Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg
Speaker 1: Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: All right, So, as you know, it's a busy Thursday,
Speaker 2: a lot going on, and that includes in the IPO market.
Speaker 2: IPO is definitely having a moment. We talked about Chime
Speaker 2: and Financial earlier today, surging as much as sixty six
Speaker 2: percent on the company's first day of trading. The IPO
Speaker 2: priced at twenty seven dollars to share. Circle Internet surged
Speaker 2: one hundred and seventy percent on its first day of
Speaker 2: trading last week. And then you had the cryptocurrency exchange
Speaker 2: Bullish Global confidentially filing paperwork with the SEC for an
Speaker 2: IPO in recent weeks. There's a lot going on that filing,
Speaker 2: according to a report last week, Tim in the Ft.
Speaker 1: Yeah, So the IPO is the culmination for a lot
Speaker 1: of venture capitalists. The question we have is how are
Speaker 1: things looking for them earlier in the process, for companies
Speaker 1: that are raising money right now. For that, we check
Speaker 1: in with Bob Curley, CEO Bridge Bank. It's the tech
Speaker 1: division of Western Alliance. Bob Curley is Deputy Chief banking
Speaker 1: Officer of Regional Banking at Western Alliance. The bank has
Speaker 1: more than eighty billion dollars in assets kind of the
Speaker 1: market cap of around eight billion dollars. He joins us
Speaker 1: this afternoon from San Jose. Bob, your focus at bridges
Speaker 1: on every stage of the life of a startup, So
Speaker 1: you focus from them raising money all the way to
Speaker 1: IPO and you go past that. Tech in life sciences
Speaker 1: is your specialty. How would you characterize the environment right now?
Speaker 1: We know IPOs are pretty hot, but what about earlier
Speaker 1: on in the stages.
Speaker 3: Yeah, there is a mix of things going on in
Speaker 3: the industry, most of them good. There's robust capital available
Speaker 3: to founders these days, and so a lot of people
Speaker 3: are making choices today whether they go public. It has
Speaker 3: that window, as you covered earlier, is wide open. No
Speaker 3: telling how long that will last, but it does look
Speaker 3: like this will be a nice run. But alternatively, in
Speaker 3: the old days, IPOs and M and A were your solution.
Speaker 3: Today you have a third option, which is to stay
Speaker 3: private for longer, and there are plenty of sources of
Speaker 3: capital to be able to do that, and of course
Speaker 3: Bridge Western Alliance is one of the sources for that,
Speaker 3: So talk.
Speaker 2: To us about in terms of activity and what you're seeing.
Speaker 2: I think we love talking to different aspects of financial
Speaker 2: markets and kind of our business world, including anything to
Speaker 2: do with certainly startup company companies and entities in terms
Speaker 2: ofbo of what it tells us about the environment more
Speaker 2: a beat or not, certainly when uncertainty has really been
Speaker 2: the narrative and the watchword for all of us. And
Speaker 2: I think it's safe to say I remember hearing somebody
Speaker 2: on surveillance this morning that you know, the one thing
Speaker 2: we know that is a very effective tool of this president.
Speaker 2: I don't think i'm speaking out a turn here is
Speaker 2: that ability to catch people off guard, and so uncertainty
Speaker 2: will probably be with us until the end of his
Speaker 2: turnure in his second term. So give us an eye
Speaker 2: idea of what you are seeing and how you would
Speaker 2: describe kind of the environment when it comes to startups,
Speaker 2: the capital raise and everything around them.
Speaker 3: Well, I think you're dealing with a couple of things.
Speaker 3: One is, you have a whole cadre of companies that
Speaker 3: raise money at very high valuations during the zero interest
Speaker 3: rate environment, the ZERP period. Those folks are trying to
Speaker 3: figure out where they go from here. A lot of
Speaker 3: them were priced to perfection, and obviously, with the increase
Speaker 3: in rates among other things, they're finding sometimes that fundraising
Speaker 3: is more challenging. What those folks have been focused on
Speaker 3: is bringing the burned down, getting themselves to be more sustainable,
Speaker 3: and now addressing whether there's a growth story behind it.
Speaker 3: They will go in one of two directions that will
Speaker 3: resume a growth story, or they will manage the company
Speaker 3: for cash. The third option is if neither of those
Speaker 3: paths are available, they will have to look for a
Speaker 3: soft landing for the company. Those are the companies that
Speaker 3: were funded in the i'll call it the helcyon days
Speaker 3: of the of the post pandemic period. Then you have
Speaker 3: a whole other group of companies that are up and
Speaker 3: coming that I think could be some of the most
Speaker 3: exciting companies we have ever seen. Those include very popular
Speaker 3: AI companies, but a whole lot of companies that benefit
Speaker 3: from the formula of the formative technology developed by AI,
Speaker 3: which would lead you into robotics, in the defense, into space, etc.
Speaker 3: So I think we're entering a whole new area of
Speaker 3: great returns, great opportunities on the new front. While we
Speaker 3: also contend with or deal with the companies that we're
Speaker 3: left behind.
Speaker 2: Is there enough money out there to kind of keep
Speaker 2: these companies private for longer. It seems to be the
Speaker 2: mode as of late, or certainly what we've seen the
Speaker 2: last few years. And sometimes that can be great in
Speaker 2: terms of giving company the space to do what they
Speaker 2: need to do. It also, though, can keep alive companies
Speaker 2: that probably shouldn't be kept alive. So give us an
Speaker 2: idea of how liquid it is out there and the
Speaker 2: money that are chasing startups at different stages of their
Speaker 2: lif life right now.
Speaker 3: They're absolutely right, Carrol. The amount of capital of being
Speaker 3: deployed into the space today is a multiple of what
Speaker 3: we've seen before. Put in perspective, sixty billion dollars in
Speaker 3: venture debt was done this past year. The next highest
Speaker 3: year was in twenty twenty one, where it was forty
Speaker 3: one billion dollars, So it gives you a sense for
Speaker 3: the growth in that period of time. It is almost
Speaker 3: double last year what it was in twenty twenty three.
Speaker 3: So we're seeing all different sources of capital. I think
Speaker 3: the most important thing if you're a founder, you want
Speaker 3: to align with investors who have been there, done that,
Speaker 3: who have been through the cycles. We've been doing this
Speaker 3: for twenty years. We've seen a lot of people come
Speaker 3: in and go referred to as the tourists. But I
Speaker 3: would say at this point in time, there are more
Speaker 3: options on the table, and I think it's also becoming
Speaker 3: more accepted in the boardroom that people will consider debt
Speaker 3: because of its non diluted nature or less diluted nature.
Speaker 3: But as an alternative.
Speaker 1: It's an alternative, but it's an alternative that comes out
Speaker 1: of price because of the and look the entire businesses
Speaker 1: that are made up of venture debt and entire public
Speaker 1: trading companies that really just focus on venture debt. But
Speaker 1: what are we talking rates rates here in an environment
Speaker 1: such as this.
Speaker 3: Yeah, so the old prime rate or reference rate is
Speaker 3: the rate. And depending on how early a stage, you
Speaker 3: may also have a little bit of warrants I at
Speaker 3: warrant in a warrant upside. However, tim you've got to
Speaker 3: compare that to equity dilution where ownership is being given up.
Speaker 3: And the primary tool of using venture debt in the
Speaker 3: earlier stage companies is to defer that next capital raise
Speaker 3: so that you can knock down milestones and or attract
Speaker 3: customer bases that you wouldn't otherwise be able to do,
Speaker 3: which obviously has a positive impact on the valuation that
Speaker 3: you're able to drive for the company. So in a sense,
Speaker 3: it's a way of staging. When I raise the amount
Speaker 3: of equity capital, I think the need the business needs
Speaker 3: over time.
Speaker 2: I want to get into, in particular, what you're seeing
Speaker 2: in terms of AI and where the money's going. We
Speaker 2: just came off of an event on TIM and I
Speaker 2: at in San Diego on Tuesday at Cisco Live twenty
Speaker 2: twenty five, and we talked to a lot of their
Speaker 2: key executives in terms of what they are doing in
Speaker 2: AI strategy in particular, They've got a lot going on
Speaker 2: and it seems like they are working aggressively to pivot
Speaker 2: to the AI infrastructure build. But it's been fascinating right
Speaker 2: to watch over the last two years where it was
Speaker 2: all it seemed like Nvidia and open AI. But it's
Speaker 2: branching out to power needs and software and so on
Speaker 2: and so forth. But where are you seeing capital deployed,
Speaker 2: be it debt or equity, you know, in terms of
Speaker 2: capital raises when it comes to AI, what's interesting what
Speaker 2: are the trends that maybe aren't being talked about as much.
Speaker 3: Sure well, certainly, you're absolutely right. There's a huge amount
Speaker 3: of money being deployed into the infrastructure for AI and
Speaker 3: pure compute power. You need to accomplish that. Those tend
Speaker 3: to have very large investors, very large dollar amounts involved,
Speaker 3: and hence you tend to have mega funds that are
Speaker 3: focused on that. I think what's particularly interesting is I
Speaker 3: call it, I would call it applied AI, and that's
Speaker 3: companies that are taking AI capabilities and focusing it on
Speaker 3: functional areas, solving a single problem, for example, or a
Speaker 3: group of problems, or applying it to a particular vertical
Speaker 3: which is using AI technology, but then applying it to
Speaker 3: real problems that clients have today and solving them very
Speaker 3: much the way application software would have years ago, but
Speaker 3: ever more efficient with the AI capability.
Speaker 1: In terms of where venture capital is flowing, it does
Speaker 1: seem like, you know, a lot of the big money
Speaker 1: is going toward the lms, but on sort of the
Speaker 1: more the smaller side, the deals that we don't hear about. Bob,
Speaker 1: I'm wondering where where you're seeing in the layer that
Speaker 1: you're seeing built on AI, where the money is going there?
Speaker 1: What can you tell us about where where, What's what's
Speaker 1: being attracted where within the valley?
Speaker 3: Yeah, so a little more than half of what we
Speaker 3: see is somehow AI deployed. I think we have to
Speaker 3: be a little bit careful now. Uh. I was around
Speaker 3: for the whole Internet craze and everyone put a dot
Speaker 3: com after their name, and so there are different levels
Speaker 3: of AI involvement and AI capability. But having to put
Speaker 3: that in place, what I would say is we're seeing
Speaker 3: the ability to take AI and get great amounts of
Speaker 3: information and create, create, create quick learning where someone's able
Speaker 3: to develop what would have tend over over weeks, maybe
Speaker 3: even months, they can have a summary of data very quickly.
Speaker 3: And so we're seeing it applied in security situations. We're
Speaker 3: seeing it applied in cyber We're seeing it applied clearly
Speaker 3: in defense, uh, and we're seeing it apply in healthcare.
Speaker 3: So again, I view of the greatest opportunity for mid
Speaker 3: sized funds is in these applied AI categories.
Speaker 1: You mentioned that you saw you were around for the
Speaker 1: dot com boom and busts, So I got to get
Speaker 1: your take on if you think there's a there there
Speaker 1: right now with the rise of AI versus sort of
Speaker 1: what we saw in the late nineties early two thousands
Speaker 1: with the bust of dot com. Are you seeing similarities?
Speaker 1: There is this completely different.
Speaker 3: Well, we said the bust of dot com, and certainly
Speaker 3: there were a number of casualties associated with that. That's
Speaker 3: because I think investors knew at the front end it's
Speaker 3: going to be a huge change in our economy and
Speaker 3: the way we look, the way we do things, and
Speaker 3: so there was a frenzy to make sure I got
Speaker 3: in at any price, and as a result, a lot
Speaker 3: of business models were funded that probably shouldn't have been,
Speaker 3: but that was all in an effort to be associated
Speaker 3: what would turned out to be one of the greatest
Speaker 3: developments in technology. I think we're at a similar turning point.
Speaker 3: I think we're at a point where our official intelligence
Speaker 3: is that enabling technology but I don't. But I believe
Speaker 3: there will only be a few winners of it, and
Speaker 3: there's probably much many more companies getting funded, particularly on
Speaker 3: the lum side.
Speaker 2: Bob just twenty seconds here, Silicon Valley Bank and all
Speaker 2: that that entailed. Andy worried about the future of Western
Speaker 2: Alliance at that time. Everything back to normal after that
Speaker 2: or at least back to where you were before and
Speaker 2: again just got about fifteen seconds.
Speaker 3: It really has. We leveled out a little bit for
Speaker 3: a quarter or two, but with the backing with Western
Speaker 3: Alliance track record and bank for all seasons, we've resumed
Speaker 3: on growth and we're now stutting records.
Speaker 2: All right, Bob Curly, thank you so much. Toeo Bridge Bank,
Speaker 2: Deputy Chief Banking Officer of Regional Banking at Western Alliance