Speaker 1: From the heart of where innovation, money, and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay. I'm Katie Grayfield in New York in for
Speaker 1: Emily Chang. This is Bloomberg Technology. Coming up in the
Speaker 1: next hour. Musk's latest subpoena the whistleblower who used to
Speaker 1: run Twitter security. He says the company has been incompetent
Speaker 1: with thoughts and privacy. Is that enough to sway the
Speaker 1: court's opinion? Will discuss. Plus, the tech industry's most prestigious
Speaker 1: business incubator, y Combinator, has named its first American Asian
Speaker 1: American CEO. I'll chat with Gary Tan about what to
Speaker 1: expect under his leadership, and Bitcoin falls below twenty thou
Speaker 1: as investor respond to the fed's hawkish dance. So how
Speaker 1: are the world's largest crypto performed during a recession? We'll
Speaker 1: try to answer that question, But first let's check in
Speaker 1: on the meme trade, because that's really been sort of
Speaker 1: one of the narratives that's emerged over the last few weeks,
Speaker 1: seemingly out of nowhere. It continued today. You saw some
Speaker 1: of the speculative corners of the crypto market, the miners
Speaker 1: up there posting some gains. Then once again you had
Speaker 1: bed Bath and Beyond just crushing it up almost twenty
Speaker 1: five percent, and some of the originals to you had
Speaker 1: game Stop notching gains of about two percent on a
Speaker 1: down day in the broader markets. But speaking of memes,
Speaker 1: let's listen to how some of the Bloomberg television guests
Speaker 1: are reacting to this moment. Memes come and go quickly,
Speaker 1: same thing goes with these prices of alatility down, stock
Speaker 1: market up a perfect precondition for some more meme stock
Speaker 1: action towards the very very big pictu where there's a
Speaker 1: price discovery and market efficiency and all sorts of things
Speaker 1: that do adhere to fundamentals a little bit more. Game
Speaker 1: Stop has been daddy uh, and so the interest there
Speaker 1: from the retail world has has maintained better than some
Speaker 1: of the other stocks you bad, Bathroom Beyond. I think
Speaker 1: there's probably a lot of factors that play here. Gator
Speaker 1: Stop is still not sustainable at the price that it's at.
Speaker 1: If you use fundamental analysis for leadership to be you know,
Speaker 1: maintained in those areas, we wouldn't think that's sustainable moving forward.
Speaker 1: So we've seen a turn both in terms of the
Speaker 1: general market environment and in terms of people interested in
Speaker 1: once again playing equities, getting involved in capital markets, and
Speaker 1: the two of those things together, I think I explain
Speaker 1: why we're seeing a little bit of a meme stock resurgence.
Speaker 1: Let's get more from Bloomberg's Bailey Lipshal. He joins us
Speaker 1: on the phone, and Bailey actually the Market's live blog
Speaker 1: over at Bloomberg News just ran a survey on this topic.
Speaker 1: Will the mean mania fizzle out? Almost two thirds said no.
Speaker 1: So let's start simple why, Katie. I think it's a
Speaker 1: combination of factors. Like some of the guests for Bloomberg
Speaker 1: TV mentioned, is just that you have de free trading
Speaker 1: applications like robin Hood. You have the ability now for
Speaker 1: retail traders to buy far out of the money call options.
Speaker 1: You also just have the sense of camaraderie and really
Speaker 1: community that platforms like Reddit and stock twits have founded.
Speaker 1: So you when you look at it kind of the
Speaker 1: confluence of those uh kind of factors, you see it
Speaker 1: continue to pop up here and there, and that's something
Speaker 1: that we saw most recently last week with bed, Bath
Speaker 1: and Beyond a particular but that really does date back
Speaker 1: to even the hurt stage of late nineteen when this
Speaker 1: trend of retail traders kind of taking up in picking
Speaker 1: up the ability to trade kind of came into Vote
Speaker 1: and Billy. If I think about the last two years
Speaker 1: of living through and reporting on this sort of meme
Speaker 1: craze that still is continuing in markets, these stocks used
Speaker 1: to sort of trade as a block. If one was up,
Speaker 1: you could bet the other was up. You can sort
Speaker 1: of see a little bit of a break apart here
Speaker 1: now though, Are we starting to see any sort of
Speaker 1: fundamental stories returned to some of these names. I wouldn't
Speaker 1: say it's fundamental. The more investors I talked to and
Speaker 1: strategists that each has their own story. And that's really
Speaker 1: what we saw play out in the summer of last
Speaker 1: year when you look at a game Stop obviously kind
Speaker 1: of lifted all boats. Was the titlisted all boats back
Speaker 1: in January one, But then AMC really caught fire in
Speaker 1: the early June late in May area when CEO Adam
Speaker 1: Aaron embrace retail trading. When then you saw that kind
Speaker 1: of play out with bed Bath and Beyond with its
Speaker 1: own way, with Ryan Cohen's Steak which he is subsequently dumped,
Speaker 1: So really you're looking at it where there's not really
Speaker 1: fundamental reasons for these rallies. But Bed Bath and Beyond
Speaker 1: is set to a strategic update on Wednesday, so that's
Speaker 1: another event for speculative investors to play, which is something
Speaker 1: we saw play out today in particular with call options
Speaker 1: on bed baton kind of by itself. Well, let's dig
Speaker 1: into bed Bath and Beyond because actually one of the
Speaker 1: questions in this survey was which stocks of these will
Speaker 1: go bankrupt within a year? You had game stop bed
Speaker 1: Bath and Beyond n a m C expect Bed Bath
Speaker 1: and Beyond to go bankrupt within the next year. What
Speaker 1: are we expecting to hear on Wednesday? The big focus
Speaker 1: was laid out by Morgan Stanley and what they're looking
Speaker 1: for comments on cash burn. This was a company that's
Speaker 1: been continuing to burn cash in the last few years, dwindling,
Speaker 1: dwindling cash position down from over a billion at point
Speaker 1: one point a year ago can now closer to a
Speaker 1: hundred million. So looking for cash burn, comments around vendor
Speaker 1: support because we have seen that Bloomberg report from about
Speaker 1: two weeks ago that maybe they weren't getting uh good
Speaker 1: supplied because they were running back on payment. And another
Speaker 1: thing is just looking at current trend going into the
Speaker 1: holiday season. This is really according to Wall Street analysts,
Speaker 1: they make or break stretch, board, bed, bath, and beyond
Speaker 1: going into the fourth quarter. And what that could mean
Speaker 1: for a company that really, when you look at it
Speaker 1: from a fundamental basis, who was kind of nearing uh
Speaker 1: the end of at least according to some what could
Speaker 1: be a potential light make or brick stretch. Definitely watching
Speaker 1: with bated breath. But Bailey, I know you also cover
Speaker 1: SPACs in addition to memes, and when I think about
Speaker 1: SPACs and memes and crypto, it's sort of all boils
Speaker 1: down to that same speculative urge driving these bets. At
Speaker 1: least in my view, Is that fair though? Is it
Speaker 1: fair to lump SPACs in with some of these mean names? Uh?
Speaker 1: It really depends, obviously when you look at the SPAC
Speaker 1: trade that played out when you go back to Virgin
Speaker 1: Galactic in tween turning into Draft Kings in early one,
Speaker 1: which really set the stage for the craze where pretty
Speaker 1: much any celebrity or investing kind of tighten hat us
Speaker 1: back in some way, shape or form. It just kind
Speaker 1: of caught the enthusiasm and energy of a market that
Speaker 1: seemingly was a bull market that could not run out
Speaker 1: of gas. And that really is why I think when
Speaker 1: I talk to some of my sources, SPACs got caught
Speaker 1: up with meme stocks again with some of these alternative cryptocurrencies,
Speaker 1: because there was so much froth in the market that
Speaker 1: it is able to have some of these speculative corners.
Speaker 1: The market really kind of go mainstream and be adopted
Speaker 1: by professional traders as well as retail investors. Bailey Lips,
Speaker 1: Bloomberg News, thank you so much. I really appreciate your
Speaker 1: time coming up how startups can change their strategy to
Speaker 1: raise capital in the current environment. This is Bloomberg. Restoring
Speaker 1: price stability will likely require maintaining a restrictive policy stance
Speaker 1: for some time. The historical record cautions strongly against prematurely
Speaker 1: loosening policy. The Federal Open Market Committee's overarching focus right
Speaker 1: now is to bring inflation back down to our two gold.
Speaker 1: Price stability is the responsibility of the Federal Reserve and
Speaker 1: serves as the bedrock of our economy. Without price stability,
Speaker 1: the economy does not work for anyone in particular. Without
Speaker 1: price stability. We will not achieve a sustained period of
Speaker 1: strong labor market conditions that benefit all. The burdens of
Speaker 1: high inflation fall heaviest on those who are least able
Speaker 1: to bear them. We are taking forceful and rapid steps
Speaker 1: to moderate demand so that it comes into better alignment
Speaker 1: with supply and to keep inflation expectations anchored. We will
Speaker 1: keep at it until we're confident the job is done.
Speaker 1: And that hawkishness from FED chaired room pal just crushing
Speaker 1: the risk on mood that we've seen from markets in
Speaker 1: recent weeks. And of course that shifting sentiment does not
Speaker 1: bode well for fund ups seeking starting seeking funding. Rather,
Speaker 1: I'm here to discuss this Christina Ras. She is CEO
Speaker 1: of the financial software startup Cube. Christina, you recently raised
Speaker 1: thirty million dollars for your Series B funding round earlier
Speaker 1: this summer. Obviously, that's a much different environment than your
Speaker 1: Series A round from just a couple of years ago.
Speaker 1: Compare and contrast the difficulty. So our Series day was
Speaker 1: about eighteen months prior, so at the end of twenty twenty,
Speaker 1: beginning of one, and that was really the beginning of
Speaker 1: the party. So this was the time when unicorns were
Speaker 1: being crowned nearly every other day. It was the world
Speaker 1: of endless capital without guardrails. And we've now moved into
Speaker 1: a world where certainly the sentiment has changed, but we're
Speaker 1: going back to good old fashioned business fundamentals. So for
Speaker 1: us in particular, we are a planning company and we
Speaker 1: did plan for this, and our business model is really
Speaker 1: lends itself well to both good times and bad. So
Speaker 1: when times they're good, we're a sword in the sense
Speaker 1: that companies need to allocate capital in the most effective
Speaker 1: way possible. Uh, that's actually harder to do the net
Speaker 1: loooks if you think about all of the companies out
Speaker 1: there that have blown billions of dollars and then when
Speaker 1: times are challenging, it's really bad extending runway. So we
Speaker 1: like to say, while cash is king, runways queen um
Speaker 1: and we help companies to do just that. Runway is queen.
Speaker 1: I'm going to write that down and use that. But
Speaker 1: this thirty million dollars that you raised in your Series B,
Speaker 1: what are you spending the proceeds on right now? And
Speaker 1: is that different than what you might have planned to
Speaker 1: spend it on. Had this sort of risk off vibe
Speaker 1: rippled its way through ASSA classes, we would have definitely
Speaker 1: been more aggressive in our go forward growth targets. So
Speaker 1: there was almost a joke going around this startup ecosystem
Speaker 1: last year of six to eight X is the new
Speaker 1: three X, meaning companies are going to grow seven year
Speaker 1: over year, which is what vcs are expecting. UM three X.
Speaker 1: Of course we're sort of the gold standard for growth.
Speaker 1: What we're now hearing in terms of um of sentiment
Speaker 1: is three years is the new three X. So going
Speaker 1: back to how we're sending this capital, we're looking at
Speaker 1: extending runway for a longer period of time, whether rather
Speaker 1: than growing aggressively to the point of maybe putting ourselves
Speaker 1: in a position uh that that that growth is difficult
Speaker 1: to achieve or maintain. UM So I would say that
Speaker 1: that is definitely something different than the world of one.
Speaker 1: But we are in a really great position to get
Speaker 1: to either a path to profitability or extend or runway
Speaker 1: as long as possible. I'd love to expand on that
Speaker 1: a little bit. How do you expand your runway in
Speaker 1: a market environment such as this one. So going back
Speaker 1: to core business fundamentals, every company, especially a tech company,
Speaker 1: has to think about how much they're willing and ready
Speaker 1: to invest in R and D, and for us, in
Speaker 1: our investors and for our customers, this is an area
Speaker 1: that's really important and we don't want to pull back.
Speaker 1: We could certainly get to profitability faster if we pull
Speaker 1: back on R and D because that doesn't generate immediate revenue,
Speaker 1: but it's more of an investment in the future. Where
Speaker 1: it comes down to us is really solid execution around
Speaker 1: our go to market. So that means we're looking at
Speaker 1: a lot of predictive measures around how well our go
Speaker 1: to market is UM is performing. So we look at
Speaker 1: things like magic number, which is how much we're sending
Speaker 1: each quarter versus how much revenue it's generating in the
Speaker 1: following quarter, and a good or best business practices for
Speaker 1: that magic number to be somewhere between point seven five
Speaker 1: and one UM and that's something we're doing to extend
Speaker 1: runway so that we're very efficient with the capital we use. UM.
Speaker 1: And one of my favorite UM sort of business uh
Speaker 1: I guess coaching lines actually came from the Netflix show Cheer,
Speaker 1: which when the coach was saying, it's you know, it's
Speaker 1: not about what the other teams are doing it's what
Speaker 1: we do here on the mat and for us in
Speaker 1: our company internally, it's about how we execute internally um
Speaker 1: and how efficient and effective we are at leveraging the
Speaker 1: capital that we already have. That show made me feel
Speaker 1: so inferior, but I'm glad that you pulled something away
Speaker 1: from it. Christina, someone who recently went through fundraising, who
Speaker 1: recently worked with vcs, I'd love to hear your perspective
Speaker 1: on what's top of mind for those vcs right now,
Speaker 1: what are they looking for in potential investments. First of all,
Speaker 1: it's good old fashioned business fundamentals, and I'm a former CFO,
Speaker 1: so I love to hear it. I love going back
Speaker 1: to basics. The numbers that are really top of mind
Speaker 1: for most investors today are your growth, sin net dollar retention.
Speaker 1: So great, you get customers, but how well are you
Speaker 1: retaining them and growing them? That's the most effective use
Speaker 1: of capital. How quickly and effectively are you growing? Some
Speaker 1: of those terms like magic numbers, so a lot of
Speaker 1: things around go to market fundamentals, and more importantly, of course,
Speaker 1: I haven't mentioned cash yet, but your burn rate and
Speaker 1: your burn ratio, so how well are you using the
Speaker 1: cash that you already have to generate either additional growth
Speaker 1: or moving towards profitability. So a very one of my
Speaker 1: favorite metrics is the rule of forty, which looks at
Speaker 1: how much um profit you have versus how much growth
Speaker 1: and trying to get to or above the number forty.
Speaker 1: And So, if you were to give an advice advice
Speaker 1: to a startup who is trying to attract funding right now,
Speaker 1: who is trying to capture the attention of some of
Speaker 1: those vcs, what advice would you give them to sort
Speaker 1: of tailor their strategy in this environment. So right now,
Speaker 1: what I'm hearing is most sterns are not advised to
Speaker 1: raise right this second. If you can extend runway, that's
Speaker 1: not just going to be you know, through business fundamentals,
Speaker 1: but also looking at other external sources like debt. So
Speaker 1: if you can't raise equity, look for a line of
Speaker 1: credit or another way to extend runaway, maybe reducing burn
Speaker 1: whether it's reducing your growth rate or reducing the amount
Speaker 1: of R and D depending on the type of business
Speaker 1: you're in, are just ways to extend capital until we
Speaker 1: get out of I would say, do we know a
Speaker 1: little bit more of when we hit the bottom of
Speaker 1: the market, or at least when investors are confident enough
Speaker 1: to start really investing heavily. Again, that is cheaper than equity.
Speaker 1: I've heard that one before. Q CEO Christina Ross great
Speaker 1: to spend some time with. You really appreciate it well.
Speaker 1: The U S and China are nearing a deal to
Speaker 1: avoid Massy listings over audit supervision disagreement let's American auditors
Speaker 1: go to Hong Kong to check the records of Chinese
Speaker 1: companies listed New York. But if the agreement falls through,
Speaker 1: more than two hundred US listed Chinese companies face delistings
Speaker 1: from American stock exchanges starting in early Here discuss the
Speaker 1: strategy risks founder and CEO Isaac Stonefish, Isaac, great, to
Speaker 1: have you with us. In your view, how likely is
Speaker 1: it that this agreement actually goes through. I think it's
Speaker 1: very likely that the agreement will go through. What I'm
Speaker 1: more uncertain about is whether it will solve what the U. S.
Speaker 1: Government wants it to solve, namely equal treatment for Chinese
Speaker 1: companies and US companies and other globile companies, and whether
Speaker 1: or not it will actually stem the tide of worsening
Speaker 1: US China relations, which seem increasingly likely to lead to
Speaker 1: all out conflict or war. And do you think such big,
Speaker 1: big hurdles such as that could ever be solved? Is
Speaker 1: there any agreement that could go through that would satisfy
Speaker 1: all of those requirements out? No? Okay, Well, let's talk
Speaker 1: about the ramifications here. If this doesn't of the course,
Speaker 1: this agreement, like you're saying, doesn't go far enough in
Speaker 1: your view, But if it doesn't go through at all,
Speaker 1: what are the ramifications of that? What is actually at
Speaker 1: stake here? It seems what the Chinese side is doing
Speaker 1: is buying time. There still are roughly eighteen months or
Speaker 1: so until the companies would have to delist. I think
Speaker 1: probably the idea is we'll sign this, the U S
Speaker 1: side will try to implement it, They'll find a lot
Speaker 1: of stonewalling on the Chinese side, and by two and
Speaker 1: twenty four things will be different enough that will be
Speaker 1: able to keep moving the goalposts and keep pushing the
Speaker 1: can down the road and figure something out. Then it
Speaker 1: doesn't feel like this is a very big concession. It
Speaker 1: feels like this is a very good stalling technique so
Speaker 1: that companies on both sides and investors on both sides
Speaker 1: don't see Beijing communicating that they're not really open for this.
Speaker 1: So if that's the future we're looking forward to, that
Speaker 1: the goal post just continue to move forward, just a
Speaker 1: series of stalling techniques. Do you think that we'll ever
Speaker 1: actually see these d listings go through? It's a great question.
Speaker 1: I think the question of whether or not these companies
Speaker 1: will be list will depend so much more on the
Speaker 1: macro environment at the time. So we saw significant deal
Speaker 1: listings earlier in the month from several large s o
Speaker 1: e s, presumably because they didn't want any US linked
Speaker 1: auditors anywhere near their books. I think it's possible that
Speaker 1: if US China relations worse in certain companies will be lists,
Speaker 1: maybe not even because of this, but because of other considerations.
Speaker 1: And I think certainly a lot of promising Chinese companies
Speaker 1: are finding it less appealing to list on US markets
Speaker 1: and are looking closer to home for their capital raises.
Speaker 1: So why is that? Why is listing on US exchanges
Speaker 1: Maybe not the holy grail or the big goal that
Speaker 1: it might have once been. A lot of it is
Speaker 1: Aijing and the Chinese Communist Party is increasing paranoia about
Speaker 1: data and data security, and a lot of folks believe
Speaker 1: this has to do with Beijing really fearing that the
Speaker 1: US is going to go to war with China against
Speaker 1: Taiwan if Beijing worre to sees the island, and national
Speaker 1: security is really coming into the forefront. There's an expression
Speaker 1: in China and China politics dominance, and I think we're
Speaker 1: seeing that not only with domestic politics, but really with
Speaker 1: foreign policy and national security as a major major force
Speaker 1: driving Beijing's decisions, Isaac, who has more to lose here?
Speaker 1: If we make it sort of a binary conversation, I mean,
Speaker 1: is it more important for a Chinese company to list
Speaker 1: on a US exchange? Is it more important for that
Speaker 1: US exchange to have those Chinese companies? That's a great question.
Speaker 1: I think it's pretty even. I think from a broader perspective,
Speaker 1: it's investors who lose because of less choice, less efficient markets.
Speaker 1: And really what we're seeing on both sides is the
Speaker 1: U S and China prioritizing national security. And that's what
Speaker 1: governments do, and that's what investors often don't like governments
Speaker 1: to do. But that's really the new reality, the new
Speaker 1: base case for US China relations. So investors thinking about
Speaker 1: various equities should really have a national security strategy in
Speaker 1: mind as they make decisions, and ISAAC going with your
Speaker 1: expectation that really we just continue to stall and stall.
Speaker 1: What do you think could happen along the way in
Speaker 1: terms of the Chinese tech crackdown? For example, do do
Speaker 1: we do we expect to see delistings even if not
Speaker 1: forced to? For example? I think that's really impossible. And
Speaker 1: I think one thing investors have to keep an eye
Speaker 1: out is both Beijing and the US is worried about
Speaker 1: US companies in China and Chinese companies in America. So if,
Speaker 1: for example, this seems to move forward and then there's
Speaker 1: some corruption allegations against a Chinese company on the US exchange,
Speaker 1: Beijing could retaliate against an American company in China. It's
Speaker 1: also possible that investors start to feel like the markets
Speaker 1: in the other country are a lot less appealing, and
Speaker 1: the government's respond accordingly. I do feel like there's a
Speaker 1: lot of people with large positions in China who want
Speaker 1: you to believe that this is business as normal, and
Speaker 1: it's really not, and Beijing has been very explicit about that.
Speaker 1: So this to me is not the key signal. This
Speaker 1: is part of the noise alright, Isaac, we have to
Speaker 1: leave it there. Really appreciate your time, though, That is
Speaker 1: strategy Risks founder and CEO Isaac stone Fish. Well, let's
Speaker 1: move on to the Musk Twitter drama now with the
Speaker 1: Twitter whistleblower now subpoena by Elon Musk's lawyer, that whistle blower,
Speaker 1: Peter Zatko, claims Twitter officials didn't know or care to
Speaker 1: find out how many of its accounts or spam and
Speaker 1: bought accounts. Let's bring in Bloomberg's Kurt Wagner for more
Speaker 1: on that and current The argument that has been made
Speaker 1: is that zach Coe's claims could help Elon Musk actually
Speaker 1: walk away from this deal over those spam accounts. Does
Speaker 1: that theory hold water? You know, I think it's a
Speaker 1: little more complicated than that, right, I Mean, what the
Speaker 1: whistle blowers basically said was that Twitter has not done
Speaker 1: a good job with security and also not a good
Speaker 1: job with identifying how many bots are on the service.
Speaker 1: And when he says that, he's really meaning in total, right,
Speaker 1: how many of all the accounts that are on there,
Speaker 1: how many our bots? He claims that Twitter has no
Speaker 1: idea now where it gets a little bit more complicated
Speaker 1: is that Twitter's argument has long been that, hey, it's
Speaker 1: fewer than five percent of the accounts that we you know,
Speaker 1: count his monthly active users and share with Wall Street, Right,
Speaker 1: So the kind of talking about two different things here.
Speaker 1: What I do think matters here is that this whistleblower
Speaker 1: is a top senior executive at the company, reported directly
Speaker 1: to the CEO, who basically is painting a picture of
Speaker 1: a company who's you know, mismanaged and and not taking
Speaker 1: these issues seriously. Right, So, whether or not the data
Speaker 1: he has is going to help Elon Musk, I think
Speaker 1: he's painting a picture of a company that hasn't taken
Speaker 1: the body issue nearly as seriously as Twitter wants you
Speaker 1: to believe it has, and theoretically za CO would know.
Speaker 1: But is there any world in which this subpoena could
Speaker 1: actually backfire on Elon Musk? I mean sure if if
Speaker 1: he goes and starts answering a bunch of questions that
Speaker 1: basically confirmed that even though maybe Twitter doesn't know how
Speaker 1: many bots are total on the service, they're making their
Speaker 1: best guess right there, They're doing the best that they
Speaker 1: can to uh create this number that they share with investors.
Speaker 1: That's really all Twitter has to do and has been
Speaker 1: saying that they've been doing for years, right as they
Speaker 1: are doing their best to calculate this stuff. So if
Speaker 1: for some reason he comes out and and you know,
Speaker 1: some of these answers start to show that Twitter did
Speaker 1: put some thought into this and did handle this in
Speaker 1: the best way possible for investors, you know, certainly that
Speaker 1: seems to, in my opinion, defend Twitter's argument a little
Speaker 1: bit here. Well, let's talk a little bit more about
Speaker 1: the Twitter side. How would you expect Twitter to respond
Speaker 1: to the subpoena. Well, they declined to comment on this
Speaker 1: venus specifically. I imagine that you know, they too are
Speaker 1: very interested to hear what Zacho is about to say.
Speaker 1: They have somepe did a bunch of people, um and
Speaker 1: and I'm sure that they would love to, you know,
Speaker 1: ask some questions of of him themselves. But they have
Speaker 1: since come out and said, you know that everything that
Speaker 1: he said in this whistleblower complaint is false. They said
Speaker 1: it was uh, you know, mischaracterized all the things that
Speaker 1: you would expect a company to say to someone like this.
Speaker 1: Um And so, you know, again, no comments specifically on
Speaker 1: his subpoena today, but they're clearly, you know, unhappy with
Speaker 1: what he shared thus far, and you know, claim that
Speaker 1: it is not accurate. And Kurt, I know that you
Speaker 1: are living and breathing this case. But for the rest
Speaker 1: of us, what should we keep an eye on next? Yeah, well,
Speaker 1: there is going to be a shareholder vote in a
Speaker 1: few weeks, and it feels a bit like a formality,
Speaker 1: but I think it's an important one, right because this
Speaker 1: feels sort of like the last hurdle that Twitter has
Speaker 1: to really clear to show that they have done everything
Speaker 1: in their power to make this deal happen. And so
Speaker 1: that's going to happen. I believe it's on September, so
Speaker 1: in just a few weeks. And again, if shareholders come
Speaker 1: and approve of this deal, then it's kind of Twitter
Speaker 1: can say, hey, look, we've done everything we said we
Speaker 1: were going to do. We'll see you in court. So
Speaker 1: I think that that's a big moment um that's coming
Speaker 1: up just after the holiday. Alright, plenty to keep an
Speaker 1: eye on. Bloomberg's Kurt Wagner, thank you so much, Really
Speaker 1: appreciate it coming up. As crypto follows the sharp adjustment
Speaker 1: in US stocks, where is it headed and what does
Speaker 1: it mean for institutional interests in the space. We'll discuss next.
Speaker 1: This is Bloomberg time now for our crypto report and
Speaker 1: bitcoins still hovering around twenty thousand dollars. This is risk
Speaker 1: appetite wavering following FED chair j Rome Pals speech on
Speaker 1: Friday stressing that interest rates may have to stay elevated
Speaker 1: to stamp out inflation. Let's bring in Blockchain Capital partner
Speaker 1: Kim jall Shop for her read on this kindel great
Speaker 1: to have you with us at this point. How much
Speaker 1: is bitcoin and the crypto space space broadly just a
Speaker 1: macro trade? Thanks for having me, you know. I think
Speaker 1: bitcoin and the crypto markets more broadly have certainly expanded
Speaker 1: into broader attack over this last cycle, and I think
Speaker 1: we're starting to see that get reflected when it comes
Speaker 1: to UM macro comments coming from Germ Powell and sort
Speaker 1: of the general market sentiment tending to sort of edge
Speaker 1: away from risk UM. I don't know if that's going
Speaker 1: to continue for you know, the long term, but it
Speaker 1: certainly is I think a result of how the markets
Speaker 1: have behaved in the past twenty four months. We also
Speaker 1: have crypto contributortionally basic on set with us Sinale. It
Speaker 1: definitely feels like uh fed chair Jerale pal spoke and
Speaker 1: Crypto listens. Crypto did listen, even though it's trading lower
Speaker 1: than where it was a week ago. Katie, you do
Speaker 1: have that lift back up just a little bit today
Speaker 1: in the last twenty four hours. Kindle that if you
Speaker 1: look at what's happening here. Of course, the macro is
Speaker 1: driving so much of the story, but there's also some
Speaker 1: single name events. When you look at a lot of
Speaker 1: the tokens that are trading Ethereum being one of them.
Speaker 1: When you see what happens to Avalanche on the downside,
Speaker 1: some news over the weekend driving the price a lot lower.
Speaker 1: How much do the fundamentals matter here? You know, I
Speaker 1: think there are going to be short term narrative driven
Speaker 1: you know, moments, as there are with any sort of
Speaker 1: equity or asset class. More broadly, however, the fundamentals I
Speaker 1: think continue to matter. I think that the long term
Speaker 1: investor is still paying attention to the fundamentals and that's
Speaker 1: really going to be driving a lot of investment. As
Speaker 1: far as investment goes, then, how much are you thinking
Speaker 1: about valuation? There's a lot of question about whether ethereum
Speaker 1: just has a lot more room to run given that
Speaker 1: run up with bigcoin we've seen over the last several years.
Speaker 1: Is that something that you believe or do you believe
Speaker 1: that the merge can create some more complications ahead, you know,
Speaker 1: I think the merge is a really big milestone for
Speaker 1: the Ethereum ecosystem UM. You know, this this transition, I
Speaker 1: think is going to have a lot of ramifications UM,
Speaker 1: whether that's related to institutions being able to allocate to
Speaker 1: ethereum more um heavily than they have in the past,
Speaker 1: as well as UM certain fundamentals around the issue issuance
Speaker 1: of ethereum itself. I think this is going to be
Speaker 1: a really big milestone. It's it's unclear if that's UM
Speaker 1: you know, being sort of reflected in the price of
Speaker 1: ethereum today. That's something I certainly don't UM don't have
Speaker 1: the ability to sort of see into, but certainly think
Speaker 1: it's going to be a part of big part of
Speaker 1: the discussion in the next six months. Canential I want
Speaker 1: to talk up more about institutions in the crypto space
Speaker 1: because a narrative that I've picked up on over the
Speaker 1: past few months is that this big volatility, this really
Speaker 1: dramatic draw down that we've seen across the crypto landscape
Speaker 1: is going to scare off some more of those traditional players,
Speaker 1: those big institutional players. Has that been your sense as well?
Speaker 1: My sense is that a lot of institutions and enterprises
Speaker 1: more broadly have been getting really smart on crypto assets
Speaker 1: more broadly and are using this time as a way
Speaker 1: to implement strategies and sort of figure out exactly what
Speaker 1: they what role they want to play in these markets.
Speaker 1: You know, even today we heard an announcement from Meta
Speaker 1: announcing the ability to post your un f t s
Speaker 1: across Instagram. I think that's a big sort of strategic
Speaker 1: move that's been in play for a number of months,
Speaker 1: and I think we'll see similar reflection on the institutional side,
Speaker 1: as they've been putting sort of the pieces in place
Speaker 1: into what that looks like. Well, Ken Jaws, speaking of Meta,
Speaker 1: I think back to this time last year or even
Speaker 1: six months ago, I was hearing a lot about the metaverse,
Speaker 1: I was hearing a lot about Web three. It feels
Speaker 1: like those conversations have sort of petered off as we've
Speaker 1: seen this big market volatility. When are we going to
Speaker 1: start to see a rejuvenation in that space. Is that
Speaker 1: ultimately tied back to what the Federal Reserve is going
Speaker 1: to do? Yeah, you know, it's it's difficult to know
Speaker 1: exactly when sort of markets will will come back to life. However,
Speaker 1: I will say that founders and teams continue to build
Speaker 1: in the web three space as well as the metaverse.
Speaker 1: There are a lot of really interesting projects that have
Speaker 1: been funded over the past twelve months that we're going
Speaker 1: to start to see execute and ship on their roadmaps,
Speaker 1: and I think we'll start to see some great um
Speaker 1: engagement and use cases really come to light over the
Speaker 1: next uh, you know, year, year and a half. Well,
Speaker 1: there's also just a lot of dry powder on the
Speaker 1: sidelines when you look at how much money has been
Speaker 1: raised in the venture capital industry. Is there an opportunity
Speaker 1: now that valuations seem to be stabilizing a little more,
Speaker 1: they've come down quite a bit. Where are you placing
Speaker 1: your bets? Yeah, we continue to think up watching capital
Speaker 1: that this is one of the most opportune periods to
Speaker 1: engage with right founders that are really focused on the
Speaker 1: long term. You know, we're doubling down on infrastructure. I
Speaker 1: think as a really key theme for us, whether that
Speaker 1: relates to scaling existing blockchains, privacy more broadly, powering consumer
Speaker 1: use cases. I think infrastructure is a really interesting space
Speaker 1: span right now and something that we're spending a lot
Speaker 1: of time on. I'm curious about some of the existing
Speaker 1: companies that you've placed your bets on. Over time, We're
Speaker 1: seeing some really interesting changes here in in what some
Speaker 1: of them are doing. Think about coin Base, for example,
Speaker 1: and how it says that more customers will be using
Speaker 1: its staking services. I'm curious as to how consumers are
Speaker 1: going to be interacting with some of these companies differently
Speaker 1: as we look to what crypto looks like coming out
Speaker 1: of this most recent winter. Yeah. I think companies like
Speaker 1: coin base are really trying to put their users in
Speaker 1: the best position given the market changes. So as staking
Speaker 1: becomes more of a mainstream use case, enabling their millions
Speaker 1: of users to be able to get access to those products,
Speaker 1: I think is a really big value prop for folks
Speaker 1: like coin Base or other exchanges that have that ability
Speaker 1: in their in their um you know, product suite. On
Speaker 1: the other hand, we're seeing entry points for retail users
Speaker 1: really proliferate across the open protocol ecosystem, whether that's using
Speaker 1: defied protocols or more consumer oriented and f T communities.
Speaker 1: I think, um, everyone's entry point into into Web three
Speaker 1: looks a little bit different right now, and so really
Speaker 1: trying to ensure that there's a place and a use
Speaker 1: case for for everyone. And when it comes to Web three,
Speaker 1: I mean, I'm just fascinated by the idea of the
Speaker 1: Internet on the blockchain. And I've heard it both ways
Speaker 1: that you could see, uh, some of these trad five
Speaker 1: players come in, some of these more traditional companies that
Speaker 1: aren't necessarily crypto native come in and build Web three.
Speaker 1: I've also heard the case that you know, it has
Speaker 1: to be someone who's native to the crypto industry. Where
Speaker 1: do you fall on that debate? And when you think
Speaker 1: about the own bets, your own bets that you're placing,
Speaker 1: I mean, are you more likely to invest in a
Speaker 1: crypto native company or maybe someone with a little bit
Speaker 1: more experience coming from the realms of traditional finance, you know,
Speaker 1: I think every company is its own sort of use
Speaker 1: case to think through. However, I will say there is
Speaker 1: a certain something special that comes from being crypto native
Speaker 1: and really solving for pain points that you're seeing within
Speaker 1: this ecosystem crypto and webrary more broadly is very focused
Speaker 1: around grassroots organization and community really giving ownership back to
Speaker 1: the users of the products that we see, and so
Speaker 1: I think being crypto native is really important to the
Speaker 1: ethos of how, um, how you can build a product
Speaker 1: in crypto, and how that really can scale over time.
Speaker 1: That's not to say that financial institutions and sort of
Speaker 1: web two companies won't be able to build some really
Speaker 1: great products and ideas in the crypto space, but I
Speaker 1: will say that being digital and crypto crypto native is
Speaker 1: certainly I think a unique advantage. And I'll put another
Speaker 1: question to you along those lines. You know, when you're
Speaker 1: invested in everything from unit sap swap and sushi swap
Speaker 1: to coin base and crack and centralized or decentralized, which
Speaker 1: is the way of the future, you know, it really
Speaker 1: is a spectrum. It's it's certainly not a black or
Speaker 1: white question in terms of, you know, whether the world
Speaker 1: is going to look completely centralized or decentralized. And I
Speaker 1: think that's something that's really become clearer and clearer over
Speaker 1: the past few years at watching capital and and UM.
Speaker 1: You know, more broadly, thinking about the market, we really
Speaker 1: want to back founders and products that are solving for
Speaker 1: customer pain points and for real problems that they're facing
Speaker 1: in the market. And I think that's going to continue
Speaker 1: to exist on this factrum. Blockchain Capital partner kin jall
Speaker 1: Shaw and Bloomberg's own Shinali Basset. Great discussion. Thank you
Speaker 1: both so much. Gary Tan, one of the founders of
Speaker 1: y Combinator and currently the managing partner at Initialized Capital,
Speaker 1: will come back to y Combinator as its president and
Speaker 1: CEO early next year. He will also be the firm's
Speaker 1: first Asian American chief. Gary Tan, I'm pleased to say
Speaker 1: joins us now for more on this news. And Gary,
Speaker 1: in many ways, this is a homecoming. What brought you
Speaker 1: back to y Combinator. You know, for me why combinator
Speaker 1: is truly sort of the beacon for opportunity and you know,
Speaker 1: for me growing up, you know that gave me everything
Speaker 1: in my life. You know, I started my life actually
Speaker 1: as child of Chinese immigrants, and you know something times
Speaker 1: food and secure we were sometimes, you know, we're in
Speaker 1: one bedroom too, betterom apartments. I got my first job, uh,
Speaker 1: making web pages, and that helped me pay for the
Speaker 1: down payment for their home. And I just remember going
Speaker 1: to White Combinator, dot com, slash apply and putting down
Speaker 1: what my idea was, and they met me, they gave
Speaker 1: me an interview, they funded me, they put me in
Speaker 1: this community, and that community changed my life. And so
Speaker 1: at the end of the day, I just know that
Speaker 1: that is what we can keep doing for thousands more people,
Speaker 1: you know, possibly way more than that, And that's really
Speaker 1: the goal. That's why, you know why ce gave me
Speaker 1: so much, and you know, I want to give back.
Speaker 1: So you start early next year as president and CEO.
Speaker 1: What's top of your priority list if you had to pick,
Speaker 1: you know, one of the things that has been incredible
Speaker 1: for me that you know, I want people to know
Speaker 1: out there why c A is a place where the
Speaker 1: alumni help each other in such a fundamental way. And
Speaker 1: I'll tell you a story of when I was in
Speaker 1: y C in uh summer of two thousand and eight. Um,
Speaker 1: there's a company that most tech people know called Hiroku
Speaker 1: that um you know, they were on their way. They did,
Speaker 1: of course go on to get acquired by Salesforce, and
Speaker 1: it was great. One of the biggest exits of the
Speaker 1: time for y Combinator. But I remember those founders coming
Speaker 1: and telling me, hey, this is how you raise your
Speaker 1: seed round, this is how you actually do it. And
Speaker 1: they gave us their secrets. They said what they said
Speaker 1: in those conversations, and they gave us the words to
Speaker 1: do it. Six months later, Uh, you know, we were
Speaker 1: running one of the biggest rails websites on the planet,
Speaker 1: called Posterous, and they wanted our source code because they said, well,
Speaker 1: we need we're a hosting service for rails and we
Speaker 1: need to be able to handle you know, the biggest website.
Speaker 1: And you know, normally in technology, nobody would ever do that,
Speaker 1: Like the source code is your crown jewels. But we said,
Speaker 1: you know what, here it is and we helped them.
Speaker 1: And you know, that's the kind of thing that happens
Speaker 1: every single day. Like these aren't stories or you know,
Speaker 1: access to information that you can get at a conference
Speaker 1: or you know, sitting next to someone you know, even
Speaker 1: you know at the top business schools, Like this is real,
Speaker 1: really advice and resources from people who are the best
Speaker 1: in the game. Uh. And you can just apply online
Speaker 1: and anyone has access to it, so that you know
Speaker 1: that is still super unique and so powerful in the world.
Speaker 1: And Gary, of course you are y combinators first, Asian
Speaker 1: American CEO, and when you're seeking to fund VC founders,
Speaker 1: how important will diversity be for you? You know, at
Speaker 1: the end of the day, you know, at INITIALIZED, I'm
Speaker 1: super excited about gen Wolfe and Brett Gibson sort of
Speaker 1: stepping into the rules of managing partner at INITIALIZED, and
Speaker 1: I really have to just recognize gen Wolfe as a
Speaker 1: true leader in sort of bringing diversity to you know,
Speaker 1: even actually the fund itself. You know, Initialized is actually
Speaker 1: the second most diverse fund in the world according to
Speaker 1: the information And you know, at the end of the day,
Speaker 1: what is investing about if not trying to build the
Speaker 1: world that we want to live in? And well, Gary,
Speaker 1: talking about the world that we currently live in. The
Speaker 1: markets have seen just incredible volatility over the past few months.
Speaker 1: We heard from Jerome pal on Friday sparking even more volatility.
Speaker 1: If you think about this period of higher interest rates
Speaker 1: that we're heading into, how is that affected sort of
Speaker 1: the startup world and some of the investments you could
Speaker 1: be funding. You know, I think one of the very
Speaker 1: lucky things about just early stage investing period is if
Speaker 1: you look at these times of great crisis, really great
Speaker 1: work is done. So you know, when people thought the
Speaker 1: web was deader than dead, that's when Facebook was created,
Speaker 1: when people thought and actually I was in the least
Speaker 1: successful Why Combinator batch of summer two thousand eight because
Speaker 1: Lehman died, which was crazy. And you know friends of
Speaker 1: mine now Brian Chesky and Joe Gibia and Nathan bar
Speaker 1: Chick actually like they went through air they went through
Speaker 1: White combinatd with Airbnb the year after, and that was
Speaker 1: the batch where Paul Graham said, you know what, there
Speaker 1: might not be a demo day because there might not
Speaker 1: be any investors. So the blessing is, you know, whether
Speaker 1: it's a good economy or a bad economy, if you
Speaker 1: pick a problem space that's real. If you can use
Speaker 1: technology to attack really big markets, those are actually the
Speaker 1: times when some of the biggest opportunities present themselves. And
Speaker 1: so you know rain or shine, you know, I think
Speaker 1: y C and early stage it's you know, things have
Speaker 1: adjusted a little bit, they flowed down a little bit.
Speaker 1: But this is good, this is healthy, and it's good
Speaker 1: for the ecosystem. Well, let's move beyond some of the
Speaker 1: early stage investments. I would love to get your thoughts
Speaker 1: on the I p O market because it's really really
Speaker 1: dried up over the summer. When could we start to
Speaker 1: see some of those companies coming public. Well, you know,
Speaker 1: it's like Warren Buffett says, right, these things are in
Speaker 1: the short term popularity contests and in the long term
Speaker 1: their weighing machines. And when you're talking about I p
Speaker 1: O s well, the weighing machine is uh not willing
Speaker 1: to give multiples that a lot of people want. Um.
Speaker 1: You know, it's hard for me to predict, to be frank, um,
Speaker 1: when this will happen, because it's sort of separate from
Speaker 1: sort of the day to day of these startups, which
Speaker 1: I know really well. Um, I really hope that you
Speaker 1: know a lot of the macro sort of situation resolves
Speaker 1: itself and that you know, I think there are a
Speaker 1: lot of indicators out there that say that inflation is over.
Speaker 1: But you know, I'm not exactly the right person to
Speaker 1: pay attention to their like. You know, what we can
Speaker 1: do is tell our early stage and growth stage founders
Speaker 1: be thoughtful about your cash, build something of true value,
Speaker 1: and you know, don't build something for just that next
Speaker 1: round or to be able to sort of impress that
Speaker 1: next VC. It's really about impressing your customer, your user,
Speaker 1: high retention, high gross margin, and you know, great customer
Speaker 1: acquisition cost versus LTV. That's you know, the fundamentals, and
Speaker 1: that's what we try and teach every day in and
Speaker 1: day out. Early Early, Gary, it is great to get
Speaker 1: some time with you. That, of course is Gary Tan.
Speaker 1: He is initialized Capital founder and partner and soon to
Speaker 1: be y Combinator president and CEO. Thank you so much.
Speaker 1: That does it. For this edition of Bloomberg Technology Tuesday,
Speaker 1: we're going to speak to Cours, Sarah's CEO, to discuss
Speaker 1: growth in education technology. And don't forget to check out
Speaker 1: our podcast. You can find it on the terminal as
Speaker 1: well as online on Apple, Spotify, and I Heart This
Speaker 1: is Bloomberg