WEBVTT - Betsy Cohen On Tech Investing and How SVB Failed Banking 101 0:00:10.080 --> 0:00:14.200 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.280 --> 0:00:17.800 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know, 0:00:17.840 --> 0:00:21.360 I was thinking something with the Silicon Valley bank crisis 0:00:21.440 --> 0:00:23.880 that you know, it's funny when we think of tech, 0:00:24.520 --> 0:00:26.599 we think of like these companies that are growing like 0:00:26.720 --> 0:00:29.159 super fast, shooting for the moon, trying to be like 0:00:29.200 --> 0:00:32.520 the next Amazon or Google or Open Air Eye or whatever. 0:00:32.960 --> 0:00:35.440 And when we think of banks, we think of these 0:00:35.440 --> 0:00:40.240 companies that really should be about like protecting downside, like conservatism. 0:00:40.720 --> 0:00:44.840 There's sort of like just first, steady, predictable deposit growth. First, 0:00:44.840 --> 0:00:47.200 do not lose money. And I do think I wonder 0:00:47.240 --> 0:00:50.440 if there's just like this inherent tension between like tech 0:00:50.479 --> 0:00:52.720 and banking. It's so funny you mentioned that because I 0:00:52.760 --> 0:00:55.040 was thinking about this, because if you think about the 0:00:55.120 --> 0:00:58.880 venture capital model, it's basically throw a bunch of money 0:00:59.120 --> 0:01:02.560 at different company as you kind of assume that some 0:01:02.760 --> 0:01:04.840 of them are going to fail, but maybe one of 0:01:04.880 --> 0:01:08.119 them will be the next Amazon or Google. And that 0:01:08.280 --> 0:01:12.000 seems to be almost the polar opposite of the banking model, 0:01:12.080 --> 0:01:15.440 which is you have a diversified portfolio, but you're really 0:01:15.440 --> 0:01:18.800 hoping that all of them eventually pay you back. Yeah, No, 0:01:18.920 --> 0:01:22.040 it's very it's a very different model. So here you 0:01:22.080 --> 0:01:24.440 have this bank that you know, obviously was the chief 0:01:24.480 --> 0:01:27.720 bank to startups and even in the best of times, right, 0:01:27.760 --> 0:01:30.200 not in a rate hiking cycle. Now that you imagine 0:01:30.240 --> 0:01:33.800 that like the majority of your clients are going to fail, 0:01:33.880 --> 0:01:36.920 because most startups fail, it is sort of an interesting 0:01:37.319 --> 0:01:39.679 tension that emerges, and it's like, well, how do you 0:01:39.720 --> 0:01:42.840 like responsibly bank the tech industry is kind of an 0:01:42.880 --> 0:01:45.520 interesting question even outside of right now. I think it's 0:01:45.520 --> 0:01:47.920 a fascinating one. And I guess the other question that 0:01:47.960 --> 0:01:51.240 goes right alongside that is our tech company is particularly 0:01:51.280 --> 0:01:54.080 good at managing their own money. Yeah, that's also an 0:01:54.120 --> 0:01:56.560 interesting question because you have a lot of companies like 0:01:56.800 --> 0:01:59.280 start with some hacker or coder and they have three 0:01:59.320 --> 0:02:01.080 people or five people. You know, if they don't have 0:02:01.160 --> 0:02:03.160 they're not going to have a big like finance group, 0:02:03.480 --> 0:02:05.600 And it is it unrealistic that they would even have 0:02:05.640 --> 0:02:08.520 someone doing like treasury management. After they get their first 0:02:08.560 --> 0:02:12.320 like seed check from like Sequoia or whoever. Everyone figured 0:02:12.360 --> 0:02:14.600 out how to put their crypto in cold storage, but 0:02:14.720 --> 0:02:19.240 not how to buy t bills. Through Schwab or Treasury Direct. Yeah, 0:02:19.040 --> 0:02:21.519 that if only they had, then we wouldn't be talking 0:02:21.520 --> 0:02:24.240 about this anyway. I do think there's some interesting questions here, 0:02:24.240 --> 0:02:26.560 and I'm very excited about our guest because we're going 0:02:26.600 --> 0:02:29.680 to be speaking to someone who's been involved in tech 0:02:30.000 --> 0:02:33.320 finance for quite a while. It's sort of like pioneer 0:02:33.520 --> 0:02:36.680 in sort of many aspects of whether it's like spacks 0:02:36.800 --> 0:02:41.919 IPOs providing financial services to tech companies more generally fintech companies. 0:02:42.040 --> 0:02:44.239 We're going to be speaking with Betsy Cohen. She is 0:02:44.280 --> 0:02:47.560 the co founder and chairman of Cohen Circle and Investment Group, 0:02:47.960 --> 0:02:50.880 and she founded a bank and done much more. So, Betsy, 0:02:51.000 --> 0:02:52.840 thank you so much for coming on odd lots really 0:02:52.840 --> 0:02:54.880 excited to have you here. Well, I'm delighted to be 0:02:54.960 --> 0:02:59.000 here and thank you for inviting me before this whole crisis. 0:02:59.240 --> 0:03:02.680 With this, you must have had numerous partners and clients 0:03:02.680 --> 0:03:05.560 who have worked with Silicon Valley Bank for a long time. 0:03:05.720 --> 0:03:07.920 How would you have characterized them? What didn't your view 0:03:08.360 --> 0:03:10.560 made it so that they were so sort of like 0:03:10.680 --> 0:03:15.200 influential throughout the valley and really throughout the entire industry. Well, 0:03:15.200 --> 0:03:18.720 I think that's an interesting question. I think that they 0:03:18.720 --> 0:03:22.920 were well located, certainly early on in terms of being 0:03:22.960 --> 0:03:26.560 in San Francisco, which at the time was the only 0:03:26.680 --> 0:03:31.440 of tech development, but that since changed. I think that 0:03:31.480 --> 0:03:35.040 they had a deep knowledge of the industry, which made 0:03:35.120 --> 0:03:40.400 them good lending partners for tech companies because you didn't 0:03:40.440 --> 0:03:44.480 have to go through a whole description of what was technology, 0:03:44.520 --> 0:03:49.240 what was a platform, etc. Etc. So having that expertise 0:03:49.480 --> 0:03:55.320 was certainly helpful. I think somewhere along the line the 0:03:56.400 --> 0:04:03.920 opportunity to move from simply being a traditional bank as 0:04:04.280 --> 0:04:09.360 was described, slow moving one thing at a time, let's 0:04:09.400 --> 0:04:16.160 not grow too fast, to seeing the opportunity because both 0:04:16.440 --> 0:04:22.160 health tech and biotech and fintech we're all growing very quickly. 0:04:22.880 --> 0:04:27.920 To take advantage of that opportunity to actually grow the 0:04:28.000 --> 0:04:32.839 bank that quickly, it meant that they took their eye. 0:04:32.880 --> 0:04:38.200 I think of what we're banking fundamentals, forget the tech fundamentals, 0:04:38.240 --> 0:04:43.160 because within a portfolio alone, portfolio you do expect losses, 0:04:43.800 --> 0:04:48.880 and whether they're due to a mortgage to an individual 0:04:49.120 --> 0:04:53.280 who dies and there's no nothing to do about it, 0:04:53.480 --> 0:05:00.480 or some other personal and probable event. It's why banks 0:05:00.560 --> 0:05:03.880 do have provisions for loan laws. So it's not that 0:05:04.040 --> 0:05:08.440 every tech company had to be successful, but they had 0:05:08.480 --> 0:05:12.719 to have within their portfolio the appropriate provision. I think 0:05:12.760 --> 0:05:17.320 what they really really didn't do as well as they 0:05:17.400 --> 0:05:21.960 might have is, or are two things, and they're really 0:05:22.000 --> 0:05:25.360 both banking one oh one. One is that they had 0:05:25.400 --> 0:05:30.359 a concentration of industry. It should have given them. I 0:05:30.400 --> 0:05:34.960 would have thought a better understanding of the current situation 0:05:35.040 --> 0:05:39.239 of technology companies, that they were having difficulty raising money 0:05:39.240 --> 0:05:43.000 and therefore would lean on their deposits more, but apparently 0:05:43.000 --> 0:05:48.000 it didn't. And the other is really asset management, asset 0:05:48.120 --> 0:05:51.240 liability management, and not so much in terms of the 0:05:51.360 --> 0:05:57.520 quality of the underlying bonds that they made or the 0:05:57.600 --> 0:06:01.919 underlying loans, because the both the loan and the and 0:06:02.200 --> 0:06:07.680 the quality of the securities in their portfolio is pretty good. 0:06:08.640 --> 0:06:13.839 But they had eighteen months during which interest rates were 0:06:14.000 --> 0:06:19.680 rising at a very quick pace, and not to adjust 0:06:19.760 --> 0:06:25.120 the portfolio, not to take on a duration basis of 0:06:25.240 --> 0:06:30.800 the appropriate steps is just to me mind blowing. Yeah, 0:06:30.839 --> 0:06:34.880 an asset liability duration mismatch. I was going to ask 0:06:34.880 --> 0:06:37.400 you what you thought caused the collapse, but since you 0:06:37.480 --> 0:06:40.520 already answered that, can you maybe just talk about I 0:06:40.520 --> 0:06:44.080 should mention, we're recording this on March fifteenth, what's been 0:06:44.160 --> 0:06:49.080 the experience or the mood in Silicon Valley over the 0:06:49.120 --> 0:06:52.080 past week or so. You know, I assume that you're 0:06:52.120 --> 0:06:56.200 talking to your various partners. What are they telling you. 0:06:56.560 --> 0:07:01.479 I mean, it's your panic, and it's surprise, and it's disappointment, 0:07:02.520 --> 0:07:06.760 and it's all of the things that go with having 0:07:06.839 --> 0:07:11.440 a trusted partner not perform. I think that there are 0:07:11.520 --> 0:07:16.040 companies that had credit lines. Let's just take a number 0:07:16.080 --> 0:07:19.440 at random, one hundred million dollars credit line. They had 0:07:19.520 --> 0:07:23.920 drawn sixty million dollars. They knew that they had forty 0:07:23.920 --> 0:07:27.400 million dollars let's put this in quotation marks in the 0:07:27.480 --> 0:07:32.240 bank in order to cover what was their ongoing period 0:07:32.320 --> 0:07:36.440 of negative cash flow. So they felt pretty good about 0:07:36.480 --> 0:07:38.880 themselves because they could see at the end of that 0:07:39.000 --> 0:07:43.800 period they would be in a cash flow positive situation. 0:07:44.120 --> 0:07:47.200 As is the case when a bank is taken over 0:07:47.320 --> 0:07:51.680 by the FDIC, all loans are frozen, so that forty 0:07:51.680 --> 0:07:55.800 million dollars is no longer available to them in our example. 0:07:56.320 --> 0:08:01.000 Add that to the fact that whatever money they had raised, 0:08:01.200 --> 0:08:05.000 and it's not true of all tech companies, but the 0:08:06.600 --> 0:08:11.520 majority of them had a very comfortable feeling that Silicon 0:08:11.680 --> 0:08:17.080 Valley Bank, at two hundred and nine billion dollars, was 0:08:17.400 --> 0:08:21.320 the sixteenth largest bank in the country, was a very 0:08:21.400 --> 0:08:27.000 safe place to put their deposits. You know, both it 0:08:27.040 --> 0:08:30.200 looked like earlier in the week that both they were 0:08:30.200 --> 0:08:32.560 not going to have access to their money through the 0:08:32.679 --> 0:08:35.600 loan mechanism and they were not going to have the 0:08:35.760 --> 0:08:40.440 uninsured deposits. So one piece of that has been resolved, 0:08:41.080 --> 0:08:43.800 but the second piece has not, so there's a lot 0:08:43.800 --> 0:08:47.000 of panic. I haven't heard as much about that line 0:08:47.000 --> 0:08:49.720 of credit or evolving line of credit issues. So even 0:08:49.920 --> 0:08:53.840 so it's like, okay, relief, you get your deposits back, 0:08:54.320 --> 0:08:57.839 But that must mean that for a lot of companies now, 0:08:58.240 --> 0:09:03.480 they're financial security is still impaired by this, simply because 0:09:03.840 --> 0:09:05.679 I don't know, it's hard for me to I don't know, 0:09:05.720 --> 0:09:08.080 it's hard for me to imagine some other bank right 0:09:08.160 --> 0:09:12.160 now jumping up and start getting excited about offering startups 0:09:12.160 --> 0:09:14.600 lines of credit in this environment. Well remember it's not 0:09:14.720 --> 0:09:18.600 only started right, right, Yeah, So startups make a part 0:09:18.640 --> 0:09:24.200 of it. And certainly customer loyalty was reinforced by the 0:09:24.240 --> 0:09:28.480 willingness of the bank to make loans perhaps to earlier 0:09:28.640 --> 0:09:34.120 stage companies than maybe other banks might see fit to do. 0:09:34.480 --> 0:09:41.040 But it's really beyond that and the opportunity to have 0:09:41.280 --> 0:09:46.439 another because everyone is swooping in, I mean, from hedge 0:09:46.440 --> 0:09:51.959 funds to other banking institutions, and I'm sure that some 0:09:52.040 --> 0:09:56.679 portion of the credit lines will then become available, but 0:09:56.720 --> 0:10:16.000 that's not going to happen tomorrow. You know, we started 0:10:16.120 --> 0:10:20.280 in the intro talking about how should tech companies or 0:10:20.360 --> 0:10:24.120 startups be banked, and there's an implicit assumption there, which 0:10:24.160 --> 0:10:27.800 is that that industry is somehow different to others. You 0:10:27.920 --> 0:10:32.760 anticipated the next question. I'm sorry, So A, do you 0:10:32.800 --> 0:10:35.439 agree with that? And B if that is true, if 0:10:35.440 --> 0:10:40.479 there are some idiosyncrasies or some peculiarities around tech slash startups, 0:10:41.160 --> 0:10:43.320 what is the ideal way that they should be banked 0:10:43.320 --> 0:10:45.040 in finance? Well, and if I could just add on 0:10:45.080 --> 0:10:47.040 a little bit to the question, I mean you were 0:10:47.040 --> 0:10:49.040 early on this, I mean you started your career. You 0:10:49.040 --> 0:10:51.160 were like one of the first like financial service at 0:10:51.200 --> 0:10:54.720 partners like PayPal and so forth. So it presumably you 0:10:54.800 --> 0:10:59.880 identified a gap in the existing banking infrastructure for us. 0:11:00.080 --> 0:11:03.000 Certain type of like fast growing company and so what 0:11:03.240 --> 0:11:05.360 is it that yeah, what is it that makes that distinct? 0:11:05.360 --> 0:11:09.440 That we were not traditionally a lender to those companies. 0:11:10.080 --> 0:11:13.480 We were providing a service what we call a bank 0:11:13.600 --> 0:11:19.240 rapper for non bank fintech companies, so that they could 0:11:19.280 --> 0:11:25.400 offer their customers a deposit service. PayPal is not a bank, 0:11:25.480 --> 0:11:28.679 and so it needs to have a way and a 0:11:28.720 --> 0:11:33.080 place to have access to the banking system. So we 0:11:33.080 --> 0:11:38.160 were the window into the banking system. It's why today 0:11:38.320 --> 0:11:42.120 I can say very proudly the banking model of Bankcorp 0:11:42.640 --> 0:11:45.600 is as valid as it was twenty five years ago 0:11:45.640 --> 0:11:48.959 when we started. That being said, we did do a 0:11:48.960 --> 0:11:53.920 significant amount of due diligence on the companies with whom 0:11:54.120 --> 0:11:57.400 we were going to partner on the bank rapper side. 0:11:58.000 --> 0:12:03.800 So they were not only companies that had a product 0:12:04.080 --> 0:12:08.560 that they were going to develop that might work, but 0:12:08.720 --> 0:12:13.920 there was a great deal more depth of understanding of 0:12:14.040 --> 0:12:18.520 where they were in their process. We didn't care whether 0:12:18.559 --> 0:12:22.840 they grew to be a very large company or not, 0:12:23.080 --> 0:12:27.480 as long as they could service their particular needs. That's 0:12:27.520 --> 0:12:31.320 a very different position to be in than being a 0:12:31.440 --> 0:12:35.319 lender to these companies where you're putting out your money 0:12:35.400 --> 0:12:40.920 up front, and you are looking at the potential viability 0:12:42.400 --> 0:12:48.199 of particular platform. It's sort of the middle ground between 0:12:48.480 --> 0:12:53.480 equity and debt, or let me say equity and traditional debt. 0:12:54.480 --> 0:12:56.240 Can you explain that what is it? Like? What is 0:12:56.280 --> 0:12:58.880 it then? And so talking about like, Okay, it's not 0:12:58.960 --> 0:13:01.160 quite equity, it's not quite dead. How should we think 0:13:01.200 --> 0:13:04.400 about I guess venture dead or lending to these fast 0:13:04.400 --> 0:13:07.440 growing companies, and that how why it doesn't quite fit 0:13:07.480 --> 0:13:11.160 in your view into either category. I think that equity 0:13:11.720 --> 0:13:15.360 is clearly a bet, maybe a good bet. It may 0:13:15.360 --> 0:13:18.040 be a well researched bet. It may be a bet 0:13:18.040 --> 0:13:23.600 based on prior performance of a particular company. But when 0:13:23.600 --> 0:13:26.320 you make an investment, you're making a bet that a 0:13:26.400 --> 0:13:29.760 product will be successful, that the management will be able 0:13:29.800 --> 0:13:34.840 to manage through a variety of changes in the marketplace. 0:13:35.520 --> 0:13:39.559 All of those things are in the nature of betting, 0:13:39.640 --> 0:13:44.720 not gambling with a bad connotation, but bets with a 0:13:44.720 --> 0:13:49.360 good connotation and with deep knowledge. You know, lending is 0:13:50.000 --> 0:13:56.319 more akin to having predictability, and many of these companies 0:13:56.880 --> 0:14:02.840 did not yet have the predictability that being said, a 0:14:02.960 --> 0:14:08.520 bank like Silicon Valley bank which had deep knowledge of 0:14:08.559 --> 0:14:14.319 the tech industry might make that judgment better than somebody else. 0:14:16.080 --> 0:14:20.960 So Bangkor was providing private label banking services, but also 0:14:21.120 --> 0:14:25.920 the underlying payments technology or additional payments technology as well. 0:14:26.520 --> 0:14:31.720 What was it like doing that as a competitor to 0:14:32.440 --> 0:14:36.960 traditional banks at that period of time? Was it? I 0:14:37.000 --> 0:14:39.560 can imagine maybe to some extent it was a competitive 0:14:39.600 --> 0:14:42.960 advantage because a lot of those larger banks tend to 0:14:43.000 --> 0:14:47.280 move very slowly, especially on the payments portion of things. 0:14:47.360 --> 0:14:50.240 But on the other hand, you know, you're talking about 0:14:50.800 --> 0:14:54.680 giants of traditional financial services, and when they decide that 0:14:54.720 --> 0:14:57.280 they care about something, they can throw a lot of 0:14:57.320 --> 0:15:01.120 money at it. Yeah, the I remember we started in 0:15:01.160 --> 0:15:05.760 two thousand. Nobody understood what we were doing, so that 0:15:05.840 --> 0:15:08.920 was an advantage. We then had an advantage for a 0:15:09.000 --> 0:15:13.280 couple of years because the big banks didn't think it mattered. 0:15:13.720 --> 0:15:17.560 I mean, I remember attending a conference and I was 0:15:17.840 --> 0:15:21.320 placed opposite I don't know a banker from a big bank, 0:15:22.000 --> 0:15:26.080 and he was very clear that we would certainly fail 0:15:26.160 --> 0:15:29.440 within the next period of time because we were not 0:15:29.680 --> 0:15:33.360 offering the services that a big bank could offer. We 0:15:33.440 --> 0:15:38.920 didn't have to, so we evolved into the dominant platform 0:15:39.000 --> 0:15:42.760 with the deepest knowledge of how to do this, and 0:15:42.840 --> 0:15:46.800 the banquet remains that in that position. Today there are 0:15:46.840 --> 0:15:52.520 many who have tried to model themselves after the business 0:15:52.680 --> 0:15:58.160 model that we developed, but nobody has had the length 0:15:58.200 --> 0:16:03.440 of time, the relationships, the predictability, the depth of knowledge, etc. 0:16:04.280 --> 0:16:08.400 That the Bancorp was hid. I want to sort of 0:16:08.600 --> 0:16:12.120 zoom forward and bring to the present day for a second. 0:16:12.440 --> 0:16:16.560 You were an innovator and early I don't know, sponsor 0:16:16.840 --> 0:16:19.320 or active in SPACs for years. So we saw this 0:16:19.480 --> 0:16:22.920 SPAC boom that started in twenty twenty, really like summer 0:16:22.920 --> 0:16:25.360 of twenty twenty, right after the pandemic. Maybe it's there 0:16:25.360 --> 0:16:27.160 are a few in the year before. I think like 0:16:27.280 --> 0:16:29.720 Virgin Galactic was the year before, but you were like 0:16:29.760 --> 0:16:32.160 several years before everyone else, and I think you've done 0:16:32.200 --> 0:16:35.080 more than anyone else. Or maybe it's closed. Maybe it's 0:16:35.080 --> 0:16:37.800 a time I'm not sure you can correct me. Then 0:16:37.800 --> 0:16:39.840 a bunch of them collapsed and it did terribly Like 0:16:40.040 --> 0:16:43.080 right now, like what is it? Just sort of your 0:16:43.200 --> 0:16:48.120 sense of I don't know, investment appetite, Like how frozen 0:16:48.160 --> 0:16:52.000 are things? I think very frozen is the short answer. 0:16:52.120 --> 0:16:54.760 But remember that a SPACK is just a league legal 0:16:54.880 --> 0:17:00.640 villa vehicle. It is designed to provide capital to an 0:17:00.720 --> 0:17:05.159 industry that can't get capital through a straight on IPO 0:17:05.359 --> 0:17:11.960 because there is some either gap in the development of 0:17:12.160 --> 0:17:15.800 the company, so they don't have numbers from prior years. 0:17:16.160 --> 0:17:19.159 If you look back, what you see is really the 0:17:19.200 --> 0:17:22.320 beginnings of a company, and there was no way under 0:17:22.359 --> 0:17:26.640 the traditional IPO to talk to investors about what might 0:17:27.280 --> 0:17:30.879 come in the future. Having come out of the Bankcorp 0:17:30.960 --> 0:17:35.440 fifteen years with all these fintech companies, I recognize that 0:17:35.520 --> 0:17:38.760 some of them had reached a level at which they 0:17:38.800 --> 0:17:43.640 could be predictable. They did have recurring income, they had 0:17:43.680 --> 0:17:49.000 an opportunity to make acquisitions, and therefore they could use 0:17:49.040 --> 0:17:52.600 a public currency. This was not for the whole portfolio, 0:17:53.800 --> 0:17:57.920 but at the time the IPO market was open, which 0:17:57.960 --> 0:18:03.359 it is not today. The IPO market, therefore, as a whole, 0:18:04.200 --> 0:18:11.280 was receptive to a vehicle which provided capital to what 0:18:11.520 --> 0:18:16.000 should be a public or could be a good public company. 0:18:16.200 --> 0:18:21.120 And we always emphasize it's why our basket of spec 0:18:21.640 --> 0:18:25.119 companies that are still trading that haven't been sold or 0:18:25.240 --> 0:18:30.600 some other disposition are all trading very well. It's really 0:18:30.640 --> 0:18:36.040 the discipline that we brought to and the deep knowledge 0:18:36.160 --> 0:18:39.639 that we brought to the area that enabled us to 0:18:39.680 --> 0:18:44.560 make these good decisions. Will there be I mean, if 0:18:44.600 --> 0:18:47.960 we look back at the history of specs, they were 0:18:48.000 --> 0:18:52.399 begun in the nineties when steel companies and other such 0:18:52.440 --> 0:18:55.320 companies coming we were coming right out of a depression 0:18:55.800 --> 0:18:59.960 in ninety two, did not have access to the capital 0:19:00.280 --> 0:19:05.040 markets but needed capital. That was the first round. The 0:19:05.160 --> 0:19:08.920 second round might have been for real estate companies following 0:19:09.040 --> 0:19:12.400 two thousand and eight, where they were cut off from 0:19:12.440 --> 0:19:16.520 the public markets but actually needed the capital. And the 0:19:16.680 --> 0:19:20.920 third round was really in the tech area. I think 0:19:21.000 --> 0:19:25.479 one of the things that happened is that people maybe 0:19:25.520 --> 0:19:30.640 confused companies that either had a path to profitability which 0:19:30.760 --> 0:19:37.840 was highly predictable, or had were in fact modestly profitable, 0:19:38.080 --> 0:19:42.399 which had very experienced executives that were attached to the 0:19:42.440 --> 0:19:47.520 company and could navigate and had differentiable products. I mean, 0:19:47.560 --> 0:19:50.639 I think if you look at the electric vehicle area 0:19:50.920 --> 0:19:55.679 or the biotech area, those are two areas in which 0:19:55.720 --> 0:20:01.680 the predictability of performance is at the very nader. So 0:20:01.920 --> 0:20:05.920 you know, the public markets are all about predictability, They're 0:20:05.920 --> 0:20:11.720 all about reporting. Next this quarters and hopefully next quarters earnings, 0:20:12.280 --> 0:20:15.959 and that's what the market responds to. Could you launch 0:20:16.160 --> 0:20:18.879 a spack in the current environment or is the window 0:20:18.960 --> 0:20:23.040 just closed? I think in the next couple of months 0:20:23.640 --> 0:20:26.760 I would have said, prior to this upheaval in the 0:20:27.440 --> 0:20:30.800 in the banking area, I would have said one Ndita, 0:20:31.000 --> 0:20:36.840 I would say so today that one could launch a spack, absolutely, 0:20:37.400 --> 0:20:40.560 but it would have slightly different characteristics. This spack is 0:20:40.600 --> 0:20:43.919 not sitting there and out of space, It's sitting in 0:20:43.960 --> 0:20:46.680 a spacks in space. Does have a good ring to it? Yeah? 0:20:46.720 --> 0:20:48.920 It does? It does you know, just the next three 0:20:49.680 --> 0:20:55.479 But in fact they are responsive to the current public market. 0:20:56.280 --> 0:21:01.240 So would they be constructed differently probably so. Would there 0:21:01.359 --> 0:21:07.399 be elements that were not needed in the prior iteration 0:21:07.520 --> 0:21:14.800 of specs that wouldn't be inducive to the investor? Probably so, 0:21:14.800 --> 0:21:17.320 so they would take a different shape, But it's a 0:21:17.440 --> 0:21:23.320 shape that is responsive to external factors rather than to 0:21:23.440 --> 0:21:27.600 the legal structure itself. Let me ask a broader question 0:21:27.840 --> 0:21:31.080 on investing, and I think you did an interview last 0:21:31.119 --> 0:21:34.840 year where you were talking about how tech valuations had 0:21:34.920 --> 0:21:36.840 gone down quite a lot, and that meant it was 0:21:36.960 --> 0:21:39.520 probably a better time to invest. There were a lot 0:21:39.560 --> 0:21:44.119 of opportunities. Presumably, as we sit here today, valuations have 0:21:44.200 --> 0:21:47.880 gone down even further. How are you feeling about the 0:21:47.920 --> 0:21:53.080 investment landscape in general? I think valuation is only one 0:21:53.200 --> 0:21:58.040 component of making a decision. Remember, since the time that 0:21:58.160 --> 0:22:04.080 I probably gave that interview, the war in Ukraine evolved, 0:22:04.080 --> 0:22:10.400 the several other large unnerving occurrences. Certainly the banking issues 0:22:10.440 --> 0:22:16.680 of today give investors pause. You know, it's a matter 0:22:16.760 --> 0:22:19.920 of looking at the whole package. I do think that 0:22:19.960 --> 0:22:24.920 there are opportunities today. I think they're good opportunities, not 0:22:25.080 --> 0:22:31.520 only because valuations are really rolled back in ten years, 0:22:31.800 --> 0:22:37.439 but because there are companies that have reached a level 0:22:37.800 --> 0:22:43.800 of both scaling and differentiation and have good executive and 0:22:44.040 --> 0:22:49.359 internal corporate elements at place in place to be good 0:22:49.440 --> 0:22:53.720 public companies or be good investments on the private basis. 0:22:54.000 --> 0:22:57.920 You know, I'm not moving away from that. Looking at 0:22:57.920 --> 0:23:01.800 it from the investor point of view, everybody is nervous. 0:23:02.560 --> 0:23:05.680 You know. It's interesting sometimes when you talk to investors 0:23:05.800 --> 0:23:08.320 in the background, I'm still excited, I'm still investing. We're 0:23:08.359 --> 0:23:11.000 like excited about AI or I'm really excited about There's 0:23:11.000 --> 0:23:13.560 still many opportunities. Do you think like that in terms 0:23:13.560 --> 0:23:17.160 of like sectoral opportunities or because it sounds like what 0:23:17.200 --> 0:23:21.600 you're describing is less about sectors per se and more 0:23:21.840 --> 0:23:25.840 about patterns that you like to see among management teams 0:23:25.920 --> 0:23:30.920 and financial operations regardless of the industry. I would say 0:23:30.920 --> 0:23:35.000 it's the latter. That I think that there are elements 0:23:35.040 --> 0:23:40.880 that are necessary in order to make a private company 0:23:40.920 --> 0:23:45.160 a successful public company, and that has less to do 0:23:45.240 --> 0:23:48.119 with the sector than it does have to do with 0:23:48.240 --> 0:23:54.240 the business model and corporate profile of the company. That 0:23:54.320 --> 0:23:59.040 being said, there is more opportunity to grow in certain sectors. 0:23:59.600 --> 0:24:02.280 So that is a component of what you look at, 0:24:02.640 --> 0:24:05.560 but it's not the only component. But it also did 0:24:05.600 --> 0:24:08.040 sound in your one of your previous nistors to Tracy, 0:24:08.119 --> 0:24:11.560 which I found interesting. The types of companies that came 0:24:11.640 --> 0:24:16.520 public during the twenty twenty one spack boom. To your view, 0:24:16.720 --> 0:24:20.680 many of them were just not appropriate for public markets 0:24:21.080 --> 0:24:25.040 by dint of their extreme profitability uncertainty. So like an 0:24:25.040 --> 0:24:29.199 early stage electric battery company, an early stage biotech a 0:24:29.400 --> 0:24:31.880 company that makes you know, electric trucks, but it's still 0:24:31.880 --> 0:24:34.560 never manufactured one. In your view, these were just like 0:24:34.680 --> 0:24:39.240 never appropriate for like public market infestors. Absolutely, they weren't 0:24:39.240 --> 0:24:41.600 appropriate at the time that they were brought to the 0:24:41.600 --> 0:24:45.080 public markets. Maybe they will be in twenty four, twenty 0:24:45.119 --> 0:24:52.120 five when they have actual contracts, actual manufacturing facilities, actual sales, 0:24:52.640 --> 0:24:57.560 actual customers. But indeed, when brought to the public markets, 0:24:57.600 --> 0:25:17.440 they were not appropriate. So one of the things about 0:25:17.520 --> 0:25:20.840 tech is it's always evolving. It's always trying to solve 0:25:20.880 --> 0:25:27.240 new challenges. And within your fintech expertise in particular, talk 0:25:27.320 --> 0:25:31.400 to us about how you see that evolving now, not 0:25:31.440 --> 0:25:36.040 just in response to the current interest rate environment and inflation, 0:25:36.520 --> 0:25:39.600 but also maybe in response to some of what we 0:25:39.680 --> 0:25:45.080 saw with SVP. I think that technology is evolving, and 0:25:45.320 --> 0:25:50.360 we're at a crossroads in financial technology where we're moving 0:25:50.600 --> 0:25:56.720 from one level to another level. We call it embedded finance, 0:25:57.520 --> 0:26:03.400 but it's not a standalone phenomenal. It requires a partner. 0:26:03.680 --> 0:26:10.520 One of the reasons that the financial technology industry was 0:26:11.080 --> 0:26:14.920 slow to scale at the beginning of the two thousands 0:26:15.320 --> 0:26:17.560 was really that there was nobody on the other side, 0:26:17.680 --> 0:26:20.919 or there were fewer people on the other side. Consumers 0:26:20.960 --> 0:26:26.720 were not sophisticated and knowledgeable about how to use their computers, effectively, 0:26:26.920 --> 0:26:30.640 most of the computing work Internet work that they done 0:26:31.200 --> 0:26:35.919 did was done it at work. Small businesses and enterprises 0:26:36.000 --> 0:26:41.920 were not sophisticated about how to run their businesses on 0:26:41.960 --> 0:26:47.040 the Internet. Today you have both elements crossing. You have 0:26:47.160 --> 0:26:52.400 a more sophisticated technology capacity and you have a more 0:26:52.440 --> 0:26:58.160 sophisticated and knowledgeable user. You know. One of the things 0:26:58.200 --> 0:27:01.840 again going back to like that twenty twenty one, the 0:27:01.880 --> 0:27:05.639 boom the boom years. In addition to taking companies public 0:27:05.680 --> 0:27:08.000 that probably were not appropriate to public markets, which we 0:27:08.040 --> 0:27:12.199 saw quite a bit of another phenomenon that existed in 0:27:12.280 --> 0:27:14.400 a few years in the last few years is like 0:27:15.080 --> 0:27:19.119 vcs in tech investors like talking to the public in 0:27:19.160 --> 0:27:21.760 a way they never did before. A lot of like 0:27:21.840 --> 0:27:26.720 promotion on Twitter and trying to get people into cryptocurrencies, etc. 0:27:27.160 --> 0:27:30.240 Like do you think that tech investors in generally sort 0:27:30.280 --> 0:27:32.359 of like need a little bit of a gut check 0:27:32.720 --> 0:27:36.840 about what they're promoting publicly when it's public retail money 0:27:37.080 --> 0:27:39.320 and getting people, Oh you should get excited about this, 0:27:39.400 --> 0:27:41.600 or if you're not in this, you're missing out. How 0:27:41.640 --> 0:27:44.679 reckless was that? And how much shaming should people have? 0:27:44.680 --> 0:27:47.479 What's your what's your gut view of all that. I 0:27:47.480 --> 0:27:53.600 don't know that it's shaming. Remember that social media, which 0:27:53.640 --> 0:27:59.520 is what you're really talking about, and communication flattened the 0:27:59.640 --> 0:28:03.760 kind of communication that was done. That was not limited 0:28:03.800 --> 0:28:08.480 to technology companies. It's really right across the board. It's 0:28:08.640 --> 0:28:14.080 what is driving meta to rethink their algorithms. You know, 0:28:14.160 --> 0:28:22.840 it's all of those elements that have changed the way 0:28:21.920 --> 0:28:27.800 in which in which we communicate. A company like Reddit 0:28:28.320 --> 0:28:32.440 could not have existed ten years ago because there weren't 0:28:32.520 --> 0:28:35.800 enough people who were interested and there were not enough 0:28:35.840 --> 0:28:42.480