Speaker 1: From Marhart where Innovation, money and power Collie in Silicon
Speaker 1: Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and ed Love Love.
Speaker 3: We are live from London for the Bloomberg Technology Summit.
Speaker 3: I'm Caroline Hyde and this is Bloomberg Technology. Coming up
Speaker 3: on the program, we'll speak to a range of UK
Speaker 3: based tech entrepreneurs to discuss everything from much capital, fintech,
Speaker 3: cybersecurity and so much more. Plus, China rattles foreign firms
Speaker 3: again as it opens an investigation into one of Apple's
Speaker 3: most critical suppliers, Fox Con details ahead. Plus we go
Speaker 3: back to the picket line as Hollywood studios return to
Speaker 3: negotiations with actors this week to end the month's long strike.
Speaker 3: But first check in on those markets. And boy has
Speaker 3: there been some volatility, particularly in treasuries, abbagailty Little, what's
Speaker 3: the readacross here?
Speaker 4: Well, there's been tremendous volatility at the surface level, Caroline,
Speaker 4: so much so let's actually start beneath the surface, because
Speaker 4: if we had been looking at this board an hour
Speaker 4: and a half ago, there would have been at least
Speaker 4: some red on it. But we've had a flip to
Speaker 4: the upside. Microsoft and Meta too. Of the megacap companies,
Speaker 4: megacap tech companies that are reporting this week, Microsoft tomorrow
Speaker 4: and Meta on Wednesday. A big piece of this turnaround
Speaker 4: for sure from a micro standpoint and from Meta excuse me.
Speaker 4: For Microsoft, one of the keys could be their outlook.
Speaker 4: For Azure, that cloud business was a little bit disappointing,
Speaker 4: plus color on AI. For Meta, it will be all
Speaker 4: about whether or not they can maintain mid teens growth.
Speaker 5: That could have a lot to do with price.
Speaker 4: And we also have Bitcoin in rally mode up seven
Speaker 4: of the last ninety days that is helping out Riot
Speaker 4: platforms up ten point two percent and in video receiving
Speaker 4: some favorable commentary from a Wall Street investment bank. Now,
Speaker 4: let's put this together with the NAZAQ one hundred and
Speaker 4: see what it means. Here's this roller coaster ride. Now
Speaker 4: to your point at the lows, it was more of
Speaker 4: a macro story, Caroline. The fact that you had that
Speaker 4: ten year yield back above five percent following the two
Speaker 4: year yield, the whole yield curve really flattening out. That
Speaker 4: of course makes stocks look more expensive, but big cap
Speaker 4: tech in particular, that growth, the liquidity, it tightens the
Speaker 4: situation overall, but as the ten year yields slip back
Speaker 4: to four ninety, take a look at the rally we
Speaker 4: have plus some of those individual movers we were just
Speaker 4: taking a look at now on the year.
Speaker 5: It's very interesting because over.
Speaker 4: The last three months we've had stocks down, the S
Speaker 4: and P five hundred down about eight percent so on
Speaker 4: the year up about ten percent, the Nazak one hundred
Speaker 4: at one point up more than forty percent, so about
Speaker 4: ten percent or so, very roughly coming off of both
Speaker 4: of these indexes.
Speaker 5: You can see though, that the.
Speaker 4: Megacap tech indexes that have some of these stocks that
Speaker 4: are reporting this week up much more. What makes us interesting, Caroline,
Speaker 4: if we go into the Bloomberg terminal, it means that
Speaker 4: the S and P five hundreds doing something that the
Speaker 4: Nazak one hundreds not doing.
Speaker 5: The Russell two thousand.
Speaker 4: Led it, but the S and P five hundred on
Speaker 4: the day was firmly below the two hundred day moving
Speaker 4: average back above. It looks like we're probably going to
Speaker 4: see some more weakness through the downside. The question is
Speaker 4: will the Nazak one hundred of these big KEP tech
Speaker 4: names file at some point? It could have just as
Speaker 4: much to do with yields as it could with earnings
Speaker 4: this week and.
Speaker 3: Next Macro Charts Tech. You do it all, Abigail, we
Speaker 3: thank you. Meanwhile, of course, a key corporate story of
Speaker 3: the day has been Chinese authorities again shaking the confidence
Speaker 3: of foreign companies, in particular, that's with a series of
Speaker 3: arrests across industries and an investigation into the all important
Speaker 3: tech name that is fox Con. It's a key supply
Speaker 3: to Apple, of course, and for more. We want to
Speaker 3: really dig into this narrative. Riva Goujon's with us director
Speaker 3: at the Rhodium Group, and really your expertise here, Weaver,
Speaker 3: is so important you advise, of course within China, and
Speaker 3: I'm interested as to whether you think this is an
Speaker 3: ongoing pushback because of well the tech issues that we've seen,
Speaker 3: the rivalry between US and China.
Speaker 5: Is it something different entirely.
Speaker 6: Well, lots of layers of intrigue here, of course. Now,
Speaker 6: any multinational corporation operating in China knows that there is
Speaker 6: always the risk of tax and compliance audits. This runs
Speaker 6: from technology to retail, really across the gamut.
Speaker 5: But in this.
Speaker 6: Geopolitical climate, of course, whenever these moves are taken. There's
Speaker 6: always the question of whether there's more of a political
Speaker 6: tinge here of economic coercion, and of course Fox Convene
Speaker 6: so closely tied to Apple is more of a question
Speaker 6: mark here in terms of targeting. There have been rumors
Speaker 6: of informal bands against Apple products. This comes in the
Speaker 6: wake of revelations around Huawei's breakthrough making it a more
Speaker 6: formidable competitor to Apple as well, So lots of different
Speaker 6: things to entangle here. Other companies also facing crackdowns from
Speaker 6: china S data security laws. But there's a bit more
Speaker 6: to unpack here on whether this is truly a case
Speaker 6: for coercion and how it could tie into the Taiwanese
Speaker 6: election as well.
Speaker 3: Yeah, let's dig into that in a moment, Honhai Precision Industry.
Speaker 3: It's the public arm of Fox Cohn basically saying they
Speaker 3: will collaborate with authorities. And indeed you mentioned this is
Speaker 3: in some ways to do with reviewing of land use
Speaker 3: and in particular tax audits. Tell us a little bit
Speaker 3: more about the added complexity that the founder of Fox
Speaker 3: gone or Honhai, has stepped down of course, because he's
Speaker 3: running for the Taiwanese election.
Speaker 6: He is, and of course that changes up the race
Speaker 6: a bit. He's running as an independent, and this is
Speaker 6: a very complex electoral dynamic for Beijing in trying to
Speaker 6: favor an outcome for the KMT which is more friendly
Speaker 6: to mainland policies. It's hard to conclude though, that a
Speaker 6: move against Fox KHN would translate into a political favorability
Speaker 6: toward Beijing. When it comes to the upcoming Taiwan election
Speaker 6: in January. You know, there's a question of whether Terrygo
Speaker 6: his participation in the race would divide the opposition vote
Speaker 6: in a way that undermines the KMT favors the DPP,
Speaker 6: which Beijing would not like to win. But still that's
Speaker 6: a very complex logic chain, and I doubt that these
Speaker 6: moves against Fox con would translate into Terrygo actually pulling
Speaker 6: back from the race. So again, I think there's a
Speaker 6: temptation to see everything as a highly politicized move. But
Speaker 6: here I think we need to take a closer look
Speaker 6: at Apple's diversification moves, other electronics companies and their diversification moves. China,
Speaker 6: of course, has a very big impulse now to strike
Speaker 6: back at US led technology and investment controls. We just
Speaker 6: had another round of US led ship controls, which is
Speaker 6: putting a lot of pressure on major US tech partners,
Speaker 6: to include Taiwan. So that is really I think the
Speaker 6: hypothesis to test here.
Speaker 3: When you put, of course you say it's easy to
Speaker 3: go for the highly political lens, go for the highly
Speaker 3: economic lens, because all of this comes in a much
Speaker 3: tougher context for China.
Speaker 6: More broadly, absolutely so, anything perceived as retribution are falling
Speaker 6: into the scope of tightening laws around counter espionage and
Speaker 6: countering any type of perceived espionage activity, you know, crackdowns
Speaker 6: around data security. In general, multinational corporations are already on
Speaker 6: high alert, and this certainly doesn't help the souring investment climate,
Speaker 6: as we've already seen FDI inflows into China have been
Speaker 6: leveling off, particularly since twenty nineteen. That's been very worrying,
Speaker 6: to the point where you see the State Council of
Speaker 6: China putting out all kinds of pledges to say it's okay,
Speaker 6: you know, we're doing things to promote foreign investment, to
Speaker 6: include very notable things like easing cross border flows in
Speaker 6: data regulations, a big ask for many of these companies.
Speaker 6: At the same time, every time that the US engages
Speaker 6: in another round of technology and investment controls. There is
Speaker 6: this impulse and to strike back, and you're seeing this
Speaker 6: through landmark legislation coming out of China, everything from counter
Speaker 6: kind of espionage law, the foreign relations law. It's a
Speaker 6: form of codifying retribution. And so as we start to
Speaker 6: see things translate into actions. For example, MOFCOM export controls
Speaker 6: on artificial and natural graphite. Artificial graphite is a very
Speaker 6: critical input for eed batteries. We've seen recent restrictions on
Speaker 6: gallium and germanium experts. Those are important for semiconductor manufacturing.
Speaker 6: And so all of this only underscores the unreliability of
Speaker 6: China in these critical value chains, and so that can
Speaker 6: energize diversification moves. But of course China's looking to show
Speaker 6: where it can create pain in the here and now.
Speaker 3: And it infects pain on its own publicly traded companies.
Speaker 3: I'm looking at the Stall fifty index, which is only
Speaker 3: conceived of about three years ago to really try and
Speaker 3: be the rival the version, the Chinese version of the
Speaker 3: NASDAQ one hundred, and it's hit a record low since
Speaker 3: its inception. We are worried about growth concerns we're worried
Speaker 3: about global liquidity and a weak export outlook, not to
Speaker 3: mention some of these political elements to it all, So
Speaker 3: go back to what you advise clients.
Speaker 5: In the here and now.
Speaker 3: Ever, of course you are someone who need client engagement
Speaker 3: for Rodium's China corporate advisory. If I'm about to think
Speaker 3: about entering the country, do you say I wouldn't.
Speaker 6: Well, it depends on where you are, which value chain
Speaker 6: we're speaking of. Even as diversification is happening. You can
Speaker 6: look at Apple for example. You can even look at
Speaker 6: fox CON's footprint and how it has a notable presence
Speaker 6: in China, but you know emerging presence in places like India, Mexico, Vietnam.
Speaker 6: So that trend is happening, of course, But these companies
Speaker 6: are also greatly exposed Apple in particular, And as these
Speaker 6: companies are engaged in this balancing act, it is very
Speaker 6: important to understand the intent behind China's policy moves this.
Speaker 6: It's caught between trying to promote a healthier foreign investment
Speaker 6: climate to counteract the forces of its structural economic downturn,
Speaker 6: and that is something that is going to last for
Speaker 6: a while. At the same time, to stay alert to
Speaker 6: US LED and partner moves on technology and investment controls.
Speaker 6: This is a fast evolving space. There is a lot
Speaker 6: packed into the for example, the four hundred some pages
Speaker 6: of controls that came out just last week from the
Speaker 6: US that is making it very hard for technology companies,
Speaker 6: in particular at the leading edge to continue operating in China.
Speaker 6: You only have to look at a company like Samsung
Speaker 6: for example, to see how actively they are diversifying outside
Speaker 6: of China already. So lots of moves in play balancing
Speaker 6: acts are hard to pull off in those geopolitical climate
Speaker 6: but really depends on what where you have a credible
Speaker 6: competitor in the Chinese space, where you're at the leading edge,
Speaker 6: and where are their opportunities lie outside of China.
Speaker 3: Such complexity and you help break it down. Thank you,
Speaker 3: Va gujan O the Roodium Group for expertise. The Bloomberg
Speaker 3: Technology Summit is going to kick off tomorrow right here
Speaker 3: in London, showcasing whole range of startups, maybe in the
Speaker 3: biotech field, the healthcare stand.
Speaker 5: That's for example.
Speaker 3: During a series of discussions about the UK's global role
Speaker 3: in the most pressing questions in technology today, whether it
Speaker 3: be climate change, whether it be AI as well, and
Speaker 3: in fact, just in a few weeks the UK government
Speaker 3: plans it can mean hundreds of international finances executives of course,
Speaker 3: government leaders to promote well some investing opportunities in British companies,
Speaker 3: including those working on nuclear fusion, on deep tech, but
Speaker 3: most notably thinking about how AI safety can be deeped
Speaker 3: and seeped.
Speaker 5: Into the global narrative.
Speaker 3: Right now, let's dive deeper into the world of the
Speaker 3: tech scene here in the UK with a standout startup.
Speaker 5: Philip Benemoth's the leader, the CEO of Zilch.
Speaker 3: It's Europe's fastest growing fintech company, to go from Series
Speaker 3: eight to Unicorn status in just fourteen months self professed growth.
Speaker 3: And I'm interested at this time that what have been
Speaker 3: your business model? And I know it's of consumer credit
Speaker 3: basically reducing costs. How has that managed to see that
Speaker 3: growth in what has been a much tougher time for
Speaker 3: tech more broadly form.
Speaker 7: Yeah, I think what's interesting to note here is that
Speaker 7: the landscape, which if I kind of paint the picture
Speaker 7: a little bit, it'll explain why we're seeing this disproportion
Speaker 7: that growth to the rest of the market, and that
Speaker 7: is that the landscape today is.
Speaker 8: That we have high cost of capital.
Speaker 7: What that typically means is that your high street lenders,
Speaker 7: your banks tend to actually withdraw themselves from lending, so
Speaker 7: you have financial exclusion at its highest. So the demand
Speaker 7: goes crazy for credit products. At the same time, you
Speaker 7: have the cost of living has gone up, and so
Speaker 7: you have demand from the mass market is really intense
Speaker 7: for credit products. And typically what happens is you have
Speaker 7: lenders actually thrive in a market like this, but they
Speaker 7: make a lot of money off the customer. What's unique
Speaker 7: about Zilch is that we found a way to generate
Speaker 7: ad revenue from brands when our customers shop, and we're
Speaker 7: using that to offset the cost of credit to customers
Speaker 7: whilst servicing this mega demand. So for us, we're seeing
Speaker 7: ultra high growth through the next year to two years
Speaker 7: based on all of this coming together. Of course, most
Speaker 7: uniquely providing lots of savings. We're talking about hundreds of
Speaker 7: millions in savings in interest and fees for consumers as
Speaker 7: they use our product and move away from traditional lending
Speaker 7: products like revolving credit cards and things like this.
Speaker 3: So that's the opportunity they can improve a credit score
Speaker 3: not have to depend on credit cards. I'm interested in
Speaker 3: Philip as well as a South African entrepreneur to come
Speaker 3: and build in London.
Speaker 5: Why.
Speaker 7: I mean, I think it's part of why there's the
Speaker 7: Tech Summer tomorrow. There's a lot going on in London. Obviously,
Speaker 7: we look at the market here and say, you know,
Speaker 7: we really wanted to have that was going to hours
Speaker 7: access to Europe, of course to the United States.
Speaker 5: And you still got access to Europe, and we still do.
Speaker 7: I mean, you know a lot of people, of course
Speaker 7: have spoken about Brexit, and what does that change the
Speaker 7: reality of the situation is is that you just need
Speaker 7: to make sure your licensing is correct and you understand
Speaker 7: how to operate in that environment. Regulation, by the way,
Speaker 7: as long as it's clear, is a fantastic thing. We've
Speaker 7: also said this for our industry, which is why Zilch
Speaker 7: is one of the only regulated providers in the space.
Speaker 7: We're calling for regulation in B and PL and so
Speaker 7: i'd make this come in the vein that you just mentioned.
Speaker 7: As long as the rules are clear, you can engage
Speaker 7: with those rules and you can transact.
Speaker 8: And so we do have access to Europe.
Speaker 7: We understand Europe very well from the United Kingdom and
Speaker 7: equally the United States, which is a massive opportunity for us.
Speaker 7: So we really wanted to be in London. We think
Speaker 7: we can control what we're doing from here really well.
Speaker 7: Great unique pool of talent, lots of walks of life
Speaker 7: and different types of backgrounds in our business, and we
Speaker 7: really wanted that diversity in the company as we built
Speaker 7: this mass spirational product, something we want everyone.
Speaker 3: To enjoy, mass rational About those that you were in
Speaker 3: for money, you just said, of course you're now viewed
Speaker 3: as a unicorn. Money has been allocated from venture capital.
Speaker 3: Is that pool of money UK based and is it
Speaker 3: firm at this moment when people are questioning those sorts
Speaker 3: of valuations.
Speaker 8: I think it just depends on the business.
Speaker 7: I mean, we've seen a lot of companies raising flat rounds,
Speaker 7: up rounds. You've also seen of course down rounds. There's
Speaker 7: been an adjustment, There's no doubt about that. The way
Speaker 7: we think about it ourselves is do you have enough
Speaker 7: capital and do you have a sustainable business model to
Speaker 7: get yourself to break even and beyond right now in
Speaker 7: this market? I think that's how we see at least
Speaker 7: our company and you know, the strong view is as
Speaker 7: long as you can demonstrate that and that is the case,
Speaker 7: you're probably quite a standout business right now.
Speaker 8: And that's not because there's a lot of.
Speaker 7: Terrible businesses just because a lot of money was chasing
Speaker 7: high yield.
Speaker 8: They wanted growth at all costs.
Speaker 7: And the meant is the problem with that is they
Speaker 7: sacrifice the margin and a real business model in some
Speaker 7: cases for that. And the chickens are coming home to
Speaker 7: If you have a real profitable margin and you've got
Speaker 7: enough capital to get to break even or beyond, we
Speaker 7: still think that you can demonstrate the real value in
Speaker 7: your company and you can grow in and beyond your valuation.
Speaker 7: And that's really how we thinking about our business. So
Speaker 7: pools of capital wise, I mean, I think in the
Speaker 7: UK we sometimes underestimate. Second deepest pools of capital on
Speaker 7: this planet are in the United Kingdom, But we certainly
Speaker 7: do see in our business are spread of capital from
Speaker 7: the US and the UK. And that begs the question
Speaker 7: where do you go next? What do you do next?
Speaker 7: As a company which we are evaluating right now.
Speaker 3: Okay, leave using on the idea that we're seeing some
Speaker 3: are raising of funds from Philip Bellamont of Ziltch will
Speaker 3: be at the Bloomberg Technology Summit tomorrow.
Speaker 5: We thank him very much for joining, and we'll be.
Speaker 3: Talking about that wealth of more money coming from various
Speaker 3: pools later in the show.
Speaker 5: Whether it's of course well vcs.
Speaker 3: We've got Emily Heath, general partner over at Cybersecurity VC
Speaker 3: firm cyber starts joining us as she wants to discuss
Speaker 3: some of the trends she's seeing across the sector. And meanwhile,
Speaker 3: let's just get in the public markets for a moment
Speaker 3: as well. Let's tune into what's happening with the shares
Speaker 3: of Airbnb again, a rally on our hands, a bounce
Speaker 3: back from what has.
Speaker 5: Been so questions regarding regulation.
Speaker 3: We're just talking a lot about financial fintech regulation there
Speaker 3: and certainly in New York. Airbnb has been a focus
Speaker 3: in terms of regulatory pushback. We're currently go up almost
Speaker 3: four percent from New York, usually from San Francisco, usually
Speaker 3: from London.
Speaker 5: Today. This is a bluemotechnology. Look.
Speaker 3: We were remiss if we weren't thinking about some of
Speaker 3: the geopolitical situation that we currently live within. And it's
Speaker 3: notable that in the concerns around conflict in the MIDDLEAE.
Speaker 3: Government and private companies are looking to continue to beef
Speaker 3: up their cybersecurity and cyber startups are turning two venture
Speaker 3: capital firms like cyber Starts for backing. So far, it's
Speaker 3: portfolio is valued at one thirty billion dollars. Joining us
Speaker 3: now from London is Emily Heath, general partner at Cyberstats.
Speaker 3: It is wonderful to have some time with you and Emily.
Speaker 3: You're British originally, so I am now based in SF.
Speaker 5: You have worked for a whole host.
Speaker 3: Of companies across industries such as airlines, but you've been
Speaker 3: of course docu signed being a key company and that
Speaker 3: you were chief information security officer. Now you're using expertise
Speaker 3: to allocate capital.
Speaker 5: Yes, why are cyberstats.
Speaker 9: Cyberstrates has a very very unique model.
Speaker 10: We're a very small but mighty cyber only venture capital
Speaker 10: firm and there's a secret source behind this firm.
Speaker 9: They're very small.
Speaker 10: There's three partners, two in tel Avivan, Me and San Francisco,
Speaker 10: and we each bring something very very different. We've got entrepreneurs,
Speaker 10: we've got a traditional venture capitalists and myself being the practitioner,
Speaker 10: so when you think about bringing the operational experience to
Speaker 10: young founders that are in the very early seed stages,
Speaker 10: we forget sometimes as practitioners how much value we can
Speaker 10: actually add to these young companies to make sure that
Speaker 10: we stress test the problem statements that they have and
Speaker 10: make sure that they're building long lasting, meaningful companies.
Speaker 3: Founded in twenty eighteen by a Sequoia partner but also
Speaker 3: the godfather of the Israeli cybersecurity scene. Israeli just talk
Speaker 3: to us at the moment about how you are seeing
Speaker 3: the ecosystem affected there. You must have, of course, a
Speaker 3: large Mountain portfolio company is based there.
Speaker 10: Yes, in fact, every one of our portfolio companies is
Speaker 10: based in Israel.
Speaker 9: And there's a sadness.
Speaker 10: I mean, there's an absolute, profound sadness amongst the community
Speaker 10: right now. And on a personal level, I don't think
Speaker 10: I've met a single founder that hasn't been affected in
Speaker 10: some way, whether they know somebody who has been murdered,
Speaker 10: somebody that's missing, or somebody that's been profoundly affected. So
Speaker 10: on a personal level, it's struck really really close to
Speaker 10: home for us. On a professional level, however, I am
Speaker 10: so impressed with the resilience of the Israeli people and
Speaker 10: of the Israeli startup community.
Speaker 9: It is absolutely incredible.
Speaker 10: I think this concept of business continuity and resilience is
Speaker 10: something that we talk about all the time.
Speaker 9: Israelis have this natural ability.
Speaker 10: To think about what that actually means because they're used
Speaker 10: to living in turmoil. This is, of course unprecedented, but
Speaker 10: what it means is they were prepared in able to
Speaker 10: bounce back. Now, some of the portfolio companies have had
Speaker 10: some of their stuff that are now on reserve duty.
Speaker 9: There's people in the United States that.
Speaker 10: Are standing in for them, but business has remained relatively unaffected.
Speaker 9: I would not say it's business as.
Speaker 10: Usual by any stretch, but these are resilient people who
Speaker 10: really truly have continuity plans that have gone into effect.
Speaker 3: Geopolitics is complex, so too is the world in which
Speaker 3: you work of cybersecurity, and I'm wondering what therefore problems
Speaker 3: they are generally trying to tackle. What ways in which
Speaker 3: you're seeing your startups your portfolios managed to outperform it
Speaker 3: in a market context.
Speaker 5: It's been very difficult, but.
Speaker 9: It's all about the people.
Speaker 10: I mean our philosophy first, as we invest in people,
Speaker 10: most of the companies that we invest in haven't written
Speaker 10: a single line of code when we give them seed funding.
Speaker 10: So as I said earlier, they stress test the problem.
Speaker 10: One of our main portfolio company is Unicorn, called whiz
Speaker 10: fastest growing software company on the planet, ever faster than Twitter, Airbnb.
Speaker 5: How he's measuring that based on growth.
Speaker 10: So they've been around for three years, ten billion dollar
Speaker 10: valuation and over three hundred million dollars in revenue in
Speaker 10: just three years.
Speaker 9: So just the trajectory of the growth.
Speaker 10: Because these founders, there's some of the second time founders,
Speaker 10: so they've been there don't before and that definitely helps.
Speaker 10: They listen to the market and have adjusted to the
Speaker 10: market very easily during times which are very tumultuous. And
Speaker 10: again we want to make sure we're solving very real problems.
Speaker 3: Emily, we're going to talk about some of those challenges
Speaker 3: and opportunities a little bit more. Of course, it's going
Speaker 3: to be attending the Bloomberg Technology Summit tomorrow. Emily Heaths,
Speaker 3: general partner at Cyberstats, and look, we're going to be
Speaker 3: discussing a little bit coming up on the LP side
Speaker 3: of the equation pension funds. How are informs here in
Speaker 3: the UK going to change the game. This is Bloommeg Technology.
Speaker 3: Welcome back to Blue Bog Technology. I'm karenin Hyde, London
Speaker 3: today and for the next few days. Meanwhile, let's get
Speaker 3: a quick check on the market instead, are training worldwide
Speaker 3: for you because it has been a volatile day with
Speaker 3: yields on the higher side, but they actually have pulled back.
Speaker 3: Now we're down some five six basis points on the tenure,
Speaker 3: having eclipsed five percent. Of course highcens more than a decade,
Speaker 3: two decades. We're now pulling back to four point eighty
Speaker 3: five on the tenure. That leaves some breathing rooms from
Speaker 3: the growthier names. Now's that one hundred managers to rally
Speaker 3: on the day up some eight ten percent as we
Speaker 3: anticipate some key earning something some Microsoft from Alphabet after
Speaker 3: the bell. Of course, looking at that tomorrow, I'm looking
Speaker 3: at New York crude though still off by two percent.
Speaker 5: But elevated. We're at eighty six dollars.
Speaker 3: Of course, this is in a geopolitical context where we
Speaker 3: are awaiting whether or not indeed the conflict between Israel
Speaker 3: and Hamas is indeed escalated in any way.
Speaker 5: For now, we damp down some of those concerns.
Speaker 3: Move on to what is of course a key risk
Speaker 3: asset of choice when it comes to technology. Bitcoin it
Speaker 3: has been on a run where up almost three point
Speaker 3: three percent thirty thousand in excess of that now key
Speaker 3: technical level, and of course, as many anticipate, perhaps the
Speaker 3: sec it pulled back from its cases versus ripple. Are
Speaker 3: we looking towards some sort of etf in the future,
Speaker 3: Is in indeed some sort of well haven?
Speaker 5: That's a key question.
Speaker 3: Meanwhile, we want to talk a little bit more about
Speaker 3: some private markets, an allocation of funds. Here in the UK,
Speaker 3: some of Britain's largest pension firms have committed to allocating
Speaker 3: a minimum of five percent of defined contribution funds to
Speaker 3: unlisted equities by twenty thirty, So I think startups. The
Speaker 3: aim is to unlock over perhaps fifty billion pounds of
Speaker 3: new capital by the end of the decade. Joining us
Speaker 3: now is someone who's spearheading this entire movement. Nicholas Lyons
Speaker 3: is the Lord Mayor of the City of London. Where
Speaker 3: you oversee basically the economy of the square mile. You
Speaker 3: try and anticipate the ways in which we can make
Speaker 3: it thrive and One way is you think allocate pension funds,
Speaker 3: of which you come from Phoenix Group a pension focus.
Speaker 5: Why startups? Why is that a benefit?
Speaker 11: Well, look, the starting point about pensions is to get
Speaker 11: the best returns for pension savers and that you know,
Speaker 11: we must never move away from that as a fundamental underpin.
Speaker 11: Here the most successful pension funds in the world usually
Speaker 11: you know the Canadian state pension funds. The Aussie supers
Speaker 11: have between thirty and fifty percent of assets invested in
Speaker 11: unlisted asset classes of infrastructure, real estate, private credit and
Speaker 11: private private equity. So we need to get the pension
Speaker 11: system in the UK, of which is over four trillion
Speaker 11: pounds more invested in productive assets to give better returns
Speaker 11: for pension savers. The reason that I particularly focused on
Speaker 11: late stage venture capital is, as you've heard earlier, there
Speaker 11: is good incubator and ceed capital in the UK, but
Speaker 11: often our high growth companies, and we are brilliant at
Speaker 11: these high growth industries of tech, fintech, green and renewable tech,
Speaker 11: clean tech, biotech, life sciences. Got four of the best
Speaker 11: ten universities in the world, so one of the best
Speaker 11: twenty universities in the world but too many of these companies,
Speaker 11: once they sort of prove their business model and looking
Speaker 11: for accelerator financing, have to go externally for capital. And
Speaker 11: I want us to marry up that need with an
Speaker 11: opportunity to get the best returns for our UK pension service.
Speaker 11: Why should I mean, we love Ontario teachers pensions, but
Speaker 11: why should Canadian teachers be benefiting from the incredible entrepreneurial
Speaker 11: spirit in the UK.
Speaker 3: So it's about allocating British pensioners funds or future pensioners
Speaker 3: funds to a UK ecosystem as well, because will they
Speaker 3: not therefore be able to access private markets outside of
Speaker 3: the Unitedloate?
Speaker 11: They will absolutely And I think the idea here is
Speaker 11: that it's not just the what about allocating five percent
Speaker 11: of DC pension funds, which you know we think by
Speaker 11: twenty thirty, just because DC pensions are growing by ten
Speaker 11: percent per annum, we're going to have between a trillion
Speaker 11: and one point three trillion pounds and DC pensions, so
Speaker 11: it is about fifty billion pounds. I'd like a significant
Speaker 11: chunk of that to be allocated to a future growth fund,
Speaker 11: which has the advantage as a collective investment fund of
Speaker 11: being able to get the enormous diversification of risk that
Speaker 11: actually you need when you're talking about companies at that
Speaker 11: early stage.
Speaker 3: Can you give us a context system why why the
Speaker 3: UK has been reticent psychologically, culturally to invest in that
Speaker 3: way from its pensions funds.
Speaker 11: I think it's a combination of things. Part of it
Speaker 11: is cultural. I think since you know two thousand and eight,
Speaker 11: we've been pretty risk averse as a financial ecosystem. The
Speaker 11: regulators have been given a primary objective of making sure
Speaker 11: we didn't have a repeat of that. We looked after customers' interests,
Speaker 11: quite right, but we need to give them and we
Speaker 11: have now given them a secondary objective of competitiveness and growth,
Speaker 11: so they have another lens through which to look at
Speaker 11: these things. But I think one of the biggest issues
Speaker 11: is that we've not had that sort of culture, particularly
Speaker 11: of investing in late stage venture capital, and North America
Speaker 11: has really stolen a march on us in that regard.
Speaker 11: So we get a lot of our companies going flight,
Speaker 11: getting on a plane, going to the West Coast and
Speaker 11: looking to raise money over there, and they can continue
Speaker 11: to do that, and they should continue to do that.
Speaker 8: We should still.
Speaker 11: Get lots of international capital coming into the UK, but
Speaker 11: I want us to get some UK money. Working to
Speaker 11: fifty billion is a good start.
Speaker 3: It's interesting that, of course, this comes hot on the
Speaker 3: hills of m a UK based company listing in the
Speaker 3: US for deeper to capital reasons. Also in a global
Speaker 3: context of the technologies sector having been pretty hard hit
Speaker 3: in the rise of yields, borrowing costs going higher growth,
Speaker 3: your names have been hurt unless your AI focused in
Speaker 3: some way. What has been the conversations, like with the
Speaker 3: pension industry, of which you're somewhat apart. We're not on
Speaker 3: sort of loan to the City of London. What have
Speaker 3: they been like, where's the reticence been in this world?
Speaker 11: There hasn't really been much reticence. Nine of the largest
Speaker 11: players representing sixty five percent of the DC market have
Speaker 11: been supportive of this and signed the Mansion Has Compact
Speaker 11: in early July when the Chancellor was at Manchien House
Speaker 11: and was able to announce this. So I think there
Speaker 11: are very big players like Aviva LNGMG, who got big
Speaker 11: asset management capability, including in the private equity sector, who
Speaker 11: would like to say, well, yeah, we're happy to sign
Speaker 11: the Mansion Has compact. But we think we can do
Speaker 11: that ourselves. There are lots of others. Because we have
Speaker 11: a very very broadly diversified pension system with lots of
Speaker 11: small players. They need a collective investment fund that they
Speaker 11: can use as the vehicle through which to invest in
Speaker 11: this asset class. But I think by creating a fifty
Speaker 11: billion pound war chest, if you like, and with much
Speaker 11: of this going into a future growth fund, we'll be
Speaker 11: able to change the culture. We'll be able to develop
Speaker 11: a real ecosystem.
Speaker 8: Not just of It's not just about capital.
Speaker 11: It's about making sure that we've got really strong non
Speaker 11: executive directors and mentors who can help these companies and
Speaker 11: also prove the equity research that we write on tech companies.
Speaker 11: I'd say there's actually a significant differential at the moment
Speaker 11: in the quality of tech research that happens in the
Speaker 11: US and in the UK. So this is not just
Speaker 11: a silver bullet. We have got to change the culture
Speaker 11: and there's a lot of work that's involved in this.
Speaker 5: No to the cell side, I'm interested just to end it.
Speaker 3: Law mare on the idea of whether this money automatic
Speaker 3: goes to British based venture capital companies or are we
Speaker 3: going to suddenly see a flock of SF based funds
Speaker 3: come in and want to make the most of this
Speaker 3: poor capital.
Speaker 11: I think we again if you come back to this
Speaker 11: first mover, which is that we have the desire to
Speaker 11: deliver the very best possible returns for pension savers. Therefore
Speaker 11: we need to make sure that they have a diverse
Speaker 11: and not just UK but also international exposure too. But
Speaker 11: we have got such good companies. The fact of it
Speaker 11: is the most sophisticated investors in the world come here
Speaker 11: to invest in the best of British. So let's let's
Speaker 11: invest alongside those sophisticated investors and deliver great returns to
Speaker 11: pension savers and get some of these companies listing in
Speaker 11: the UK. In five years time, if we're successful with
Speaker 11: the Mansion has Compact and what we're doing with DC Pensions,
Speaker 11: we'll have five five billion pound ten billion pound twenty
Speaker 11: billion pound tech companies in the foot.
Speaker 3: See one hundred not just a delivery, Nicklas, Lions delivered.
Speaker 3: We thank you so much for joining us, the lawn
Speaker 3: Mayor of the City of London ahead of what is
Speaker 3: a big event that they'll be throwing on Wednesday coming
Speaker 3: up in fact, we're going to be talking with a
Speaker 3: key venture capitalist who does allocate money into the UK
Speaker 3: and Europe more broadly of VC. Spotlight time is upon
Speaker 3: us and we're going to be talking about the tech
Speaker 3: scene in here in London with Harry Nellis of Excel
Speaker 3: Partners from London. Today, we're going to be watching the
Speaker 3: shares of certain companies related to crypto. We're just showing
Speaker 3: how bigcoin is uperforming for a variety of reasons. Well,
Speaker 3: a lot of the key names that are invested in
Speaker 3: the crypto space, whether it be right Platforms for example
Speaker 3: carrying up eleven percent on the day. One of the
Speaker 3: key out performers from London. There's a Blomberg Technenergy time
Speaker 3: now for talking tech. First up, Apple is hoping to
Speaker 3: incorporate artificial intelligence into some of its key services thinks
Speaker 3: Siri of course the App store as well Apple Music.
Speaker 3: In fact, Bloomberg's Mark German says Apple is exploring new
Speaker 3: features such as auto generated playlists. Are the LM functions
Speaker 3: similar to those already found in Spotify or Microsoft Office. Meanwhile,
Speaker 3: Benge Capital firm Peak fifteen Partners of course previously Sequoia
Speaker 3: Capital in India, says AI startups are dominating its accelerated
Speaker 3: program PEAK fifteen and indeed it was present in Southeast
Speaker 3: Asia as well.
Speaker 5: Says that ten of the thirteen.
Speaker 3: Startups in its cohort are in the AI and deep
Speaker 3: tech field. The VC firm has invested as much as
Speaker 3: three million dollars in capital to startups thus far, plus
Speaker 3: Microsoft will invest roughly three point two billion dollars to
Speaker 3: grow its Australian data centers. The US tech company plans
Speaker 3: to expand its cloud computing and AI infrastructure over the
Speaker 3: next couple of years. Is largest investment to their country
Speaker 3: in forty years. In fact, Australian Prime Minister Anthony at
Speaker 3: Albany's is currently on a four day visit to the
Speaker 3: United States. Oh, there's lots of billions and millions being
Speaker 3: thrown around. Let's do a little bit more in our
Speaker 3: venture capital scene here in London. Axcel has been on
Speaker 3: the ground in Europe for twenty three years, opening its
Speaker 3: London office all the way back in the year two
Speaker 3: thousand and The firm has made investments.
Speaker 5: In some of the key standout names.
Speaker 3: That about performed, you know, Spotify, super Cell Delivery. Axcel
Speaker 3: partner Harry Nenness is now joining us to discuss an
Speaker 3: evolution in the ecosystem that has exited founders, has money
Speaker 3: that gets reinvested into the tech scene, does it get
Speaker 3: reinvested here in Europe? Do you founders leave the likes
Speaker 3: of Spotify Delivery to go build their own companies?
Speaker 2: Absolutely?
Speaker 1: Recently that are study and I showed that two hundred
Speaker 1: unicorns in Europe have in fact generated twelve hundred new
Speaker 1: startup companies.
Speaker 2: And that is critical for the.
Speaker 1: Ecosystem because for an ecosystem capital entrepreneurs, but also repeat
Speaker 1: management teams. And that is finally now starting to happen,
Speaker 1: which was very different from twenty three.
Speaker 2: Years ago when the market was very very early.
Speaker 5: Yeah, and it took a while to build such unicorns.
Speaker 3: I mean when you say that there have been more
Speaker 3: than two hundred, I think it's exactly two hundred and
Speaker 3: twenty one unicorns in the region. People might be soly
Speaker 3: surprised by that, do you think, I mean, what key
Speaker 3: areas have we seen billion dollar companies founded here in Europe?
Speaker 2: Yeah?
Speaker 1: Well, it was our conviction twenty three years ago that
Speaker 1: it was indeed possible for Europe to generate these billond
Speaker 1: dollar outcomes.
Speaker 2: Our investors doubted it at the time. In fact, we had.
Speaker 1: To wait five years for that first Unicorn to show up,
Speaker 1: and then three more years for the second one.
Speaker 2: To show up.
Speaker 5: What was the first one here?
Speaker 1: The first one was Skyper, of course, and then my SQL.
Speaker 2: In two thousand and eight.
Speaker 1: So the big sectors that have generated is online games,
Speaker 1: super cell, enterprise software, click tech, consumer technologies including Skypes,
Speaker 1: so a variety of things in fact, which is one
Speaker 1: of the things that characterized at very early market you
Speaker 1: couldn't really specialize in anything. You have to be very
Speaker 1: broad because innovation happened across the board, but very shallow.
Speaker 1: Later there weren't many companies of the same type.
Speaker 3: It's interesting, of course, of Skype was Nicholas Zenstrom, who's
Speaker 3: gone on to found his own VC. When you think
Speaker 3: of Atomaco and I'm interested in like that was early
Speaker 3: days sort of artificial intelligence, before AI was cool to
Speaker 3: be saying in every single Lexican, but what are you
Speaker 3: seeing in terms of AI proficiency here? We're about to
Speaker 3: have an AI summit about the regulation, the safety is
Speaker 3: that key AI expertise and businesses being built.
Speaker 1: Absolutely, there's many universities across Europe that have generated very
Speaker 1: interesting founders and deep technology insights into artificial intelligence.
Speaker 2: We've been funding a number of those.
Speaker 1: And artificial intelligence is really impacting a number of themes
Speaker 1: that we're investing in already, enterprise automation. With artificial intelligence,
Speaker 1: you can actually improve that. Cybersecurity powered by artificial intelligence,
Speaker 1: you can actually make that better. So we see artificial
Speaker 1: intelligence as a major paradigm shift the new platform, if
Speaker 1: you will, after many of the others. So we had
Speaker 1: the Internet, we had mobile, we had cloud computing, Now
Speaker 1: we have AI.
Speaker 3: Why then, let's play the cidic and the counter or
Speaker 3: to this narrative of one that is optimistic. Why then
Speaker 3: do you think there is this worry about post Brexit
Speaker 3: London not being an ecosystem for Europe. Why then do
Speaker 3: you think perhaps in a current market cycle has been
Speaker 3: very difficult, we're not getting companies raising their funds in
Speaker 3: Europe instead arms going to the US for the deep pockets.
Speaker 1: Yeah, I think there's been a We've gone through very
Speaker 1: strange period during COVID where there was enormous amounts of
Speaker 1: capital available and enterprise is actually over bought software that
Speaker 1: is now over So we're going through this transition period
Speaker 1: where people are trying to find a new price at.
Speaker 2: Which deals will be done.
Speaker 1: And the reality is that many software companies and other
Speaker 1: tech businesses just had so much money that they hadn't
Speaker 1: didn't have.
Speaker 2: To raise more money.
Speaker 1: So we're now entering a stage where they are running
Speaker 1: out of money. We think in the year to come,
Speaker 1: we all have to raise more money and then we'll
Speaker 1: discover where.
Speaker 2: That price is.
Speaker 5: Does that mean?
Speaker 3: And we actually had for example, anow Doogils of the
Speaker 3: Female Founders Fund in New York saying that there are
Speaker 3: going to be about a thousand unicorns that are going
Speaker 3: to have the rubber hit the road. They're not going
Speaker 3: They're going to run out of money and likely won't
Speaker 3: find new funding. Do you think that we will see
Speaker 3: an awful lot of unicorns suddenly exploding?
Speaker 1: You know, there's two hundred billion dollars of dry capital
Speaker 1: on the side clients.
Speaker 2: Waiting for market discovery of new prices.
Speaker 1: So I think there's plenty of money available for unicorns.
Speaker 1: I think it will be an environment in which flat
Speaker 1: is the new up. So if you can raise money
Speaker 1: now at the price where you raised money three years ago,
Speaker 1: that will be victory. In fact, in the subsector of software.
Speaker 1: We did a study and of the two hundred unicorns
Speaker 1: in software, only ten percent of them actually had to
Speaker 1: do financing, and half of those actually financed at flat
Speaker 1: or up prices, and only a.
Speaker 2: Fraction of them down. So I don't think it's going
Speaker 2: to be that bad.
Speaker 3: What about more international funds such as yourself, you allocate
Speaker 3: money around the world accel as a.
Speaker 5: Worldwide known name.
Speaker 3: Are more international vcs West Coast bace vcs those in
Speaker 3: emerging markets?
Speaker 5: Are they coming here to Europe?
Speaker 2: Yeah?
Speaker 1: Absolutely, because Europe has become a really interesting market. What
Speaker 1: we saw twenty years ago people are seeing now, namely
Speaker 1: Europe is a real innovation happens everywhere, including Europe. It's
Speaker 1: a great market to be at. It's a great advantage
Speaker 1: for us who have been here for so long. But
Speaker 1: many of our competitors are now here as well, which
Speaker 1: is good because you cannot have an ecosystem with only
Speaker 1: a few investors.
Speaker 3: What does this ecosystem seem like, look like, sound like
Speaker 3: from a diversity perspective, How does Europe, for example, compare
Speaker 3: with Silicon Valley where people are always bringing their hands
Speaker 3: and rightly so that there is a lack of diversity
Speaker 3: in founders, and indeed the VCS allocate to them.
Speaker 2: I think Europe is not different from the US. It's
Speaker 2: very similar in that sense.
Speaker 3: So underrepresented can do better. How are you seeing it
Speaker 3: try to do better?
Speaker 2: I think.
Speaker 1: I think everybody is making a considered effort in order
Speaker 1: to get it into the right direction. But it also
Speaker 1: has a lot to do with what happens before we
Speaker 1: meet entrepreneurs, like education, primary education, college education. That all
Speaker 1: is up to the people whom we end up seeing
Speaker 1: as entrepreneurs.
Speaker 3: So fix it in several steps before as well. Harry Nas,
Speaker 3: it's great to have some time with you. Thank you
Speaker 3: for joining here in London. Of course, he's of Axcel
Speaker 3: and a key BC here in the UK space.
Speaker 5: Now.
Speaker 3: The film version of Taylor Swift Stadium Tour held onto
Speaker 3: the box office lead for a second straight weekend, out
Speaker 3: drawing a new Martin Scorsese drama from Apple. Of course,
Speaker 3: Taylor Swift the Area's tour brought in thirty one million
Speaker 3: dollars in North American ticket sales, while Killers Are the
Speaker 3: Flower Moon, first ever big screen released from Apple Original Films,
Speaker 3: it opened to sales of twenty three million dollars Meanwhile,
Speaker 3: sticking with the film industry, we've got to be talking
Speaker 3: about the Hollywood studios and the SAGAFTRA Actors' Union apparently
Speaker 3: resuming negotiations tomorrow, more than a week after suspending talks
Speaker 3: aimed at resolving a month long dispute.
Speaker 5: Joining us Now, as Blomberg's.
Speaker 3: Felix Jennet, who you know, we must key think through
Speaker 3: some of the sticking points. What is a stumbling box
Speaker 3: still remaining for the actors when the writers have moved on.
Speaker 12: It's mainly two things that are remaining. One is the
Speaker 12: compensation from streaming services and how that will go to actors.
Speaker 12: And two is protections from artificial intelligence.
Speaker 3: Okay, a lot of the AI concerns, for example, have
Speaker 3: been held by smaller acting positions, bit parts and the like.
Speaker 5: But now we.
Speaker 3: See big actors coming and weighing in to try and
Speaker 3: push on those studios.
Speaker 5: How are you seeing George Clooney's.
Speaker 3: Voice and now others added to the arena Scott Hanson.
Speaker 5: In the Night.
Speaker 12: Yeah, I think that's just evidence of the mounting frustration
Speaker 12: in Hollywood. I think there was a lot of hope
Speaker 12: that when the writers reached an agreement a month ago
Speaker 12: with the studios that the actors would be able to
Speaker 12: take that template and follow quickly. But that's been a
Speaker 12: month now it hasn't happened.
Speaker 8: So, you know, last week you saw.
Speaker 12: George Clooney and another a bunch of other A list
Speaker 12: Hollywood actors jump in, you know, set up the zoom
Speaker 12: call with the union leadership, you know, toss around a
Speaker 12: bunch of ideas, hoping maybe that would resolve things.
Speaker 8: It seemed to have done nothing.
Speaker 12: I think the consensus was that their ideas weren't going
Speaker 12: to move the needle enough.
Speaker 3: It was interesting that some of the big wigs on
Speaker 3: the other side of the equation, so JOHNA. Langley or
Speaker 3: of NBC, or whether it be Bob Byger himself for Disney,
Speaker 3: they got around the table with the writers. Do you
Speaker 3: think the same thing's happening here with actors.
Speaker 8: Yeah, I think they're involved.
Speaker 12: I think, you know, again, the main problem is that
Speaker 12: the union has this idea of you know, initially they
Speaker 12: proposed taking the percentage of all streaming revenues.
Speaker 8: I think it was two percent, then one percent.
Speaker 12: Then they came back with this idea, Okay, we're not
Speaker 12: going to take a percentage. We'd like, you know, a
Speaker 12: pern assessment per subscriber, and you know, I think the
Speaker 12: top studio bosses, including people like Ted Surrandus and Netflix
Speaker 12: has said that's, you know, that's a bridge too far.
Speaker 5: It feels like tax.
Speaker 12: We're not going to do that, and that was really
Speaker 12: the last thing that broke off the negotiations.
Speaker 5: Well, we'll see how they reform tomorrow. Felix. Great to
Speaker 5: have your perspective on it. We thank you.
Speaker 3: Meanwhile, that does it for this edition of Blombag Technology.
Speaker 3: Do not forget to check out our podcast and you
Speaker 3: know it tomorrow because we've got the big event, Bloombog
Speaker 3: Technology Summit