Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stenovich on Bloomberg Radio. On the Bloomberg
Speaker 1: Today is a story about how Silicon Valley Bank help
Speaker 1: close the funding gap for women and minority founders. Are
Speaker 1: Kelsey Butler reporting it out. SVB, which had relationships with
Speaker 1: more than fifty percent of all venture back companies in
Speaker 1: the US, built a reputation for working with businesses owned
Speaker 1: by female, Black and Latin X professionals, often when other
Speaker 1: banks would not. So we want to dig a little
Speaker 1: bit deeper into this with us as Kathy Park, She's
Speaker 1: partner at the San Francisco based venture capital firm Andrew Capital.
Speaker 1: They have invested in the likes of Palanteer, Sophi Stripe.
Speaker 1: I can't read my notes, grub Market and more. It's
Speaker 1: been a long day, sorry, Kraken, is what I wanted
Speaker 1: to say. I just couldn't get it out. She's here
Speaker 1: in our Bloomberg Interactive Broker studio. She is based in
Speaker 1: New York. Kathy, great to have you here. It has
Speaker 1: been a little bit fast and furious on this Thursday.
Speaker 1: First of all, how are you and how are you reading? One?
Speaker 1: Of the tea leaves and some of the headlines when
Speaker 1: it comes to what happened with Silicon Valley Bank, concerns
Speaker 1: about venture and money for startups because of that collapse,
Speaker 1: and then just the bigger, broader banking situation, kind of
Speaker 1: the nervousness that's out there. Sure, sure, and thanks for
Speaker 1: having me on. So I would say that it's it's
Speaker 1: crazy to think about the fact that this whole SBB
Speaker 1: situation has literally just been a week. And so in
Speaker 1: the very beginning, I think there was a lot of
Speaker 1: panic and a lot of concerned. It's a fairly small circle, so, um,
Speaker 1: just a little bit of context around and Andra is
Speaker 1: a growth and late stage equity fund. We focus on
Speaker 1: Silicon Valley pre IPO technology companies and we were originally
Speaker 1: founded with the mission of democratizing access to these types
Speaker 1: of PREIPO companies. And so for US, Silicon Valley Bank
Speaker 1: is it's just a household name in the valley. It funds,
Speaker 1: as you pointed out, Carol funds fifty percent of start
Speaker 1: up and so there's a lot of panic because people
Speaker 1: have both deposits, people take out mortgages from them, and
Speaker 1: it impacted individuals on multiple levels, and so when the
Speaker 1: run of the bank happened, initially, I think there was
Speaker 1: a lot of concern and a lot of The first
Speaker 1: question we asked is how much exposure do we have
Speaker 1: to SVB? And then the secondary question is how much
Speaker 1: do our portfolio companies have exposure to SVB? How much
Speaker 1: did you guys have? The good news is zero directly,
Speaker 1: and we only had a couple of companies that had exposure,
Speaker 1: but nothing where we were concerned because they had loans
Speaker 1: and so we did have one company that had fairly
Speaker 1: large cash balances there. But the good news is by Sunday,
Speaker 1: I think between Chairman Secretary Yellen and the FDIC, they
Speaker 1: had already come in put the markets to rest, basically
Speaker 1: contained the contagion, if you will, Yeah, and that gave
Speaker 1: us a lot of it. We were able to finally
Speaker 1: basically take us a sigh of relief by day because
Speaker 1: we knew that people would then be able to access
Speaker 1: not only the two fifty two hundred fifty K of deposits,
Speaker 1: but the full amount, and so that was good. We'd
Speaker 1: also been able to connect with the companies and just
Speaker 1: in just confirm that they were in okay shape. So
Speaker 1: so that's so that was the near term right now,
Speaker 1: what we're saying is um, while it is concerning, I
Speaker 1: think people at least feel like there are some breaks on.
Speaker 1: We know that the government, maybe having learned from the
Speaker 1: GF the great the financial crisis before, understands what the
Speaker 1: rule book looks like, even down to having the equivalent
Speaker 1: of help but having these funds available rum so that
Speaker 1: they will buy securities back at par including treasuries and
Speaker 1: things like that. So so that's great. Um. Now what
Speaker 1: does this mean though after this near term panic? And
Speaker 1: so it's um And just to turn this towards a
Speaker 1: lot of the women in minority UM startups, so who
Speaker 1: struggled to begin with you having to it and have
Speaker 1: been on a mission, but you do wonder, right, So
Speaker 1: this is our concern. It is it was already hard
Speaker 1: enough for women and people of color to tap into
Speaker 1: the system. They're not part of this club in Silicon
Speaker 1: Valley and there was increasing focus. Now the concern that
Speaker 1: we have is if banks and lenders become even more conservative,
Speaker 1: they're going to just continue the path that they went
Speaker 1: on before, but be even even more so. Right so,
Speaker 1: what we worry about is that some of these ventures
Speaker 1: that maybe don't look in and don't quite fit into
Speaker 1: the mold of what you think a traditional venture, you know,
Speaker 1: founder looks like um or business models that might serve
Speaker 1: communities that maybe are not the mainstream in America. Those
Speaker 1: are the companies that we think are going to struggle
Speaker 1: a little bit more to get funding. And so, if anything,
Speaker 1: it's very important. I'm so glad we're talking about this
Speaker 1: today because it is important for people to, you know,
Speaker 1: instead of just pulling back to really think about maybe
Speaker 1: we should lean in more and really focus on this
Speaker 1: and make sure that that we're not essentially right after
Speaker 1: making some progress, yes, in the last few years, and
Speaker 1: so so that's I think that's kind of where we're
Speaker 1: We're what we're trying to focus on. Well, yeah, Kathy,
Speaker 1: and I mean, the good news obviously is that those
Speaker 1: deposits are safe now. But even before that acute bank
Speaker 1: run on Silicon Valley Bank, there was sort of a
Speaker 1: slow draw down of the cash in these accounts that
Speaker 1: startups were burning through cash really and the assumption was
Speaker 1: that okay, maybe you got that first round of investment,
Speaker 1: second round, that that was starting to dry up. And
Speaker 1: I wonder if that's accelerating the problem. Obviously, I would
Speaker 1: assume this failure is accelerating that problem. But what sort
Speaker 1: of the climate there is there, especially for someone who
Speaker 1: invests late stage. I mean, if not, you're fun. But
Speaker 1: is there this major risk of just the purse strings
Speaker 1: being completely tightened among VC firms right now, especially if
Speaker 1: the IPO market two isn't there for an exit. Yeah,
Speaker 1: So so here's the concern. So just keep in mind
Speaker 1: in the VC space, they there is a statistic I
Speaker 1: think they have roughly close to six hundred billion of
Speaker 1: dry powder that they've raised, and so there's a lot
Speaker 1: of that. There's a lot of capital available to fund
Speaker 1: very early stage companies, and you're absolutely right, Mike. So
Speaker 1: now we're focused on these later stage companies or growth
Speaker 1: companies that are sort of maybe on their Series d
Speaker 1: ef rounds, and with the IPO markets closed most a
Speaker 1: lot of the companies that we're focused on are really
Speaker 1: twelve to thirty six months prior to IPO and with
Speaker 1: that market closed, and also with the lack of I
Speaker 1: guess cheap funding right because interest rates have now gone up,
Speaker 1: what we're finding is that companies have had to re
Speaker 1: orient a bit more from growth at all costs, more
Speaker 1: towards profitability and showing that they can reduce their cash
Speaker 1: burn in order to be public public public companies. And
Speaker 1: so you're right, there's been a it's been a slow
Speaker 1: and steady move towards i think trying to essentially conserve cash,
Speaker 1: and so they have drawn more on the bank lines
Speaker 1: than they had in the past. The real question will
Speaker 1: be is there is there enough of a correction in
Speaker 1: valuations on these companies to create really interesting investment opportunities
Speaker 1: so that people come in. Right now, there's a bit
Speaker 1: of a bid ask spread between where company valuations have
Speaker 1: to date and where people see, you know, fair value
Speaker 1: as as being um and as that gap starts to
Speaker 1: adminish a bit more, we do anticipate that money will
Speaker 1: come back in on the onder side. Frankly, that's what
Speaker 1: we're also looking for. We have we have a wish
Speaker 1: list of companies that we find really attractive and interests,
Speaker 1: and so we do think that with a little bit more,
Speaker 1: maybe a little bit less exuberance in valuations, that will
Speaker 1: present a lot of very interesting opportunities. When you talk
Speaker 1: about valuations, we've just got about thirty seconds. Are you
Speaker 1: talking about a ten percent twenty percent pull in on
Speaker 1: It depends on the company. Okay, so it all depends
Speaker 1: on where the last round is, and it's uberance. You're saying,
Speaker 1: we're up there. Yeah, we have it, And then we
Speaker 1: had to start to see a lot of correction actually
Speaker 1: at the beginning of this year. Now, I think the
Speaker 1: concern is people are so frozen they don't no one
Speaker 1: wants to catch that proverbial falling knife. And so in
Speaker 1: some cases maybe it is only ten percent. In other
Speaker 1: cases it could be a lot more than that. It
Speaker 1: could be, you know, north to thirty percent. Do you
Speaker 1: think the IPO market at all picks up later on?
Speaker 1: This year just got about ten seconds, So I think
Speaker 1: the answer is it's anyone's bet. But I think the
Speaker 1: wishful thinking is that we hope, so we really do.
Speaker 1: We could use that reply to so many different That
Speaker 1: is such a great way of like our environment. Kathy Park,
Speaker 1: come back soon. This is really great. Thanks really appreciate
Speaker 1: for having me. Kathy Park. She's partner at Andre Capital,
Speaker 1: joining us here in our interactive broker studio.