WEBVTT - Opening Opportunities for Women in Finance and Tech 0:00:00.160 --> 0:00:04.200 This is Bloomberg Business Week with Carol Messer and Bloomberg 0:00:04.240 --> 0:00:08.240 Quick Takes Tim Stenovich on Bloomberg Radio. On the Bloomberg 0:00:08.280 --> 0:00:11.080 Today is a story about how Silicon Valley Bank help 0:00:11.160 --> 0:00:13.920 close the funding gap for women and minority founders. Are 0:00:14.000 --> 0:00:17.280 Kelsey Butler reporting it out. SVB, which had relationships with 0:00:17.320 --> 0:00:19.599 more than fifty percent of all venture back companies in 0:00:19.640 --> 0:00:22.799 the US, built a reputation for working with businesses owned 0:00:22.800 --> 0:00:26.120 by female, Black and Latin X professionals, often when other 0:00:26.200 --> 0:00:28.160 banks would not. So we want to dig a little 0:00:28.160 --> 0:00:30.800 bit deeper into this with us as Kathy Park, She's 0:00:30.880 --> 0:00:34.599 partner at the San Francisco based venture capital firm Andrew Capital. 0:00:34.960 --> 0:00:41.239 They have invested in the likes of Palanteer, Sophi Stripe. 0:00:41.280 --> 0:00:44.080 I can't read my notes, grub Market and more. It's 0:00:44.080 --> 0:00:46.640 been a long day, sorry, Kraken, is what I wanted 0:00:46.680 --> 0:00:48.879 to say. I just couldn't get it out. She's here 0:00:48.880 --> 0:00:51.440 in our Bloomberg Interactive Broker studio. She is based in 0:00:51.479 --> 0:00:53.599 New York. Kathy, great to have you here. It has 0:00:53.600 --> 0:00:56.480 been a little bit fast and furious on this Thursday. 0:00:56.680 --> 0:01:00.120 First of all, how are you and how are you reading? One? 0:01:00.160 --> 0:01:02.360 Of the tea leaves and some of the headlines when 0:01:02.360 --> 0:01:05.600 it comes to what happened with Silicon Valley Bank, concerns 0:01:05.640 --> 0:01:11.560 about venture and money for startups because of that collapse, 0:01:11.880 --> 0:01:14.960 and then just the bigger, broader banking situation, kind of 0:01:15.000 --> 0:01:17.679 the nervousness that's out there. Sure, sure, and thanks for 0:01:17.720 --> 0:01:20.679 having me on. So I would say that it's it's 0:01:20.720 --> 0:01:23.440 crazy to think about the fact that this whole SBB 0:01:23.600 --> 0:01:27.360 situation has literally just been a week. And so in 0:01:27.400 --> 0:01:29.959 the very beginning, I think there was a lot of 0:01:29.959 --> 0:01:33.640 panic and a lot of concerned. It's a fairly small circle, so, um, 0:01:33.720 --> 0:01:36.600 just a little bit of context around and Andra is 0:01:36.640 --> 0:01:40.720 a growth and late stage equity fund. We focus on 0:01:40.800 --> 0:01:45.040 Silicon Valley pre IPO technology companies and we were originally 0:01:45.040 --> 0:01:49.600 founded with the mission of democratizing access to these types 0:01:49.640 --> 0:01:53.200 of PREIPO companies. And so for US, Silicon Valley Bank 0:01:53.400 --> 0:01:57.040 is it's just a household name in the valley. It funds, 0:01:57.080 --> 0:01:59.920 as you pointed out, Carol funds fifty percent of start 0:02:00.080 --> 0:02:02.200 up and so there's a lot of panic because people 0:02:02.240 --> 0:02:05.760 have both deposits, people take out mortgages from them, and 0:02:05.800 --> 0:02:09.360 it impacted individuals on multiple levels, and so when the 0:02:09.400 --> 0:02:12.160 run of the bank happened, initially, I think there was 0:02:12.280 --> 0:02:13.959 a lot of concern and a lot of The first 0:02:14.000 --> 0:02:16.639 question we asked is how much exposure do we have 0:02:17.120 --> 0:02:19.680 to SVB? And then the secondary question is how much 0:02:19.680 --> 0:02:22.400 do our portfolio companies have exposure to SVB? How much 0:02:22.400 --> 0:02:25.880 did you guys have? The good news is zero directly, 0:02:26.400 --> 0:02:29.880 and we only had a couple of companies that had exposure, 0:02:29.960 --> 0:02:33.520 but nothing where we were concerned because they had loans 0:02:33.960 --> 0:02:37.000 and so we did have one company that had fairly 0:02:37.080 --> 0:02:40.679 large cash balances there. But the good news is by Sunday, 0:02:40.960 --> 0:02:46.720 I think between Chairman Secretary Yellen and the FDIC, they 0:02:46.760 --> 0:02:49.440 had already come in put the markets to rest, basically 0:02:50.880 --> 0:02:54.560 contained the contagion, if you will, Yeah, and that gave 0:02:54.639 --> 0:02:56.840 us a lot of it. We were able to finally 0:02:57.560 --> 0:03:00.480 basically take us a sigh of relief by day because 0:03:00.520 --> 0:03:02.960 we knew that people would then be able to access 0:03:03.000 --> 0:03:06.880 not only the two fifty two hundred fifty K of deposits, 0:03:06.880 --> 0:03:09.079 but the full amount, and so that was good. We'd 0:03:09.120 --> 0:03:11.880 also been able to connect with the companies and just 0:03:12.000 --> 0:03:15.640 in just confirm that they were in okay shape. So 0:03:15.639 --> 0:03:18.639 so that's so that was the near term right now, 0:03:18.680 --> 0:03:22.760 what we're saying is um, while it is concerning, I 0:03:22.800 --> 0:03:26.320 think people at least feel like there are some breaks on. 0:03:26.760 --> 0:03:29.720 We know that the government, maybe having learned from the 0:03:29.760 --> 0:03:34.280 GF the great the financial crisis before, understands what the 0:03:34.360 --> 0:03:37.680 rule book looks like, even down to having the equivalent 0:03:37.680 --> 0:03:40.920 of help but having these funds available rum so that 0:03:40.960 --> 0:03:43.720 they will buy securities back at par including treasuries and 0:03:43.720 --> 0:03:47.440 things like that. So so that's great. Um. Now what 0:03:47.480 --> 0:03:51.800 does this mean though after this near term panic? And 0:03:51.880 --> 0:03:55.800 so it's um And just to turn this towards a 0:03:55.840 --> 0:03:58.560 lot of the women in minority UM startups, so who 0:03:58.680 --> 0:04:01.160 struggled to begin with you having to it and have 0:04:01.240 --> 0:04:04.320 been on a mission, but you do wonder, right, So 0:04:04.360 --> 0:04:07.320 this is our concern. It is it was already hard 0:04:07.440 --> 0:04:12.880 enough for women and people of color to tap into 0:04:12.880 --> 0:04:17.440 the system. They're not part of this club in Silicon 0:04:17.560 --> 0:04:20.680 Valley and there was increasing focus. Now the concern that 0:04:20.760 --> 0:04:24.960 we have is if banks and lenders become even more conservative, 0:04:25.480 --> 0:04:28.360 they're going to just continue the path that they went 0:04:28.400 --> 0:04:31.680 on before, but be even even more so. Right so, 0:04:31.760 --> 0:04:36.160 what we worry about is that some of these ventures 0:04:36.200 --> 0:04:40.080 that maybe don't look in and don't quite fit into 0:04:40.080 --> 0:04:44.240 the mold of what you think a traditional venture, you know, 0:04:44.320 --> 0:04:48.440 founder looks like um or business models that might serve 0:04:49.279 --> 0:04:54.279 communities that maybe are not the mainstream in America. Those 0:04:54.320 --> 0:04:56.640 are the companies that we think are going to struggle 0:04:56.640 --> 0:05:00.520 a little bit more to get funding. And so, if anything, 0:05:00.640 --> 0:05:03.359 it's very important. I'm so glad we're talking about this 0:05:03.400 --> 0:05:05.880 today because it is important for people to, you know, 0:05:05.960 --> 0:05:09.920 instead of just pulling back to really think about maybe 0:05:09.920 --> 0:05:12.839 we should lean in more and really focus on this 0:05:12.920 --> 0:05:18.080 and make sure that that we're not essentially right after 0:05:18.200 --> 0:05:20.520 making some progress, yes, in the last few years, and 0:05:20.560 --> 0:05:22.960 so so that's I think that's kind of where we're 0:05:23.279 --> 0:05:25.720 We're what we're trying to focus on. Well, yeah, Kathy, 0:05:25.760 --> 0:05:27.720 and I mean, the good news obviously is that those 0:05:27.760 --> 0:05:31.760 deposits are safe now. But even before that acute bank 0:05:31.880 --> 0:05:34.280 run on Silicon Valley Bank, there was sort of a 0:05:34.320 --> 0:05:36.960 slow draw down of the cash in these accounts that 0:05:37.320 --> 0:05:40.720 startups were burning through cash really and the assumption was 0:05:40.800 --> 0:05:43.480 that okay, maybe you got that first round of investment, 0:05:43.560 --> 0:05:46.880 second round, that that was starting to dry up. And 0:05:46.960 --> 0:05:50.760 I wonder if that's accelerating the problem. Obviously, I would 0:05:50.800 --> 0:05:53.719 assume this failure is accelerating that problem. But what sort 0:05:53.720 --> 0:05:56.279 of the climate there is there, especially for someone who 0:05:56.480 --> 0:05:59.680 invests late stage. I mean, if not, you're fun. But 0:06:00.360 --> 0:06:03.880 is there this major risk of just the purse strings 0:06:03.880 --> 0:06:08.159 being completely tightened among VC firms right now, especially if 0:06:08.160 --> 0:06:10.479 the IPO market two isn't there for an exit. Yeah, 0:06:10.680 --> 0:06:13.640 So so here's the concern. So just keep in mind 0:06:13.920 --> 0:06:17.760 in the VC space, they there is a statistic I 0:06:17.760 --> 0:06:21.040 think they have roughly close to six hundred billion of 0:06:21.320 --> 0:06:25.880 dry powder that they've raised, and so there's a lot 0:06:25.920 --> 0:06:28.559 of that. There's a lot of capital available to fund 0:06:28.640 --> 0:06:31.360 very early stage companies, and you're absolutely right, Mike. So 0:06:31.960 --> 0:06:35.000 now we're focused on these later stage companies or growth 0:06:35.040 --> 0:06:38.280 companies that are sort of maybe on their Series d 0:06:38.680 --> 0:06:42.560 ef rounds, and with the IPO markets closed most a 0:06:42.600 --> 0:06:45.520 lot of the companies that we're focused on are really 0:06:45.640 --> 0:06:48.719 twelve to thirty six months prior to IPO and with 0:06:48.760 --> 0:06:52.560 that market closed, and also with the lack of I 0:06:52.560 --> 0:06:56.360 guess cheap funding right because interest rates have now gone up, 0:06:56.720 --> 0:06:58.880 what we're finding is that companies have had to re 0:06:59.040 --> 0:07:02.520 orient a bit more from growth at all costs, more 0:07:02.600 --> 0:07:07.240 towards profitability and showing that they can reduce their cash 0:07:07.279 --> 0:07:10.920 burn in order to be public public public companies. And 0:07:10.960 --> 0:07:14.840 so you're right, there's been a it's been a slow 0:07:14.920 --> 0:07:19.720 and steady move towards i think trying to essentially conserve cash, 0:07:19.720 --> 0:07:22.280 and so they have drawn more on the bank lines 0:07:23.320 --> 0:07:25.680 than they had in the past. The real question will 0:07:25.720 --> 0:07:29.120 be is there is there enough of a correction in 0:07:29.240 --> 0:07:35.520 valuations on these companies to create really interesting investment opportunities 0:07:35.880 --> 0:07:37.880 so that people come in. Right now, there's a bit 0:07:37.880 --> 0:07:42.040 of a bid ask spread between where company valuations have 0:07:42.880 --> 0:07:47.360 to date and where people see, you know, fair value 0:07:47.600 --> 0:07:50.080 as as being um and as that gap starts to 0:07:50.200 --> 0:07:53.000 adminish a bit more, we do anticipate that money will 0:07:53.040 --> 0:07:55.200 come back in on the onder side. Frankly, that's what 0:07:55.240 --> 0:07:57.600 we're also looking for. We have we have a wish 0:07:57.640 --> 0:08:00.000 list of companies that we find really attractive and interests, 0:08:00.680 --> 0:08:03.560 and so we do think that with a little bit more, 0:08:04.600 --> 0:08:08.720 maybe a little bit less exuberance in valuations, that will 0:08:08.800 --> 0:08:11.280 present a lot of very interesting opportunities. When you talk 0:08:11.280 --> 0:08:13.640 about valuations, we've just got about thirty seconds. Are you 0:08:13.680 --> 0:08:18.640 talking about a ten percent twenty percent pull in on 0:08:19.000 --> 0:08:21.520 It depends on the company. Okay, so it all depends 0:08:21.520 --> 0:08:24.119 on where the last round is, and it's uberance. You're saying, 0:08:24.720 --> 0:08:26.880 we're up there. Yeah, we have it, And then we 0:08:26.880 --> 0:08:28.760 had to start to see a lot of correction actually 0:08:28.800 --> 0:08:31.160 at the beginning of this year. Now, I think the 0:08:31.200 --> 0:08:33.240 concern is people are so frozen they don't no one 0:08:33.240 --> 0:08:36.640 wants to catch that proverbial falling knife. And so in 0:08:36.679 --> 0:08:39.880 some cases maybe it is only ten percent. In other 0:08:39.920 --> 0:08:41.680 cases it could be a lot more than that. It 0:08:41.720 --> 0:08:43.480 could be, you know, north to thirty percent. Do you 0:08:43.480 --> 0:08:45.680 think the IPO market at all picks up later on? 0:08:45.679 --> 0:08:47.839 This year just got about ten seconds, So I think 0:08:47.880 --> 0:08:50.920 the answer is it's anyone's bet. But I think the 0:08:50.920 --> 0:08:53.400 wishful thinking is that we hope, so we really do. 0:08:53.600 --> 0:08:56.280 We could use that reply to so many different That 0:08:56.400 --> 0:08:59.080 is such a great way of like our environment. Kathy Park, 0:08:59.120 --> 0:09:01.440 come back soon. This is really great. Thanks really appreciate 0:09:01.440 --> 0:09:03.680 for having me. Kathy Park. She's partner at Andre Capital, 0:09:03.760 --> 0:09:05.840 joining us here in our interactive broker studio.