WEBVTT - Trinity's Tai: Large Companies Risk Becoming Dinosaurs (Audio)

0:00:03.720 --> 0:00:07.119
<v Speaker 1>Global business news twenty four hours a day at Bloomberg

0:00:07.160 --> 0:00:10.240
<v Speaker 1>dot Com, the Radio plus Mobile Act and on your radio.

0:00:10.520 --> 0:00:14.680
<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters.

0:00:14.720 --> 0:00:18.040
<v Speaker 1>I'm Charlie Pelota. The down Jones industrial averages trading lower,

0:00:18.079 --> 0:00:21.160
<v Speaker 1>the SMP and nez DAC both higher, and this update

0:00:21.280 --> 0:00:24.720
<v Speaker 1>is brought to you by Bentley University. What to tying

0:00:24.800 --> 0:00:28.520
<v Speaker 1>up the finances at Converse and managing asset allocations at

0:00:28.600 --> 0:00:32.720
<v Speaker 1>JP Morgan have in common a business degree from Bentley University.

0:00:32.760 --> 0:00:38.120
<v Speaker 1>Because business is everywhere, prepare here. Stocks are fluctuating. We've

0:00:38.159 --> 0:00:41.159
<v Speaker 1>got the SMP up two points to four. That is

0:00:41.200 --> 0:00:43.960
<v Speaker 1>a gain of one tenth of one percent, as stack

0:00:44.080 --> 0:00:46.240
<v Speaker 1>up nine a gain of two tenths of one percent.

0:00:46.560 --> 0:00:49.880
<v Speaker 1>Down Industrials lower by a point now to eighteen thousand,

0:00:49.960 --> 0:00:53.240
<v Speaker 1>five hundred seventy three. The ten year of five thirty

0:00:53.280 --> 0:00:56.480
<v Speaker 1>seconds yield one point five three percent. Gold up eight

0:00:56.520 --> 0:00:59.520
<v Speaker 1>thirty ounce the thirteen fifty three in advance of six

0:00:59.560 --> 0:01:03.319
<v Speaker 1>tenths of crude oil West Texas Intermediate traded in New

0:01:03.400 --> 0:01:07.440
<v Speaker 1>York up three point three four. Brent is above fifty

0:01:07.480 --> 0:01:09.920
<v Speaker 1>dollars a barrel, first time since July of two percent

0:01:10.040 --> 0:01:15.240
<v Speaker 1>now fifty nine. I'm Charlie Pallotte. That's a Bloomberg Business flash.

0:01:16.160 --> 0:01:19.680
<v Speaker 1>You're listening to taking Stock with pim Box and Kathleen

0:01:19.720 --> 0:01:24.880
<v Speaker 1>Hayes on Bloomberg Radio. Eat or Be Eaten, Acquire or

0:01:25.160 --> 0:01:28.520
<v Speaker 1>Be Acquired? M and A madness in the startup universe,

0:01:28.560 --> 0:01:31.120
<v Speaker 1>and our next guest says, if you want to survive

0:01:31.160 --> 0:01:34.520
<v Speaker 1>and thrive, you better pay attention to a very major trend,

0:01:34.800 --> 0:01:38.360
<v Speaker 1>the move from the information age into the intelligence age.

0:01:38.560 --> 0:01:41.120
<v Speaker 1>Joining us the studio day is gust Tie. He's general

0:01:41.160 --> 0:01:45.160
<v Speaker 1>partner at Trinity Ventures in Menlo Park, California, the heart

0:01:45.560 --> 0:01:48.160
<v Speaker 1>of the valley, and he's here today to join us

0:01:48.160 --> 0:01:51.240
<v Speaker 1>to talk about this. Gus, welcome, Thank you. So, uh,

0:01:51.840 --> 0:01:54.600
<v Speaker 1>there is certainly a lot of M and A activity

0:01:54.640 --> 0:01:57.120
<v Speaker 1>what is driving in and we're talking about trends, but

0:01:57.200 --> 0:02:02.640
<v Speaker 1>is there anything about people uh getting more confident, financing

0:02:02.680 --> 0:02:05.640
<v Speaker 1>being cheap? What's behind it? Yes, Kathleen, I think we're

0:02:05.640 --> 0:02:09.360
<v Speaker 1>in a super fascinating time right now where you have

0:02:09.480 --> 0:02:12.959
<v Speaker 1>Microsoft buying LinkedIn for six billion, you have Walmart buying

0:02:13.040 --> 0:02:16.240
<v Speaker 1>Jet for three point three billion, and even GM bought

0:02:16.320 --> 0:02:19.440
<v Speaker 1>Crews for billion dollars. I think that the trend is driving.

0:02:19.480 --> 0:02:22.640
<v Speaker 1>All of these are large corporations seeking to bring in

0:02:22.720 --> 0:02:26.120
<v Speaker 1>DNA and capability to move from the information age to

0:02:26.120 --> 0:02:29.480
<v Speaker 1>the intelligence age. Hey, Gus, you know, just to give

0:02:29.520 --> 0:02:35.000
<v Speaker 1>some context here, at Trinity Ventures, Zu Lily initial public offering,

0:02:35.160 --> 0:02:39.280
<v Speaker 1>that would be you, Blue Nile initial public offering, that

0:02:39.360 --> 0:02:42.720
<v Speaker 1>would be you. If I always keep asking myself, if

0:02:42.720 --> 0:02:46.720
<v Speaker 1>these are all such great companies, whether it's publical private,

0:02:47.280 --> 0:02:52.160
<v Speaker 1>why sell them? Sure? Well, from a venture capital standpoint,

0:02:52.160 --> 0:02:55.240
<v Speaker 1>when we make investments in companies, we do make agreement

0:02:55.280 --> 0:02:57.320
<v Speaker 1>with the management team and the other shareholders to have

0:02:57.400 --> 0:03:00.240
<v Speaker 1>some form of liquidity. And so if the liquidity comes

0:03:00.240 --> 0:03:03.079
<v Speaker 1>in other forms such as dividends, that would be possible.

0:03:03.120 --> 0:03:06.360
<v Speaker 1>But in general, when a company is acquired or goes public,

0:03:06.440 --> 0:03:10.200
<v Speaker 1>it makes their capital liquid and then we could we

0:03:10.320 --> 0:03:12.760
<v Speaker 1>buy in and we liquid eight and we distribute those

0:03:12.760 --> 0:03:15.080
<v Speaker 1>profits back to our LPs. That makes sense to me.

0:03:15.200 --> 0:03:16.440
<v Speaker 1>You want to put some money in your pocket when

0:03:16.440 --> 0:03:18.160
<v Speaker 1>you put all that work into starting up a company.

0:03:19.160 --> 0:03:21.919
<v Speaker 1>What about this? What are you talking about? Information age

0:03:21.919 --> 0:03:25.280
<v Speaker 1>to intelligence age? What does that mean? It's it's very

0:03:25.320 --> 0:03:28.600
<v Speaker 1>it's very compelling. What does it mean? Yeah, we view

0:03:28.720 --> 0:03:32.720
<v Speaker 1>this as as transformative from moving from the industrial revolution

0:03:32.760 --> 0:03:35.840
<v Speaker 1>to the information revolution. And so now over the last

0:03:35.880 --> 0:03:39.480
<v Speaker 1>twenty years, we've been aggregating all of this information about things.

0:03:39.480 --> 0:03:42.120
<v Speaker 1>So if you look at Amazon when they pulled together

0:03:42.200 --> 0:03:45.200
<v Speaker 1>all the things you could buy, that's pulling together information

0:03:45.280 --> 0:03:49.840
<v Speaker 1>on one particular place. However, the information overwhelms all of us,

0:03:49.880 --> 0:03:52.840
<v Speaker 1>whether we're individuals or businesses, and so you need to

0:03:52.880 --> 0:03:55.720
<v Speaker 1>add intelligence to be able to sort through that information.

0:03:56.160 --> 0:04:00.680
<v Speaker 1>So you've seen this intelligence revolution where you makes sense

0:04:00.760 --> 0:04:04.120
<v Speaker 1>of the data in in information technology companies, but you

0:04:04.200 --> 0:04:07.000
<v Speaker 1>haven't seen that shift yet in all the other industries.

0:04:07.280 --> 0:04:10.160
<v Speaker 1>And that's what we're arguing is taking place right now

0:04:10.280 --> 0:04:13.480
<v Speaker 1>that if these large companies don't add intelligence to all

0:04:13.480 --> 0:04:17.000
<v Speaker 1>the information they have already, they may become dinosaurs. Does

0:04:17.080 --> 0:04:21.320
<v Speaker 1>that same strategy apply to the venture capital world? Well,

0:04:21.400 --> 0:04:23.159
<v Speaker 1>because I understand that what is it you know? You

0:04:23.200 --> 0:04:27.080
<v Speaker 1>do ten investments, seven dive, three maybe live on, and

0:04:27.200 --> 0:04:30.400
<v Speaker 1>one is the thing that you know puts the roof

0:04:30.440 --> 0:04:34.440
<v Speaker 1>over everybody's head, it sure does apply to venture capital

0:04:34.480 --> 0:04:37.960
<v Speaker 1>in all other industries. And you are seeing innovation at

0:04:38.360 --> 0:04:41.240
<v Speaker 1>various different types of venture firms, particularly the newer ones

0:04:41.560 --> 0:04:44.039
<v Speaker 1>that have this fresh look A dear friend of mine

0:04:44.040 --> 0:04:46.960
<v Speaker 1>who who inspires me in the valley is Dave McClure.

0:04:47.360 --> 0:04:51.000
<v Speaker 1>He has five startups, and he would argue that firms

0:04:51.040 --> 0:04:53.479
<v Speaker 1>that are traditional, perhaps even a firm like ours, as

0:04:53.520 --> 0:04:56.080
<v Speaker 1>a dinosaur, and and we have to pay attention to

0:04:56.120 --> 0:04:58.680
<v Speaker 1>that because you need to sort data better. I mean, seriously,

0:04:58.720 --> 0:05:00.640
<v Speaker 1>what does that mean for you? If you're a dinosaur?

0:05:00.680 --> 0:05:02.880
<v Speaker 1>How could you be a dinosaur? Well? You know, I

0:05:02.880 --> 0:05:06.000
<v Speaker 1>would argue that venture firms are more resilient to this

0:05:06.080 --> 0:05:10.039
<v Speaker 1>trend because we actually are competing to understand and makes

0:05:10.040 --> 0:05:12.480
<v Speaker 1>sense of data we already have and put it in

0:05:12.520 --> 0:05:17.520
<v Speaker 1>the forms of or what it's it's the model of

0:05:17.920 --> 0:05:21.880
<v Speaker 1>so so a thesis for a disruption for venture capital

0:05:21.920 --> 0:05:23.880
<v Speaker 1>what pim the way, what I inferred from what Pim

0:05:23.920 --> 0:05:27.200
<v Speaker 1>was saying is that the traditional model is you make

0:05:27.680 --> 0:05:29.960
<v Speaker 1>two investments per partner per year. And if you have

0:05:29.960 --> 0:05:32.680
<v Speaker 1>a firm of ten ten partners at investments per year,

0:05:32.920 --> 0:05:35.800
<v Speaker 1>from a portfolio theory basis, it may make sense to

0:05:35.839 --> 0:05:38.440
<v Speaker 1>make a hundred investments per year. If you have a

0:05:38.440 --> 0:05:41.880
<v Speaker 1>strategy for feeding the winners and calling the losers, that's

0:05:41.920 --> 0:05:45.200
<v Speaker 1>a legitimate strategy. And if you have information that that

0:05:45.440 --> 0:05:47.960
<v Speaker 1>you can transform it intelligence to understand that trend better.

0:05:48.120 --> 0:05:49.960
<v Speaker 1>You could have a leg up. I just want to

0:05:50.000 --> 0:05:53.359
<v Speaker 1>go through some recent deals to get your thoughts on this. Gillette,

0:05:53.520 --> 0:05:57.000
<v Speaker 1>Dollar Shave Club. Yeah, I mean Dollar Shave Club, as

0:05:57.000 --> 0:06:00.240
<v Speaker 1>I understand, doesn't make money necessarily, at least not yet.

0:06:01.080 --> 0:06:02.960
<v Speaker 1>Is there a strategy or a theme that we need

0:06:03.000 --> 0:06:06.839
<v Speaker 1>to understand here? Yes? And and so? Uh the theme

0:06:07.000 --> 0:06:09.680
<v Speaker 1>and Uni Leaver purchased Dollar Shave Club for a billion

0:06:09.720 --> 0:06:12.440
<v Speaker 1>in Gillette, which is owned by PNG, had a lawsuit

0:06:12.440 --> 0:06:16.000
<v Speaker 1>against Dollar Shave Club. If I understand the public information properly,

0:06:16.720 --> 0:06:20.200
<v Speaker 1>the theme would be that Uni Lever, being a hundred

0:06:20.200 --> 0:06:23.400
<v Speaker 1>and thirty billion dollar, hundred forty billion dollar company, would

0:06:23.440 --> 0:06:26.640
<v Speaker 1>be interested in developing a deeper relationship with end consumers

0:06:26.720 --> 0:06:30.000
<v Speaker 1>and collecting information from them and serving them. Dollar Shave

0:06:30.080 --> 0:06:33.960
<v Speaker 1>Club innovated in moving from a product to a service

0:06:34.440 --> 0:06:37.440
<v Speaker 1>and using analytics of understanding the customers and how to

0:06:37.520 --> 0:06:42.080
<v Speaker 1>tune products for those customers. So it's very savvy. So

0:06:42.760 --> 0:06:44.479
<v Speaker 1>what what do you make of I just have to

0:06:44.480 --> 0:06:46.760
<v Speaker 1>ask you. Just Walmart just seems like a match made

0:06:46.800 --> 0:06:50.640
<v Speaker 1>in heaven potentially, sure, yes, Uh, it's I think it's

0:06:50.680 --> 0:06:54.360
<v Speaker 1>a very savvy strategic move and strategic moves have to

0:06:54.360 --> 0:06:56.840
<v Speaker 1>play out operationally. You have to execute. But why so

0:06:57.080 --> 0:07:01.760
<v Speaker 1>savvy strategically is that Walmart is a four billion is

0:07:01.960 --> 0:07:04.640
<v Speaker 1>revenue company. Last year it actually shrank from the previous year.

0:07:05.080 --> 0:07:10.320
<v Speaker 1>It's online business last year was fourteen billion dollars. And

0:07:10.360 --> 0:07:14.280
<v Speaker 1>if you think online revenue retail is important, that fourteen

0:07:14.280 --> 0:07:18.640
<v Speaker 1>billion dollars barely matched the growth of of Amazon, so

0:07:18.640 --> 0:07:21.320
<v Speaker 1>they have to do something to catch up. You remember

0:07:21.320 --> 0:07:24.080
<v Speaker 1>a dollar Shape Club? I am not no would you

0:07:24.160 --> 0:07:26.440
<v Speaker 1>invest in that? Would you have invested in Dollar Shape Club?

0:07:26.520 --> 0:07:29.480
<v Speaker 1>I made the mistake in passing, and I regretted, but

0:07:29.560 --> 0:07:34.480
<v Speaker 1>you were offered Yes both, Thanks very much, Gus, general

0:07:34.520 --> 0:07:38.080
<v Speaker 1>partner at Trinity Ventures. They're based in Menlo Park, California.

0:07:38.560 --> 0:07:46.400
<v Speaker 1>You're listening to taking Stock. This is Bloomberg coming up.

0:07:46.880 --> 0:07:52.120
<v Speaker 1>Designers on a dime, a global consignment business selling merchandise

0:07:52.200 --> 0:07:55.720
<v Speaker 1>via e commerce platform. I'm gonna take a look at

0:07:55.760 --> 0:07:58.040
<v Speaker 1>how it works and why small business and focus something

0:07:58.040 --> 0:07:58.600
<v Speaker 1>of the radio