts Hillary Fresh and Hillary
Speaker 1: you know you've learned that one session and market does
Speaker 1: not make but the FED giving us a clear kind
Speaker 1: of travel direction today right when we think about the
Speaker 1: technology sector, how are you thinking right now when it
Speaker 1: ums particularly to software and there's high multiple tech names.
Speaker 1: Thanks very much that it's good to be here. U.
Speaker 1: First of all, there has I agree with Richard, there's
Speaker 1: been a lot of speculation in this market, especially with
Speaker 1: certain components of the Tech index. However, um I have
Speaker 1: a slightly different view. Um when we look at how
Speaker 1: we got here, um Q four orians in fact weren't
Speaker 1: so bad. They weren't as bad as investors feared. UM
Speaker 1: companies actually were able to constructively take down guidance for
Speaker 1: the four year and on top of that, most companies
Speaker 1: have actually taken a much more significant step toward profitability
Speaker 1: and improving profitability, and I think that's a big part
Speaker 1: of the reason why the average stock has rallied. The
Speaker 1: IDV software next was up as of yesterday. That's almost
Speaker 1: double the SMP appreciation, and there are components of that
Speaker 1: that were up thirty not all of them speculative, but
Speaker 1: I agree how interest rates are very tough for tech um. Plus,
Speaker 1: we're entering the seasonally difficult part of the year, so
Speaker 1: it's likely we give up some of these games, and
Speaker 1: I think that would be constructive. You know, we're in
Speaker 1: the debts of earning season, and you know, all we
Speaker 1: can do on a case by case basis and look
Speaker 1: at those that be expectations and those that miss. But
Speaker 1: as you look across software sas enterprise in particular, how
Speaker 1: are you discerning those that are are struggling in this
Speaker 1: environment and those that are outdoing expectations. Sure well, at
Speaker 1: clear Bridge we have a quality bias, and we tried
Speaker 1: to invest in quality companies, quality management teams that are
Speaker 1: extremely well positioned across their sector UM. HubSpot is an
Speaker 1: example of that. HubSpot reported after the clothes that actually
Speaker 1: beat revenues by five it beat EPs by thirty percent.
Speaker 1: The street was concerned because they announced a sudden percent
Speaker 1: headcount cut about a week ago, and actually they guided
Speaker 1: inline revenues going forward and they guided EPs fift above
Speaker 1: the streets. So I would say that's an example of
Speaker 1: a quality name which we like a lot um and
Speaker 1: we try to pick leading companies in their category a
Speaker 1: comes that have UM like HubSpot, that are expanding a
Speaker 1: product portfolio, moving up and down market, doing things to
Speaker 1: really determine their destiny beyond the markets hit away. We
Speaker 1: just showed a fantastic chart. In fact, I think we'll
Speaker 1: bring it up again because it was that good showing
Speaker 1: the NAS that one hundred a pretty historic relative highs
Speaker 1: the SMP five hundred. Right we're talking about elevated levels
Speaker 1: that go back to near its dot com peak. My
Speaker 1: question to you, based on that chart is where do
Speaker 1: we sit right now with tech valuations? We had a
Speaker 1: brutal sell off in two we're trying to pass valuations
Speaker 1: as part of the equation around higher rates as well.
Speaker 1: That's such a good question, ed. Not all tech has
Speaker 1: created equal. However, software and enterprise tech in particular has
Speaker 1: actually been adjusting from evaluation perspective for two years. Two
Speaker 1: years as of April. Currently, for software in particular, evaluations
Speaker 1: stand within their pre pandemic five and tenure averages, and
Speaker 1: for growth equities there below the tenure average, in part
Speaker 1: because many of the growth contingents of of the sector
Speaker 1: weren't as profitable, but they're becoming more profitable. So I
Speaker 1: think we've done a lot of constructive work. Um. Again,
Speaker 1: the markets certainly can give back a lot of what
Speaker 1: we've gotten, but I would view those that give back
Speaker 1: as an interesting opportunity because I think at the end
Speaker 1: of the day, digital transformation and many of the things
Speaker 1: these companies are doing for digital economy remain incredibly important.
Speaker 1: I don't think that's going away by any means. Hillary,
Speaker 1: how many of your conversations at clear Bridge and with
Speaker 1: your clients are about artificial intelligence right now? Many that
Speaker 1: tell me, sure, well, well, it's interesting, um, where we're
Speaker 1: large holders of Microsoft and Avid fans, Um, what's interesting
Speaker 1: about this. Even though the world is incredibly focused on
Speaker 1: search and the impact of chat GBT on search, I
Speaker 1: think the impact to Microsoft in particular goes well the
Speaker 1: on search. I think this could be a huge boon
Speaker 1: to their cloud business, their productivity application business, their development
Speaker 1: platform business, all of that accruise eventually to their cloud business.
Speaker 1: So I think this could be a leap frogging for
Speaker 1: Microsoft in the marketplace, who has never actually been seen
Speaker 1: and never gotten the credit for their technology prowess and
Speaker 1: never been seen as a leader in important next generation technologies,
Speaker 1: whereas AI is probably the most important next generation technology
Speaker 1: of this decade. Hillary Fresh of clear Bridge, thank you
Speaker 1: so much for your time. See we take it from
Speaker 1: those market fundamentals to AI completely conversation, different conversation happening
Speaker 1: on Wall Street and globally for investors, and honestly, it
Speaker 1: is getting us excited, So thank you for your time. Night.
Speaker 1: Shares of Shopify plunging today after earning sixteen cent dropped
Speaker 1: biggest in a year, revenue forecast for the current fiscal
Speaker 1: quarter below expectations. What's really interesting, though, at least five
Speaker 1: analysts raised their price targets on the stock despite that
Speaker 1: drop and that miss you can see on a two
Speaker 1: day basis kind of the picture they're telling the story,
Speaker 1: joining us now to discuss Shopify as president Harley Finkelstein
Speaker 1: and Hardy. There's no getting away from that, right, that's
Speaker 1: a pretty severe market reaction, at least the investors in
Speaker 1: the context of the stock. But analysts raising price targets.
Speaker 1: What is it that you think they got wrong in
Speaker 1: their reaction the investors? I mean, well, first, before we
Speaker 1: started get into the reaction, let's talk about the quarter,
Speaker 1: because obviously this all came out of out of our
Speaker 1: earnings released yesterday, out of out of the print. I
Speaker 1: think in a year, in particularly Q four was a
Speaker 1: quarter where performance mattered more than anything else, to the street,
Speaker 1: to investors, to the world. More rather than you know, potential,
Speaker 1: Shopify delivered. I think we demonstrated that while commerce is
Speaker 1: moving fast, Shopify is moving much faster. On the top line,
Speaker 1: we beat gm B was up on a conte currency basis.
Speaker 1: In Q four, revenue was was up um it was
Speaker 1: sixty one million dollars for the quarter. As excuse me,
Speaker 1: revenue was up to one point seven billion dollars for
Speaker 1: the quarter. That's up twenty eight percent on a constant
Speaker 1: currency basis. So on the top line we did really well.
Speaker 1: On the bottom line, we also had we were profitable.
Speaker 1: We we showed a o I of but sixty one
Speaker 1: million dollars, and more importantly, we demonstrated operating expense growth
Speaker 1: actually decelerated from Q three to Q four. So when
Speaker 1: I think about the last two quarters Q three, in
Speaker 1: Q four, I think shop it has proven that we
Speaker 1: can we can drive improvements in our cost structure and
Speaker 1: at the same time grow revenue while still invest in
Speaker 1: critical areas. And then you know, we we mentioned brands
Speaker 1: like Supreme, Black and Deck or Glossier, Mattel all coming
Speaker 1: out to Shopify. So in terms of the Q four
Speaker 1: we're very proud of how we showed up there. Now,
Speaker 1: in terms of the expectation, obviously people didn't necessarily like
Speaker 1: the guidance. We were trying to be prudent and and
Speaker 1: and frankly, this morning we woke up and we saw
Speaker 1: inflation numbers came out completely different than everyone thought. We
Speaker 1: can of macro trends. We can do is make sure
Speaker 1: that we're building a durable company, that our products are
Speaker 1: beloved by the millions of merchancy that used it. We're
Speaker 1: now ten of all e commerce in the US, were
Speaker 1: higher in other countries, but that we're building a company
Speaker 1: that is operationally disciplined and notwithstanding obviously the you know
Speaker 1: today's today's stock price change, we think we are we're
Speaker 1: absolutely executing. My colleague Jeffrey Morgan wrote, Shopify like a
Speaker 1: film that draws critics or a film that nobody loves,
Speaker 1: is getting bad reviews from investors, but then praise from others.
Speaker 1: You know, that's kind of the summary here. Despite the reaction,
Speaker 1: you talked about the top line, and you talked a
Speaker 1: little bit about the bottom line. I know that Toby
Speaker 1: was asked about this on the call. There was a
Speaker 1: want from the street to learn a little bit more
Speaker 1: about the roadmap for profit profit throughout this calendar year.
Speaker 1: Can you talk about what Shopify is doing to to
Speaker 1: meet its profitability targets. You know, we're not a company
Speaker 1: that was raised on the venture capital If you think
Speaker 1: about the seven year period post I p O, we
Speaker 1: were profitable, profitable five at A seven at A seven years.
Speaker 1: So we're a company that actually has been profitable for
Speaker 1: a very long time, and we we understand the path
Speaker 1: back In fact, we you know, we were cashlow positive
Speaker 1: Q three, cashlow pause by a Q four and we
Speaker 1: had a y then. But we're also a company that
Speaker 1: takes its medicine. If you think about the layoffs that
Speaker 1: have been happening in tech the last couple of weeks,
Speaker 1: Shopify did head count reduction back in July of last year.
Speaker 1: So we're not a company that that has been bloated
Speaker 1: like a lot of other companies have. But we're also
Speaker 1: making sure the products that we're putting out there are
Speaker 1: are products that have that are port into our merchants.
Speaker 1: One metric that missed almost entirely is our attach rate,
Speaker 1: which is now at two point eight five two point
Speaker 1: eight five percent. The attach rate, which is effectively revenue
Speaker 1: divided by g m V, is a proxy for the
Speaker 1: usage of of of our products buy our merchants. So
Speaker 1: remember we have small business that come to Shopify. We
Speaker 1: also have a lot of larger merchants are coming to
Speaker 1: Shopify as well. I mentioned Black and Decker and Mittel
Speaker 1: and Supreme on the call yesterday, So we have all
Speaker 1: these different growth vectors. Not to mention, once they come
Speaker 1: into Shopify, we're not just helping them with a commerce
Speaker 1: we help them with physical retail. We're giving them capital.
Speaker 1: We gave about four hundred million dollars of cash advances
Speaker 1: in the quarter. That's about We've done about four point
Speaker 1: eight billion dollars of cash advances total since the capital
Speaker 1: program came to be. We're doing these like audiences to
Speaker 1: help with things right return and ad spin and helping
Speaker 1: them reduce the cost of customer acquisition. Shop play is
Speaker 1: very much becoming the retail operating system. And this isn't
Speaker 1: something that we're hoping investors, you know, trust us and
Speaker 1: you'll see in the future. We're doing that right now.
Speaker 1: And and and the performance I think was indicated by
Speaker 1: by the print yesterday. Hey Holliday, we just have about
Speaker 1: fifteen seconds. But what's your assessment of the health of
Speaker 1: your user based your customers and also others intimes of
Speaker 1: the consumer read through? Well, this is where I get
Speaker 1: excited because if you look actually at the US business registrations,
Speaker 1: the last two years have been the highest business registrations
Speaker 1: of the last ten years. That's on the merchant side.
Speaker 1: On the consumer side, the consumer is strong. You know,
Speaker 1: we had two hundred billion dollars of g m V two.
Speaker 1: That's three Times two thousand nineteen, and if you on Wednesday,
Speaker 1: when when US retail sales came out, it's served. I
Speaker 1: think it was up three percent. In January it was
Speaker 1: anticipated to be at one point eight percent. So the
Speaker 1: the consumer in the world is strong, merchants are strong,
Speaker 1: and Shopify is absolutely entrepreneurship company in the retail operating
Speaker 1: system for the future of business. And we're happy and
Speaker 1: proud of of what we're doing. We'll keep we'll keep
Speaker 1: doing us Harley Finklestein, Shopify President, We're grateful for your time.
Speaker 1: Thank you, Thank you very much. Now turning to another
Speaker 1: name that we're watching, and that's YouTube CEO Susan Jiki,
Speaker 1: stepping down from the role after nine years running Google's
Speaker 1: video streaming division, handing the reins to top Lieutenant Neil Mohan,
Speaker 1: joining us with Mooys, Bloomberg's Mark Berg and also the
Speaker 1: author of Course of Light comments subscribed inside YouTube's chaotic
Speaker 1: rise to world domination. Mark This is a big moment
Speaker 1: for YouTube. It's the big moment that some people have
Speaker 1: been expecting for a while. I'd say that the pickup
Speaker 1: succession is surprised. No one who's been tracking YouTube and
Speaker 1: Google Neil Mohan has been at YouTube in the role
Speaker 1: of Chief Product Officer since his role has expanded in
Speaker 1: those eight years. Actually worked with with Susan Wijiski before
Speaker 1: that on Google Adds. So he's a known entity certainly
Speaker 1: for advertisers and a little bit more so for for
Speaker 1: YouTube creators. Is Susan leaving YouTube at a time where
Speaker 1: they pressured and challenged or is she leaving them in
Speaker 1: sort of robust rude health. Uh, let's say both. I mean,
Speaker 1: you know, I think part of Susan's Likegacy, certainly on
Speaker 1: the business side, has been taking this asseteen when she
Speaker 1: joined YouTube, was this huge commercial success or sorry, are
Speaker 1: the huge like pop culture success right, but had never
Speaker 1: really proven itself to be profitable. Uh. They've gone through
Speaker 1: like a series of crises around the business side. But
Speaker 1: in the past five years that ad business, at least
Speaker 1: from what they disclosed, has more than tripled. Uh. And
Speaker 1: you know there's moving into TV streaming. Um, They've they've
Speaker 1: struggled a little bit on competing with Spotify, but they're
Speaker 1: big threats now are TikTok, which is clearly a much
Speaker 1: bigger existential threat. Uh. And then just the larger threast
Speaker 1: that Google has on the regulatory side, like that's very
Speaker 1: unclear about YouTube shoote. So some saw this coming. This
Speaker 1: is what Susan herself had to say in a blog
Speaker 1: post that was published on Thursday morning about why the
Speaker 1: time is right for me. I feel able to do
Speaker 1: this because we have an incredible leadership team clearly referenced
Speaker 1: as well to Neil who's going to take the reins.
Speaker 1: What do we know about him him as a leader
Speaker 1: is as an operator, he's incredibly googly. I mean, I
Speaker 1: mean that the sense of he's been there since two
Speaker 1: thousand eight. You know, people talk to me about this.
Speaker 1: This this actually does have some value in the sense
Speaker 1: of Google's a very political place and in order to
Speaker 1: get things done, you know, YouTube is a division that
Speaker 1: has to fight for resources with other with Google Cloud,
Speaker 1: with Pixel right, uh, and certainly having someone who has
Speaker 1: been so experienced with the company is an asset. He's
Speaker 1: not a media executive, right, he never worked in media before.
Speaker 1: Um Like on programming, they had Robert Kinsel, who was
Speaker 1: their Hollywood chief who left earlier this year, and I
Speaker 1: think that was his replacement was another person who worked
Speaker 1: on Google Ads, and I think It's a clear indication here.
Speaker 1: You know, YouTube has dropped their strategy to compete with
Speaker 1: Netflix and Amazon Prime. They're like all in on becoming
Speaker 1: just the pre premier sort of ad ad base destination
Speaker 1: and competing with TikTok. Before we let you go, what
Speaker 1: do we What do you kind of reflect on in
Speaker 1: your book about Susan? What did you learn about her
Speaker 1: as you went about writing. Yeah, Susan's a bit of
Speaker 1: a cipher like unlike some say Sheryl Sandberg. She has
Speaker 1: not built a public profile. Most people out on the
Speaker 1: street don't know who she is. I think that's been
Speaker 1: advantageous to to YouTube, and in some ways they've been
Speaker 1: able to sort of avoid some of the scrutiny that
Speaker 1: Facebook has. I think what will be really interesting going
Speaker 1: forward is she is described by people who worked at
Speaker 1: Google as one of the very few humings of the
Speaker 1: planet that has a relationship with the Google founders, who
Speaker 1: are as we know, have left the company but are
Speaker 1: still the majority shareholders. And now as Google is having
Speaker 1: this big existential moment around ai UM, she's an important
Speaker 1: person there and and you know she's clearly still consulting,
Speaker 1: but her absence will I think will be felt all right.
Speaker 1: Bloom Dugs montug of Coolest Bloomberg Reporter, but also author
Speaker 1: of that book that you can check out. I'm sure
Speaker 1: you can get it anywhere. It's been out since September,
Speaker 1: and I myself will be reading it like comments Subscribe
Speaker 1: inside YouTube's chaotic rise to world domination. Now something else
Speaker 1: we're keeping our eye on very closely. Changes coming to
Speaker 1: an app near you. Both Meta and Spotify launching new
Speaker 1: features metas Instagram rolling out broadcast channels, which let users
Speaker 1: send text or photo updates directly to followers. The ideas
Speaker 1: to offer another way to share posts without having to
Speaker 1: put them on a potentially cluttered main Instagram feed. Meanwhile,
Speaker 1: Spotify will launch a TikTok esque vertically scrolling feed next month.
Speaker 1: At their stream on event in Los Angeles, Spotify executives
Speaker 1: will announce the latest features and upgrades coming to the
Speaker 1: audio platform. The move toward a TikTok like feed comes
Speaker 1: as the company seeks to attract more of those gen
Speaker 1: Z listeners. Now coming up will bring you the latest
Speaker 1: news in the land of VC back startups from Hydrogen
Speaker 1: and Finte to ed Tech, and we're keeping it global
Speaker 1: as we had to break. I'm watching shares of door Dash,
Speaker 1: a pretty strong forecast for earnings, kind of beating expectations.
Speaker 1: Cross cunning efforts at that company really seemed to be
Speaker 1: taking whole door Dash and tissue fading ebit dar of
Speaker 1: a million to a hundred and seventy million in the
Speaker 1: fiscal first quarter. Clearly the street likes it. Shares up
Speaker 1: six and a half percent in after hours. This is
Speaker 1: Bloomberg time now for the VC round up, starting with Bijou,
Speaker 1: which is in negotiations with investors including TPG to raise
Speaker 1: more than five hundred million dollars. The Indian d tech
Speaker 1: startup is hoping to keep its valuation steady at about
Speaker 1: two billion dollars during that financing. That's according to sources.
Speaker 1: Now negotiations are ongoing. It's unclear if the prospective investors
Speaker 1: will go ahead with a deal and buys you. Is
Speaker 1: in talks separately with creditors to renegotiate an agreement governing
Speaker 1: a one point two billion dollar loan that's in breach
Speaker 1: of covenants. Sunfire is in talks with investors to raise
Speaker 1: about two hundred million euros and a new financing round
Speaker 1: that were put a one billion euro valuation on the
Speaker 1: hydrogen startup, as according to German newspaper Handles Flat, who
Speaker 1: cites sources similarly here, though discussions are solo ongoing and
Speaker 1: talks yet to be finalized. And over in Pakistan, fintech
Speaker 1: startup ad Alphi, which helps consumers and smaller businesses, obtained loans,
Speaker 1: raised a seven point five million dollar funding round. It's
Speaker 1: a sign of life for the South Asian country's VC
Speaker 1: market after it dried up with a global decline in
Speaker 1: tech stocks last year. The round was led by co
Speaker 1: To Ventures, Clima Ventures, Fatima, Goober Ventures and Zane Capital.
Speaker 1: I think there's hype and there's substance, and we try
Speaker 1: to separate the two. Hype comes and goes. It kind
Speaker 1: of creates this crazy animal spirits. You can't control it,
Speaker 1: and so for the better of our part, we try
Speaker 1: to ignore what happens with hype and focus on the substance.
Speaker 1: And when it comes to substance, it is just starting
Speaker 1: to see some of the results in Generative AI already.
Speaker 1: Welcome back to bloom Blow Technology IMD Lovelow in San Francisco,
Speaker 1: and that was part of our conversation with Sonya Huanga
Speaker 1: Sequoia Capital speaking with us yesterday about you Guessed it
Speaker 1: artficial intelligence and sticking with AI. Can bing take over Google?
Speaker 1: That's what Microsoft seems to think. It's reported initial findings
Speaker 1: after a week of testing new AI additions to it's
Speaker 1: being search engine with users from more than one sixty
Speaker 1: nine countries. The results aipowered answers have earned the approval
Speaker 1: of around seventy of testers, and Chat in particular has
Speaker 1: proven a popular edition that's deepened engagement. According to the company,
Speaker 1: Now people are also using the chat cabable wile bing
Speaker 1: beyond specific queries for quote more general discovery of the world,
Speaker 1: and for social entertainment. It's the story we've just got
Speaker 1: to stick with. So let's turn to Graylock, who've been
Speaker 1: investing in AIM machine learning for a little while now
Speaker 1: in companies like a Debt Inflection, Gretel and many more.
Speaker 1: You see those names of their port photo companies on
Speaker 1: the screen. Bring in Graylock General partner, some Mode medi
Speaker 1: So I don't even know where to start at the moment.
Speaker 1: Every day there's a new headline. But you heard so
Speaker 1: when you talk about the sort of the hype and
Speaker 1: the reality, where are you on the hype reality spectrum
Speaker 1: right now in terms of what we're seeing in real
Speaker 1: world deployment of AI. First, thanks for having me on
Speaker 1: excited here to talk to you about AI. As you mentioned,
Speaker 1: we've been investing in AI Graylock for over a decade,
Speaker 1: and we believe the shift that we're seeing now around
Speaker 1: generative AI is equal in importance to the earlier shifts
Speaker 1: from cloud to on premise software and the shift from
Speaker 1: desktop to mobile. I think every company is going to
Speaker 1: be an AI company, and everything we do at work
Speaker 1: and how we live is going to be transformed by AI.
Speaker 1: So I met out thinking a lot of this is real.
Speaker 1: One mental model that my partner Hoffman and I wrote
Speaker 1: about I think about how AI might impact our lives
Speaker 1: is this concept of a copilot for everybody. So get
Speaker 1: Hub copilot is an initial copilot product that's used by
Speaker 1: developers that helps developers write better code. Imagine a world
Speaker 1: where copilots get for lawyers helping them write better briefs,
Speaker 1: for doctors helping them do medical diagnoses, for salespeople helping
Speaker 1: themselves software. I think if we're having this conversation three
Speaker 1: years from now, all of us will be using these
Speaker 1: products that feel like copilots in the way we work
Speaker 1: and live some contexts with your audience. So Reid Hoffman,
Speaker 1: your partner, he's kind of one of the founding members
Speaker 1: of open ai. He is on the board. He invested
Speaker 1: through his own means, his own charity or charitable funds.
Speaker 1: But I know you guys track what open ai is
Speaker 1: doing really closely. We'll get onto your portfolio companies. But
Speaker 1: for you right now, who or what is leading the
Speaker 1: way in artificial intelligence? I think you have to start
Speaker 1: with open ai and give them immense credit what they've
Speaker 1: done with the transformer model architecture, with products like Dolly,
Speaker 1: GPP three, Chat GPT, new models that we think will
Speaker 1: come out later this year. They're really at the front
Speaker 1: lines of bringing these technology to lots of application developers
Speaker 1: and users. And as you know, they expose these and
Speaker 1: a p i s and we're fortunate to be involved
Speaker 1: with a number of companies that are leveraging those a
Speaker 1: p i s on the text and the image side
Speaker 1: to build products that solve different business use cases and
Speaker 1: consumer use cases. You said that to your mind, every
Speaker 1: company will be an AI company, because you still explain
Speaker 1: a little bit more what you meant I think if
Speaker 1: you look at the capabilities of these models on the
Speaker 1: generation side, whether they're generating text, image, video code, on
Speaker 1: the classification and discriminative side, looking at a portfolio of
Speaker 1: loans and predicting what portfolio, which loan is going to default,
Speaker 1: you're going to see every business have to have an
Speaker 1: AI strategy, and we're seeing that already. You talked about
Speaker 1: Microsoft and the release of their new products around being
Speaker 1: Google and oun sparred and as fast to catch up.
Speaker 1: There are a number of early stage companies that are
Speaker 1: leveraging AI in different ways. If you don't have an
Speaker 1: AI strategy, you're going to miss a very important computing wave.
Speaker 1: This is February of November, Chat GPT kind of gets
Speaker 1: released the world. Yet there are investors like you to
Speaker 1: have been at this for a while. My question is
Speaker 1: how do you feel about that? You know that that
Speaker 1: now there's a broader interest, But I guess you've been
Speaker 1: trying to drum up interest in this well before November two. Absolutely,
Speaker 1: as I said, we've been investing inn ai for more
Speaker 1: than a decade, and we can talk about some of
Speaker 1: our companies are scaling today and having real impact. But
Speaker 1: I think Chat GPT was an important moment. I've heard
Speaker 1: it described as the iPhone moment for Generator AI, and
Speaker 1: I think the power of that interface and the way
Speaker 1: that end users could actually use it in the real world,
Speaker 1: it felt like magic, and I think it showed everyone
Speaker 1: how a can be used. But as you pointed out
Speaker 1: that we've been investing an air for a long time. So,
Speaker 1: for example, were investors in a company called KRUSTA crusts
Speaker 1: as a generative a company that services contact center. So
Speaker 1: if you call Rising today, Rising contact center agents are
Speaker 1: using Generative I and the they interact with you, leveraging
Speaker 1: the technology Crust has built. And that's just one of
Speaker 1: many examples. So so you brought up that that particular name,
Speaker 1: that's we'll bring up on the screen your portfolio companies.
Speaker 1: How do you value them accurately? You know, look at
Speaker 1: those names you're invested in, um, you know, how do
Speaker 1: they make money is on the top line one question.
Speaker 1: But actually what we're being asked more often is valuations. Valuations,
Speaker 1: valuations absolutely, So it's hard to talk about valuations in
Speaker 1: a general sense. But whatever itsay is that Greylock, we're
Speaker 1: early stage investors. We invest in a small set of
Speaker 1: companies and we invest with a ten year plus time
Speaker 1: rising right. Depending on the business, there are different ways
Speaker 1: to think about valuations. Some of these businesses are enterprise companies,
Speaker 1: so crust as a SAS company it leverages AI to
Speaker 1: build its SaaS products, saying without normal security, a cybersecurity
Speaker 1: company that leverages AI. These are durable business models that
Speaker 1: have stood the test of time and we think will
Speaker 1: lead to high growth, profitable and during businesses. I wanted
Speaker 1: to ask you about Snorkel because I know that you
Speaker 1: have published blog posts yourself gone on podcast to kind
Speaker 1: of use them as a neat example as a case study.
Speaker 1: How do you discern these startups that are promising versus
Speaker 1: the start You know what I'm hearing from VNCH capsulists
Speaker 1: and your peers is well, I'm getting a hundred decks
Speaker 1: through my desk, about one percent of them are actually
Speaker 1: focused on AI. The rest just claimed to be. So
Speaker 1: using that as a case study, explain to me how
Speaker 1: you've identified this as something with real promise. Absolutely so,
Speaker 1: when we make an investment, we look at two things.
Speaker 1: One is what is the problem that the entrepreneur in
Speaker 1: team is trying to solve? And what type of market
Speaker 1: opportunity does it represent? And the second is do they
Speaker 1: have a durable, compounding technical advantage in solving that problem.
Speaker 1: Storcle is a great example, so snor calls a data
Speaker 1: science and machine learning platform for the enterprise. It enables
Speaker 1: large banks and insurance companies and government agencies to take
Speaker 1: advantage of all of these advancements we're seeing an AI.
Speaker 1: When we first met the team, we were blown away
Speaker 1: by this team's background, having come out of Stanford, having
Speaker 1: published a number of interesting articles and results around on
Speaker 1: ways AI can be used in enterprise contacts. And fast
Speaker 1: forward to today, they're serving many of the largest Fortune
Speaker 1: five accounts and enabling them to take something that feels
Speaker 1: like chat Gypt but actually use it on top of
Speaker 1: their own data and in use cases that they can
Speaker 1: have in production today, driving business value. I want to
Speaker 1: ask you a bit about the read three to enterprise
Speaker 1: and sort of broader software companies. There's this idea right
Speaker 1: that Microsoft may give as You're an advantage because those
Speaker 1: customers using asual can get access to the open AI
Speaker 1: A p I S, so that makes it more attractive.
Speaker 1: Do you think that makes sense as a business proposition
Speaker 1: for the biggest head companies. I think all of the
Speaker 1: cloud players are going to need to have an AI story.
Speaker 1: I think the relationship that Microsoft has with open AI
Speaker 1: is a really interesting and smart one. We're going to
Speaker 1: see similar, similar products get released by Google by AWS
Speaker 1: that would be my production. And I think as you
Speaker 1: serve the next wave of applications that leverage AI as
Speaker 1: a cloud provider, you have to have AI capabilities built
Speaker 1: in and you better believe that that's going to be
Speaker 1: a dimension on which customers are going to discern. We
Speaker 1: have to talk about ethics, and we have to talk
Speaker 1: about concern The biggest concern is accuracy when it comes
Speaker 1: to generative AI. You'll take please, I'm glad you brought
Speaker 1: this up, and this is why I'm so happy that
Speaker 1: we have things like chat gybt being these products actually
Speaker 1: in the real world so that end users can interact
Speaker 1: with them and these problems canna get surfaced that wouldn't
Speaker 1: happen if these things were being built in the laboratory.
Speaker 1: I'm confident that these things in the real world, with
Speaker 1: the right guard rail and the human feedback systems, we
Speaker 1: are going to see dramatic improvement and we're going to
Speaker 1: see models and products that are trustworthy, speak the truth,
Speaker 1: and act with high integrity. The phrase AI arms race
Speaker 1: comes up every day. Now. Is that a fair way
Speaker 1: of describing what we're seeing in the market right now?
Speaker 1: I think it is if you believe as I do,
Speaker 1: that AI is a wave on the same level of
Speaker 1: impact as the shift to mobile or the shift of cloud.
Speaker 1: Everything is up for grabs. We're seeing innovation and disruption everywhere.
Speaker 1: You talked earlier about search, so that's just one of
Speaker 1: many markets where we're seeing a lot of disruption. We
Speaker 1: saw what Mike Saft died with being Google, announcing bard
Speaker 1: and catching up newer companies like Niva and our portfolio
Speaker 1: that are building AI need of approaches to search. We're
Speaker 1: going to see it disrupt every market, all right, Graylock,
Speaker 1: General partner Son Morta Medie, Thank you so much for
Speaker 1: your time and taking us through your take. What what's
Speaker 1: happening in AI? Now? Coming up? Tesla is recalling hundreds
Speaker 1: of thousands of vehicles. We'll tell you why next. This
Speaker 1: is Bloomberg. Tesla is recalling hundreds of thousands of vehicles
Speaker 1: after US authorities said it's automating driving technology could increase
Speaker 1: the risk of a crash yours makers so called full
Speaker 1: self driving beta system quote may allow the vehicle to
Speaker 1: act unsafe around intersections that according to Nitzer. Now joining
Speaker 1: us for more is Bloomberg's Graham Star and editor on
Speaker 1: our Global business team, Graham, let's get it out there early.
Speaker 1: This recall requires an over the air update fix, right,
Speaker 1: but what is an issue here? That's right, So Tesla
Speaker 1: will be issuing these over the air software updates by
Speaker 1: April fifteen. According to Nitza, Um, what's the issue is,
Speaker 1: these cars are not behaving as up to the standards,
Speaker 1: the safety standards that knitsa once at intersections. It is
Speaker 1: going straight at lanes that are turned only. It is
Speaker 1: having inconsistent speeds when UH speed limits change. It is
Speaker 1: stopping for extended periods of time at intersections. Everything that
Speaker 1: that this company that the agency says could lead to
Speaker 1: a collision. And and so they are issuing this recall. Um,
Speaker 1: the recall does not mean that cars are being sent back.
Speaker 1: Tesla is issuing a software update that they said should
Speaker 1: fix this issue. The company also says this has not
Speaker 1: caused injuries or deaths. We're showing a tweet from Elon
Speaker 1: Musk of course, as we always do, we reached down
Speaker 1: to Tesla for comment. They did not reply. I personally
Speaker 1: reached out to elon Mask Martin Viecker in the i
Speaker 1: R team. Uh No one replied, but later he tweeted,
Speaker 1: definitely the word recall for an overdir software update is
Speaker 1: anachronistic in his view. You can see they're also the
Speaker 1: shares eventually responding took a while, but down five point
Speaker 1: seven percent. What do we know about the vehicle's impacted, Graham?
Speaker 1: The vehicle's impacted right now, NITZA is saying it's a
Speaker 1: it's a rare issue, but it is about you know,
Speaker 1: a few dozen models of model S, Model three, Model X,
Speaker 1: and mile Model Y vehicles between two thousand sixteen three.
Speaker 1: So any Tesla vehicle UH produced in the last seven years,
Speaker 1: um is you know, could be considered part of this recall.
Speaker 1: And I do recommend that if you own one of
Speaker 1: these vehicles to go on the nits A website and
Speaker 1: see if your vehicle is affected. You know, a lot
Speaker 1: of the our audience out there on Twitter, on other
Speaker 1: social platforms, on Instagram, they're saying, you know, why are
Speaker 1: you guys jumping on this is a software fixed. Why
Speaker 1: are you calling it a recal? Well, according to Nitzer,
Speaker 1: it is a technical recal. But the other point that
Speaker 1: we're making our reporting right is that Elon Musk has
Speaker 1: talked about how central fs D is to Tesla's valuation.
Speaker 1: You know that that's what he's talked about in the past. Absolutely,
Speaker 1: this is really about where he sees the company. And
Speaker 1: as we've reported before, what is marketed as full self
Speaker 1: driving or autopilot often comes into conflict with the reality
Speaker 1: of the situation. The company itself says on its website
Speaker 1: that full self driving and autopilot should not be enabled
Speaker 1: without driver's attention, that the drivers should always keep their
Speaker 1: hands available to take over um and this marketing and
Speaker 1: even the labeling of a full self driving has had
Speaker 1: people and critics and agencies complain about this. Uh. You know,
Speaker 1: this is also part of an ongoing investigation that NITZA
Speaker 1: has had into the company's autopilot and full self driving technology.
Speaker 1: So this is a real risk for the company. Should
Speaker 1: this not Should this have any more faults and be
Speaker 1: something that the US government is investigating a little bit
Speaker 1: more seriously. Bloom Doos Graham Star, thank you so much
Speaker 1: for your reporting thank you now. Snapchat user growth is accelerating,
Speaker 1: with the app now seeing seven hundred and fifty million
Speaker 1: monthly users. Joining us for more is Bloomberg's Alex Brinker
Speaker 1: and Alex this was kind of the big takeaway from
Speaker 1: their investor today. The stock kind of reactive policy positively
Speaker 1: in the sense that it paid losses, but all told,
Speaker 1: closing down pretty significantly. Why is that seven hundred and
Speaker 1: fifty million figure important? Yeah, And I was down in
Speaker 1: Santa Monica at the investor day in person today and
Speaker 1: when they shared that number, it was clear the market.
Speaker 1: I saw a little bit of excitement on the user
Speaker 1: growth side. If you think of a social media company,
Speaker 1: there's two pillars, right, there's users and growth, and there's
Speaker 1: AD revenue. Well, AD revenue has been really each challenge.
Speaker 1: So it's a good little number for Snap to be
Speaker 1: able to show up and say, hey, look our growth
Speaker 1: is not only good strong. It grew in the last
Speaker 1: ten months, but it's actually faster than the entire year
Speaker 1: prior to that when it grew at now, if you
Speaker 1: look at the stock today when that news came out,
Speaker 1: there was a bit of a jump up about two
Speaker 1: hours later. Um was when the CFO took the stage
Speaker 1: and then started talking about some of the financial bit
Speaker 1: of the business, which seemed to be a bit more disappointing,
Speaker 1: right And and you know, we're showing that the share
Speaker 1: performance on a twelve month basis is still down, so
Speaker 1: over the last twelve months, what did What did the
Speaker 1: CFO have to say about the advertising environment right now?
Speaker 1: Because you know, I'm not personally using Snap anymore it
Speaker 1: did when I was younger, but it still comes down
Speaker 1: to adds when it comes to social media, it absolutely does.
Speaker 1: And their ad business has had a lot of pressure,
Speaker 1: not only from macro issues but because of the changes
Speaker 1: that Apple made that made ads harder to track and
Speaker 1: target folks. But he basically took a look at past
Speaker 1: growth in terms of revenue, which the majority of their
Speaker 1: revenue comes from their ad business. They've been growing at
Speaker 1: a really incredibly strong clip until this past quarter. In
Speaker 1: the fourth quarter, revenue was flat for the first time ever,
Speaker 1: and they've guided that revenue is expected to fall two
Speaker 1: to ten percent in the next quarter, the first ever decline.
Speaker 1: So the CFO was basically talking through with a lot
Speaker 1: of caveats, saying, you know, if we come back to
Speaker 1: a stronger macro environment. If we are able to resolve
Speaker 1: some of the issues and implement some of the tech
Speaker 1: fixes that they're putting in place this quarter to improve
Speaker 1: their ad business, then we can return to growth. But
Speaker 1: as we saw from some of the analysts and investor
Speaker 1: questions when we were there in Santa Monica, there is
Speaker 1: some skepticism around how quickly that macro environment is going
Speaker 1: to improve. Evan Spiegel, the CEO, fielded one of those
Speaker 1: questions about the macro environment, and he said, look, things
Speaker 1: are still bad, but they're leveling off. They're not getting better,
Speaker 1: but at least we have some bad stability in terms
Speaker 1: of where marketers are spending all line. So this fight forward.
Speaker 1: Snap has this target of reaching a billion users, right,
Speaker 1: that's the next step up. How does it get that?
Speaker 1: It was really interesting and they said the majority of
Speaker 1: that next billion, which they think they can do in
Speaker 1: the next two to three years, they will be able
Speaker 1: to get there through growth outside of their developed markets,
Speaker 1: so not North America, not Europe, but the rest of
Speaker 1: the world as they call it, of onboarding new users
Speaker 1: who have never used Snapchat before in those developed areas
Speaker 1: they're really focused on basically young people. They said they're
Speaker 1: one of their key growth drivers in existing strong markets
Speaker 1: is to be one of those first favorite apps, as
Speaker 1: they called it, for people who newly get their smartphones.
Speaker 1: They already hit about seventy five of users between the
Speaker 1: age of thirteen and eighteen in their developed markets. So
Speaker 1: it seems like as those folks age into having a
Speaker 1: smartphone into their hands, they're trying to make sure that
Speaker 1: they're downloading Snapchat at the same time. Alright, bloombergs atting
Speaker 1: spurrin Ka, thank you on the ground, there a snap
Speaker 1: invest today down in l A. In the eighties and nineties,
Speaker 1: John McAfee was a Silicon Valley icon, but after he
Speaker 1: sold his company and basked in his riches, things took
Speaker 1: a dark turn. I will not allow them to imprison
Speaker 1: me and shut my voice down. This season on Foundering
Speaker 1: will retrace the life of John McAfee. Listen wherever you
Speaker 1: get your podcasts. M All right, let's get more to
Speaker 1: a deep dive into the self destruction of this Silicon
Speaker 1: Valley icon and bring in Bloomberg's Jamie Tara Bay, host
Speaker 1: of this particular Foundering podcast series. You spent fifteen months
Speaker 1: working on this Jamie, what were your conclusions. One of
Speaker 1: the things that we were really struck by, and there
Speaker 1: was also a big question that we got about why
Speaker 1: we even wanted to do this in the first place,
Speaker 1: is that by by his end, John McAfee was practically irrelevant,
Speaker 1: someone who the conspiracists really kind of looked at. But
Speaker 1: when he was in his forties at a really, you know,
Speaker 1: sort of formative time for a lot of tech founders,
Speaker 1: he was someone who was disrupted to the industry. He
Speaker 1: was someone who became very successful, very wealthy, very quickly.
Speaker 1: And one of the things that we noticed and we
Speaker 1: paid attention to, was the choices that he made once
Speaker 1: he kind of came into that wealth and a lot
Speaker 1: of there's so many similarities between him back then and
Speaker 1: and some of the tech moguls that we see today.
Speaker 1: He surrounded himself with the enighblers he made. He realized,
Speaker 1: he recognized the outsized influence he had had, and he
Speaker 1: made a lot of choices, not all of them good,
Speaker 1: in the way that he was going to sort of
Speaker 1: deploy that influence. J B. Walk us through what we
Speaker 1: can expect in this series. What do we learn along
Speaker 1: the way about the man, about his business about the
Speaker 1: controversies as well. He was an eccentric, Silicon Valley kind
Speaker 1: of guy, right, and he basically began he came to
Speaker 1: our attention with the McAfee antivirus software program. And we
Speaker 1: begin telling by telling that story, and it's it's very
Speaker 1: striking because it is the journey of a man who
Speaker 1: he goes around the world, he works as a computer programmer,
Speaker 1: and then he winds up in Silicon Valley and he
Speaker 1: basically stumbles along um this new technology that is evolving
Speaker 1: that the rest of the world is still only just
Speaker 1: learning about UM. What he does with it, the decisions
Speaker 1: that he makes. He's impulsive, He's a very brilliant man,
Speaker 1: but he's also he also has a lot of ego,
Speaker 1: and he also enjoys the attention that comes from that.
Speaker 1: There's a We spoke to a lot of people that
Speaker 1: haven't spoken publicly before, and we uncovered a lot of
Speaker 1: things that that he essentially fabricated or embellished over his lifetime.
Speaker 1: Bloomberg's Jamie Tara Bay, thank you so much, and you
Speaker 1: can go and listen to the podcast. The first episode
Speaker 1: on the early days of John McAfee's career and the
Speaker 1: first Warning Signs is out today. Now that does it
Speaker 1: for this edition of Bloomberg Technology. Don't forget tune in
Speaker 1: tomorrow Bloomberg's Technology Twitter spaces every Friday, twelve pm Eastern
Speaker 1: nine and San Francisco. We may have another special guest
Speaker 1: that wrapped this week's news. This is Bloomberg