Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay and this is Bloomberg Technology coming up in
Speaker 1: the next hour. Jewel ordered to pay almost four hundred
Speaker 1: forty million dollars to settle a probe over the e
Speaker 1: cigarette makers marketing to teens, but the company still faces
Speaker 1: hundreds of lawsuits plus the rise of the creator economy.
Speaker 1: We're gonna take a deep dive into this booming industry
Speaker 1: and how YouTube in particular reign supreme as platform of choice,
Speaker 1: but TikTok is catching up and it's back. The NFL
Speaker 1: season starts this Thursday, which means more sports betting on
Speaker 1: sites like Draft Kings. Our conversation issue with CEO Jason
Speaker 1: Robbins on what to expect as we kick off this
Speaker 1: week's sports tech series. Meantime, Jewel Labs, as ed said,
Speaker 1: agreeing to pay four thirty eight point five million dollars
Speaker 1: to thirty three states. This resolves a two year bipartisan
Speaker 1: pro into the East Grant Makers manufacturing and sales practices
Speaker 1: the States, claiming that it marketed addictive nicotine products to children.
Speaker 1: Bloom Works Eric Larson joining us now to discuss, So
Speaker 1: Eric tell us how significant this settlement is today. It's
Speaker 1: a very significant settlement. It's certainly the largest that Jewel
Speaker 1: has had to pay to date involving any individual states.
Speaker 1: You know, in the last year or so, the company
Speaker 1: had settled a few state lawsuits by Washington State in
Speaker 1: North Carolina and really had all this huge investigation hanging
Speaker 1: over it in the meantime, So clearly they decided to
Speaker 1: be done with this particular risk. Although clearly there's a
Speaker 1: lot of lawsuits still pending out there, but this definitely
Speaker 1: does away with a lot of the lawsuits that could
Speaker 1: have been filed by these thirty three states and Puerto Rico. So,
Speaker 1: you know, how much does this resolve these, you know,
Speaker 1: hundreds of other lawsuits essentially, how much of Jewels legal
Speaker 1: troubles go away as a result of this. Well, it
Speaker 1: definitely significant that these states have settled, but there are
Speaker 1: still over two thousand, five hundred civil lawsuits like personal
Speaker 1: injury lawsuits that have been filed by individuals, and also
Speaker 1: dozens of cases filed by state governments and school districts.
Speaker 1: In fact, in November, the San Francisco School District we'll
Speaker 1: go to trial in the first of these cases to
Speaker 1: go to trial, which could really show the potential for
Speaker 1: how jury might react to the evidence once it is presented.
Speaker 1: Uh So, that's another one that potentially we could see
Speaker 1: a settlement before it hits trial. But there are over
Speaker 1: suits out there, plus several states that are including New
Speaker 1: York and California by the way, which normally are you know,
Speaker 1: have the potential for big settlements or damages. They have
Speaker 1: lawsuits penning again Stool that are still pending. All right,
Speaker 1: Bloom Exeric Laws and thank you for that update. Will
Speaker 1: continue to watch how those civil suits evolved. Let's take
Speaker 1: a pulse of the VC market and declining market conditions
Speaker 1: as fears continue about a hawk ish FED, and talk
Speaker 1: about what is the future of venture capital after the
Speaker 1: growth at all costs mantra of the last couple of years.
Speaker 1: I want to get to Sheila Patel get her insight
Speaker 1: on this. She's the vice chair and general partner at
Speaker 1: the Capital Group. Sheila, thank you so much for joining us. So, Karius,
Speaker 1: just what is your reaction of, you know, to a
Speaker 1: continuing hawkers fed. Obviously we're getting mixed economic data. Uh,
Speaker 1: you know, some that looks better than others. But what
Speaker 1: does this mean for your world and you're investing investing strategy. Look,
Speaker 1: I think venture capital has been in an amazing run
Speaker 1: for the last decade, and it was inevitable that we'd
Speaker 1: come to more difficult time. Uh. That said, looking at
Speaker 1: the environment we're in today, looking at everything you mentioned
Speaker 1: that fed the geopolitical environment, I actually think it's a
Speaker 1: great time, just as it's been in the past when
Speaker 1: you've gone through vintages or cycles that are difficult in
Speaker 1: private equity in other segments of the market. To really
Speaker 1: look at BC today and the technological innovations that are
Speaker 1: driving uh, future innovation and really future productivity. So to
Speaker 1: my mind, the pullback is actually necessary and a good
Speaker 1: thing for shaking out where we need to be in BC.
Speaker 1: So where are we in VC? Talk to us about
Speaker 1: trends are seeing in the private markets? Are valuations still
Speaker 1: too high? Are there more valuations that are gonna come down? Look,
Speaker 1: I think as you're seeing in the latest rounds UM,
Speaker 1: you're seeing founders realizing they need to do larger deals,
Speaker 1: more capital at reasonable valuations. People need cash runaway. That's
Speaker 1: to be expected. Uh, it's also is able to expect
Speaker 1: we'll start to see an increasing amount of M and A.
Speaker 1: And I think many of the reports we're seeing, whether
Speaker 1: from City Group or works UH that are friends are
Speaker 1: at BCG with whom we have a strategic partnership have
Speaker 1: done UH suggests that you'll see more M and A,
Speaker 1: particularly in the software UH space, and particularly in the
Speaker 1: areas like the back office. So I do think there's
Speaker 1: room for some valuations to move, but I also think
Speaker 1: there's room for some incredible innovation to come, even in
Speaker 1: areas that have seen the most difficult you know. I
Speaker 1: think crypto is a great example of that, where there
Speaker 1: is an interesting future ahead after this latest downturn. The
Speaker 1: question is just how long is this downturn gonna last.
Speaker 1: I mean, we've had guests on the show who are
Speaker 1: predicting millions of layoffs in tech and that this is
Speaker 1: gonna last two to three years. Does that drive with
Speaker 1: your thinking? Look, I think that's entirely possible. I'm probably
Speaker 1: a bit more optimistic than that, mainly because I see
Speaker 1: some positive trends UH in what's going on as well.
Speaker 1: For example, a recent serve very done by City suggested
Speaker 1: that CFOs and c h R o s. So in
Speaker 1: the financial space and the HR space within corporate aren't
Speaker 1: pulling back on areas like software spending. A lot of
Speaker 1: what we focus on it be capital or core areas
Speaker 1: like enterprise, and these are areas where companies can find efficiencies.
Speaker 1: At the same time they're going through more difficult economic circumstances.
Speaker 1: So in many cases, for certain segments within technology, recessionary
Speaker 1: environment or at least even a difficult environment is not
Speaker 1: necessarily the worst environment to the business. Meantime, you're investing
Speaker 1: in companies that are, you know, taking on big tech,
Speaker 1: are trying to challenge big tech do things better than
Speaker 1: big tech companies do. We've been following this big piece
Speaker 1: of legislation that's been working its way through Congress to
Speaker 1: rain in big tech, but that's a chance it won't
Speaker 1: make it before the mid terms. What do you think
Speaker 1: the impact of this legislation could be and what's the
Speaker 1: impact if it doesn't happen before November ace. Look, I
Speaker 1: think around the world, the technology industry has proven itself
Speaker 1: to be incredibly adaptable, and this is not the first
Speaker 1: time or the first region or country to take on
Speaker 1: issues within big tech. We've actually seen it where I
Speaker 1: lived for many years UH in Europe, and you've seen
Speaker 1: UH the tech industry continue to adapt, and I think
Speaker 1: many within the tech industry are eager to adapt right.
Speaker 1: Technology sometimes moves faster than human capacity to handle it.
Speaker 1: So to my mind, UM, whether the regulation happens before
Speaker 1: or after the midterms, some amount of regulation to big
Speaker 1: tech is coming, and I think everyone's accepted that everybody's
Speaker 1: ready for that. The real issue is UM making sure
Speaker 1: that it's addressing the right things and really solving the
Speaker 1: right problems that people have concerns with. So what's your
Speaker 1: advice to your portfolio companies right now? You know, potentially
Speaker 1: or in a prolonged economic downturn, there's a lot of uncertainty.
Speaker 1: I had. You know, we're moving of an era where
Speaker 1: there was you know, a lots of money flooding in.
Speaker 1: But now you know, investors want to see real numbers.
Speaker 1: Oh look, I think I think, UM, it's a real
Speaker 1: chance to go back to their knitting. And I think
Speaker 1: this is where you really see UH, particularly as we
Speaker 1: look at portfolio companies, the best in the management side
Speaker 1: come to the four founders that think about things for
Speaker 1: the long term, founders that have a sense of their
Speaker 1: use of cash, their burn rates um and really maintaining
Speaker 1: their runaway but also have a sense of the competition
Speaker 1: and realize that they're in a moment right now or
Speaker 1: some of the competitors are facing more difficult times. They
Speaker 1: need to be aggressive. They need to think about ways
Speaker 1: to push themselves, their business, their product schoolward as solutions
Speaker 1: in a difficult environment. And I think you see many
Speaker 1: of the best founders and innovators able to put that
Speaker 1: hat on. Put the hat on that says my idea
Speaker 1: is the best idea I've put it together, is is
Speaker 1: one my competition is showing the signs of weakness or
Speaker 1: the challenges of the way they've managed their business. And
Speaker 1: so this is when it's my time to shine. So
Speaker 1: where are you placing your bets in terms of where
Speaker 1: you think we're gonna be this time next year. I
Speaker 1: think this time next year hopefully, uh, we look at
Speaker 1: it as a more stable time. I think what we've
Speaker 1: said repeatedly from our perspective is we invest over many boarders.
Speaker 1: We we don't raise a fun and think let's all
Speaker 1: get it put to work right away. So I think
Speaker 1: you'll still see us slow and steady investing in a
Speaker 1: year from now. I think what we've very focused again
Speaker 1: on the areas where we see opportunities, so enterprise UM.
Speaker 1: Thinking about the evolution of crypto. My colleagues Matt Levinson
Speaker 1: and Ryan Savelle just wrote a great piece UM about
Speaker 1: where does crypto go from here and where crypto and
Speaker 1: fintech merge. And to this moment, most of what's gone
Speaker 1: on in crypto has really been driven in many cases
Speaker 1: vice speculators. But where do the real world applications come
Speaker 1: in as you think about emerging markets, as you think
Speaker 1: about removing middleman, which you've already seen blockchain do in
Speaker 1: in a place as unlikely as India, in getting money
Speaker 1: to rural areas and so on. So I think we
Speaker 1: really still are thinking about where do the ideas of
Speaker 1: today that may not have been applied well get applied
Speaker 1: in real world situations tomorrow. You know, I'd take climate
Speaker 1: check is another curiate area for us that we see
Speaker 1: will be important of the next several years. All right,
Speaker 1: Sheila Patel b Capital Group Vice Chair and general partner.
Speaker 1: Thank you, Sheila for sharing your thoughts with us. Meantime,
Speaker 1: Theoronis founder Elizabeth Holmes claims a key witness in her
Speaker 1: criminal case visited her after the verdict and express remorse
Speaker 1: about his testimony. Homes alleges that a former Theories Lab
Speaker 1: director showed up at her home and said his testimony
Speaker 1: had been twisted by prosecutors. She's now asking for a
Speaker 1: new trial after they allegations. This just weeks before Holmes
Speaker 1: is scheduled to be sentenced. Coming up, the creator economy
Speaker 1: is booming. How this new industry is changing the face
Speaker 1: of entertainment and continuing to grow. We'll talk about that next.
Speaker 1: This is Bloomberg taking a deep dive now on the
Speaker 1: creator economy, which has experienced a massive boom over the
Speaker 1: last several years, along with a slew of platforms like Spotify, Instagram,
Speaker 1: and TikTok and the rule of them all of course YouTube.
Speaker 1: To give you an idea, every minute at least at
Speaker 1: least five hours of footage or uploading to YouTube. Let's
Speaker 1: break this all down with Roberto Blake, a content creator
Speaker 1: who also has his own coaching program that helps influencers
Speaker 1: build their online brands, and our very own Mark Bergen,
Speaker 1: who is out with a new book today called Light
Speaker 1: Comments Subscribe. Inside YouTube's chaotic rise to World Domination. You
Speaker 1: can buy it now. Mark and Roberto, thank you so
Speaker 1: much for joining us. Mark, I'm gonna start with you.
Speaker 1: Can you just start by giving us a sense of
Speaker 1: how big the creator economy is today and just how
Speaker 1: much it has grown on all of these different platforms
Speaker 1: over the last several years. Yeah, there are estimates out
Speaker 1: there that it's about a hundred billion, which is from
Speaker 1: zero to to to sixty within maybe the past fifteen years. Really, uh,
Speaker 1: and certainly in the past five years. I think that's
Speaker 1: just exploded as all these platforms have got involved. You
Speaker 1: know that that mind boggling stat about fifty hours uploaded.
Speaker 1: The other major stat is that there are now over
Speaker 1: two million craters in YouTube's partner program, which is actually
Speaker 1: a smaller number than it was before. If if people
Speaker 1: in the audience remember that YouTube actually cut that number
Speaker 1: and it's but they're on ten. But it's been gradually
Speaker 1: moving it up, and particularly as they're facing new competition
Speaker 1: from TikTok. Roberto, you're a graphic designer and a free
Speaker 1: in term before becoming a YouTube content creator. Why don't
Speaker 1: you make this big job change and give us a
Speaker 1: sense of a day in your life. I mean, that's
Speaker 1: a great question, Emily. For me, a lot of it
Speaker 1: comes down to the things that are obvious for people.
Speaker 1: Is you want more time freedom, You want to be
Speaker 1: able to talk about and do things you're very passionate about.
Speaker 1: You want to feel a sense of ownership over the
Speaker 1: things you're doing. So when you work in uh, you know,
Speaker 1: for other people, whether it's as a freelancer or if
Speaker 1: you work at an ad agency something I used to do, UH,
Speaker 1: it's great. It's very gratifying, it's very fulfilling, and it's
Speaker 1: very legitimate in the eyes of your relatives. But when
Speaker 1: you get to do something of your own and have
Speaker 1: complete ownership of it, get to build it with your
Speaker 1: own two hands, you feel directly supported by a community
Speaker 1: of like minding people. There's nothing like it, nothing in
Speaker 1: the world like it, And so I think that's what
Speaker 1: attracts a lot of people to the creator economy and
Speaker 1: opportunities like YouTube, podcasting and live streaming. Why are you
Speaker 1: focus on YouTube in particular and not tick to or Instagram. Well,
Speaker 1: I've been with YouTube almost since the very beginning, and
Speaker 1: YouTube is still the most powerful search engine in the
Speaker 1: world across all ages and all of demographics, and YouTube
Speaker 1: has a sense of permanence with its content. YouTube is
Speaker 1: also the best monetization opportunity for content creators, as over
Speaker 1: eight in platform monetization streams, I teach content creators UH
Speaker 1: roughly fifteen different ways they can monetize, primarily using YouTube specifically,
Speaker 1: but I also do understand and value other platforms have
Speaker 1: a presence in other platforms as well. But I feel
Speaker 1: that even with the rapid rise of TikTok, I feel
Speaker 1: that there's nothing like the permanence and longevity that YouTube
Speaker 1: content create content creation has, And if you talk to
Speaker 1: TikTokers on a regular basis, which I generally do, you'll
Speaker 1: find that a lot of them have the intention of
Speaker 1: pivoting and moving to YouTube at some point in their
Speaker 1: career because they do want a sense of stability and permanence,
Speaker 1: and they also want the potential for evergreen content to
Speaker 1: benefit them and be monetize able in the future. They
Speaker 1: know right now with the TikTok Creator Fund, that while
Speaker 1: they're getting something in exchange for their content, they know
Speaker 1: they're disproportionately underpaid for the attention when compared to traditional
Speaker 1: content on YouTube, as well as in the live streaming
Speaker 1: community and within YouTube live stream and podcasting, their air
Speaker 1: higher opportunities in terms of direct compensation when it comes
Speaker 1: to sponsored content and brand deals, and it's not even close.
Speaker 1: So so for me, that's probably one of the bigger deals,
Speaker 1: not even close. Uh is in one way to put
Speaker 1: it mark you know, we've talked so much about the
Speaker 1: threat of TikTok to YouTube, but to Rebner's point, it
Speaker 1: is a lot of disconnected content and it is less permanent.
Speaker 1: How big a threat is TikTok really in your view
Speaker 1: to YouTube and how is it How is YouTube addressing
Speaker 1: the threat internally? Yeah, I think it's a viable threat,
Speaker 1: and certainly more so than you know, Instagram, Facebook have
Speaker 1: tried multiple times to really build out a creator economy
Speaker 1: and thus far I failed. What TikTok and bite dnsiteds
Speaker 1: to do is to demonstrate, you know, Google has a
Speaker 1: remarkable system, as roberta pointed out book both for Search
Speaker 1: uh and for Modernization, in the world's biggest digital advertising company,
Speaker 1: and it's it's had this machinery in place for for years.
Speaker 1: TikTok clearly has a lot of political problems, um and
Speaker 1: they haven't really got a proven yet that they can
Speaker 1: be a threat to YouTube at at large scale. So
Speaker 1: YouTube's response so far is to is shorts. This is
Speaker 1: their their feature that's sort of short video. They're driving
Speaker 1: a lot of pushing a lot of viewers. They're encouraging
Speaker 1: creators to go there. They're about to flip the switch
Speaker 1: on modernization. You know, it's unclear how productive productive that
Speaker 1: will be for the company and how they're going to
Speaker 1: sort out modernization. But if there's a lot you know,
Speaker 1: if history shows is anything that is that YouTube has
Speaker 1: a pretty strong track record of sort this out, and
Speaker 1: I think responding to the to the threat from of
Speaker 1: TikTok in a really significant way. Reward are you're the
Speaker 1: founder of Awesome Creator Academy, which is a coaching program
Speaker 1: that helps influencers build their brands online. With some fun
Speaker 1: watching your videos earlier today, what trends are you saying?
Speaker 1: What are you telling creators today advice that that might
Speaker 1: not be obvious. I think the thing that's not obvious
Speaker 1: to most content creators is their potential, their overall potential
Speaker 1: when it comes to their earnings, and the fact that
Speaker 1: there is a compounding effect from their content over a
Speaker 1: period of time. So what a lot of creators don't
Speaker 1: do is they rely so much on platform modetization, whether
Speaker 1: it's TikTok and their creator fund or YouTube and their
Speaker 1: ad Sense partner program and things like that, that they
Speaker 1: don't explore other monetization opportunities, and they don't think of
Speaker 1: what they're doing as what I refer to as content
Speaker 1: as a service. So that's one thing it's not obvious
Speaker 1: to them is that it's very much almost like software
Speaker 1: as a service, which most of us are familiar with.
Speaker 1: We have these wonderful subscription programs everywhere now that we're
Speaker 1: all paying for well. Content creators have an opportunity to
Speaker 1: use content as a services leveraged not just with ad revenue,
Speaker 1: creator funds and sponsored content brand deals, but they can
Speaker 1: build their own communities around things like their one hundred
Speaker 1: or one thousand truest fans, and they could have monthly
Speaker 1: membership programs of their own, whether on platform or off platform.
Speaker 1: They need to look at things that give them recurring
Speaker 1: revenue outside of the platform, and telling more creators to
Speaker 1: look into opportunities to build their own products, build their
Speaker 1: own merchandise. YouTube recently partnered which Shopify, and they also
Speaker 1: expanded their creator monetization program with regard to merch and
Speaker 1: even physical and digital products. Used to have a ten
Speaker 1: thousand subscriber their it's it's so fascinating, We're gonna have
Speaker 1: to log onto you tube and watch your videos to
Speaker 1: find out the rest. But appridging joining us and of
Speaker 1: course pleased by marks book. Welcome back to one Work
Speaker 1: Technology and I'm win Chang in pal Alto. I want
Speaker 1: to get back to a check on the markets and
Speaker 1: shares of so called meme stocks on moon Works at
Speaker 1: Ludlow back with an update. Yeah, and one name in particular,
Speaker 1: which is bed Bath and beyond that stock falling for
Speaker 1: a fifth straight day, it's worse run since July. It
Speaker 1: follows news over the weekend that the company's CFO, Gus
Speaker 1: star Are Now died on Friday after falling from a
Speaker 1: skyscraper in Manhattan, the company saying that they have appointed
Speaker 1: an interim CFO. You see that decline more than eighteen percent.
Speaker 1: Reminded that this is a stock that in the month
Speaker 1: of August surged by zero percent. Caught up in the
Speaker 1: meme stock frenzy where retail investors discussed this other stocks
Speaker 1: on forums online, such as Reddit. That decline being elt
Speaker 1: in the market. You see other so called meat stocks
Speaker 1: like game Stop down eight percent. AMC Entertainment also down,
Speaker 1: but the activity around this area is really dropped off.
Speaker 1: If we use cool volumes as a proxy, we've seen
Speaker 1: the fewest CAOL trades in this space, particularly for names
Speaker 1: like game Stop, since nowhere near the frenzy that we
Speaker 1: saw in early one. Who is interesting to see some
Speaker 1: reporting on the Bloomberg terminal while I was away about
Speaker 1: this idea that when we got to return to school
Speaker 1: also meaning a return to college, that we might see
Speaker 1: the frenzy in meme stocks pick back up. Because a
Speaker 1: lot of the traders that are doing this are young.
Speaker 1: They're discussing this online in their spare time. That hasn't
Speaker 1: really been the case. We've seen that sort of negative
Speaker 1: sentiment around Meme stocks continue, with bed Bath and Beyond
Speaker 1: being the exception in the month of August. But tragic
Speaker 1: news of course relating to that that company, and our
Speaker 1: thoughts of course go to us family such tragic news.
Speaker 1: Thank you for that update. I want to move on
Speaker 1: to the I p O market, now on pace for
Speaker 1: one of its worst years in decades after an incredible
Speaker 1: amount of deal activity of course last year in one,
Speaker 1: leaving many companies with few options as they waiting for
Speaker 1: the market to calm down, joining us Now Equities and
Speaker 1: founder and chief strategy officer Phil has Let. So, Phil,
Speaker 1: I believe last time you were on the show, you
Speaker 1: said the I p O window is totally sailed shut
Speaker 1: and not opening for a very long time. Do you
Speaker 1: still believe that? Yeah, Well, it must have been a
Speaker 1: heck of a party at the Pliat burning Man, because
Speaker 1: it's been incredibly quiet this morning and today with news.
Speaker 1: You know, we normally see kind of a stampeding of
Speaker 1: ip O news and big funding rounds on the day
Speaker 1: after Labor Day. Companies really eager to get out there
Speaker 1: and announce something big, and we've seen barely anything. So, um,
Speaker 1: I'm a bit surprised that, you know, kind of post
Speaker 1: summer that there's still been a lot of activity. Um,
Speaker 1: in fact, that we're kind of starting to see that
Speaker 1: maybe some deals are getting done, but a little bit
Speaker 1: more discreetly, maybe with a bit more structure. And so
Speaker 1: I think that, you know, the thesis remains the same
Speaker 1: that actually the ip O window is still pretty quiet,
Speaker 1: and yet we're hearing that insta cart, for example, is
Speaker 1: still considering going public this year. Why would a company
Speaker 1: do this now when conditions are so unfavorable. Sure, I
Speaker 1: think there's a subset of the private unicorn companies that
Speaker 1: have such a large brand and such a large cache
Speaker 1: that really the only way to continue elevating awareness and
Speaker 1: creating a currency to buy smaller companies is really to
Speaker 1: go public. Um. Insta Cart, I guess continue to raise
Speaker 1: money in the private markets, but if they really want
Speaker 1: to have extra prominence, uh, they are going to tap
Speaker 1: the public markets. And they've also kind of created a
Speaker 1: clean path to do so by kind of already knocking
Speaker 1: down their valuation publicly having a very senior executive team,
Speaker 1: including the CEO. UM and so I kind of think
Speaker 1: of it's similar to how maybe a company like Ali
Speaker 1: Baba or Facebook, maybe even a tougher environment, still elected
Speaker 1: to go public. So how long do you think the
Speaker 1: I p O window is going to be frozen? Shot,
Speaker 1: double locked? As you say, you know, what, what is
Speaker 1: the time frame that company should be planning for? Yeah,
Speaker 1: I keep pushing it out more and more. Um, I
Speaker 1: kind of think of what's happening now is really what
Speaker 1: happened during the start of COVID, but it's just being
Speaker 1: stretched over a longer period of time. If your call
Speaker 1: kind of April May and June of twenty I p
Speaker 1: O s, we're pretty much at zero, and what we're
Speaker 1: seeing is almost just kind of a stretching out of that.
Speaker 1: And what you now see is basically a game of
Speaker 1: chicken between investors and allocators and I p o s
Speaker 1: and companies that are ready to go public. If you're
Speaker 1: a company that is profitable and good stewards of your capital,
Speaker 1: you can wait as long as you need to um.
Speaker 1: But if your company that elected to grow at all
Speaker 1: costs and burn cash, you're going to have to become
Speaker 1: markets at some point. What I actually think may evolve
Speaker 1: a bit more is that will see some more m
Speaker 1: and a activity both for strategic investors and also from
Speaker 1: private equity investors that see some opportunities where deals can
Speaker 1: get done with a bit more structure, a little less
Speaker 1: public scrutiny. So I think we expect that to pick
Speaker 1: up quite considerably in absence of an I p O
Speaker 1: market that's active. I wonder how many more valuation cutdowns
Speaker 1: we'll see, though I can imagine that You've got a
Speaker 1: lot of vcs out there sitting on port oil companies
Speaker 1: that have valuations that are just not right for the times. Absolutely,
Speaker 1: what I think will start happening is more and more
Speaker 1: deals that are actually happening kind of behind the scenes,
Speaker 1: are deals with structure, and what I mean by that
Speaker 1: is that investors are getting much more preferential terms for
Speaker 1: the money that they're putting into companies. I think we
Speaker 1: just saw recently that Joker is planning to raise money
Speaker 1: at just slight valuation bump up from their last round,
Speaker 1: but it also basically gives a guaranteed return to the
Speaker 1: new investors. More and more those deals are happening, and
Speaker 1: here at Equities and we're also hearing of those deals
Speaker 1: happening as well, and so I think those will continue.
Speaker 1: But to your point, there's a lot of investors that
Speaker 1: do you want to see some exit and some some
Speaker 1: realization of the investments they made. It's becoming very hard
Speaker 1: for ventual capital firms to raise their next fund when
Speaker 1: they can't actually return capital to their limited partners, and
Speaker 1: that's you know, creating some very tense board meetings, which
Speaker 1: again is something we've talked about and kind of harped on,
Speaker 1: but I think that the factor remains true. All right,
Speaker 1: Phil has Let Equities and founder, chief strategy Officer. A
Speaker 1: great to have you back, Phil. As always coming up,
Speaker 1: it has been a hundred eighty da since President Biden
Speaker 1: signed that Executive Order on digital assets. What does the
Speaker 1: rest of the government think about it? Christin Smith the
Speaker 1: Blockchain Association joins us. Next, this is Bloomberg a slew
Speaker 1: of reports or do this week to the White House
Speaker 1: stemming from President Joe Biden's Executive Order on digital assets,
Speaker 1: including one on the future of money payment systems and
Speaker 1: the implications of the Central Bank digital currency. Though these
Speaker 1: reports likely won't be released to the public till mid September,
Speaker 1: let's talk about what we can expect with Kristin Smith,
Speaker 1: executive director of the Blockchain Association, along with our crypto
Speaker 1: contributor Shannali Boss. Thank you both ladies for joining us. So, Christen,
Speaker 1: what do you think we're going to find in these reports? Well,
Speaker 1: I think it's really interesting. I mean, this is the
Speaker 1: first time that the federal government has looked at crypto
Speaker 1: regulation from a comprehensive perspective. You know, as you recall,
Speaker 1: President Biden issued this executive order back in March. He
Speaker 1: gave various federal agencies, both financial regulators and some non
Speaker 1: financial regulators, mandates to look at different issues, to look
Speaker 1: at some of the concerns we have with the space,
Speaker 1: but also some of the benefits that the crypto industry
Speaker 1: and sector could provide, and come up with recommendations about
Speaker 1: what types of regulation are needed going forward. So I
Speaker 1: think that we're going to see a fairly balanced analysis.
Speaker 1: I think we'll see some things around competitiveness and inclusion
Speaker 1: that the industry is going to be very excited about. UM.
Speaker 1: I do think we'll see some um concerns around, you know,
Speaker 1: sort of the lack of regulation of dollar back stable coins,
Speaker 1: which is something that has been discussed for a long time,
Speaker 1: maybe the need for some spot market regulation. But overall,
Speaker 1: this should provide a pretty substance have roadmap for policymakers
Speaker 1: should they choose to accept it as they consider legislation
Speaker 1: this fall and into now. Block Tin Association has had
Speaker 1: a state at the table with policymakers. How have they
Speaker 1: been processing this crypto winter and all of the drama. Yeah, well, listen,
Speaker 1: I think you know there's an understanding that crypto is
Speaker 1: here to stay right like that wasn't always a concern,
Speaker 1: And even in this market downturn, I think policymakers have
Speaker 1: even more incentive to try to do something in a space,
Speaker 1: especially if you look at the beginning of the summer.
Speaker 1: We had the collapse of Tera Luna, We had a
Speaker 1: couple of bankruptcies, we had sort of the three or
Speaker 1: was Capital. You know, there were a bunch of events
Speaker 1: that had big impacts on consumers, and instead of pushing
Speaker 1: away from this space, policymaker said, all right, this is
Speaker 1: a space where we need to make sure that we
Speaker 1: fill regulatory gaps. We need to better understand what regulations
Speaker 1: already exists, We need to figure out what are the
Speaker 1: options going forward. And so you know, Congress has been
Speaker 1: um pursuing several different bills this year. We saw the
Speaker 1: one that's still a brand bill earlier the spring. We've
Speaker 1: seen the Digital Commodity Exchange Act in the House. We
Speaker 1: have a new bill in the Senate that attempts to
Speaker 1: regulate this space. So they've been generating their own ideas
Speaker 1: and I think, you know, the executive order process and
Speaker 1: Congress's effort are going to converge quite nicely. To have
Speaker 1: just an overall more educated policymaking group that is looking
Speaker 1: at this in a thoughtful, comprehensive way, in a way
Speaker 1: that you know, moves the ball forward, but not so
Speaker 1: rushed that we get the policy wrong. And so I
Speaker 1: think we're really setting the stage up to get a
Speaker 1: good bipartisan compromise and and fill those regulatory gaps. What
Speaker 1: about the agencies and regulators themselves, Because even though the
Speaker 1: Executive Order was seen as a really big step for
Speaker 1: the industry, a common critique I get when I'm talking
Speaker 1: to market participants is that it really embolds in each
Speaker 1: of the agencies separately, that there's a lot of conflict
Speaker 1: among them on how they define certain issues. To take
Speaker 1: the sec and the securities issue when you come to
Speaker 1: coin base in particular, So do you see the agency's
Speaker 1: consolidating power to one agency or another, and how do
Speaker 1: you believe that Congress may enable that or or concept
Speaker 1: with that? Yeah, well, the Executive Order did require cross
Speaker 1: agency collaboration on different topics. UM. I do think the
Speaker 1: core issue out there when it comes regulating the crypto markets,
Speaker 1: like particularly the bitcoin markets. You know that those that
Speaker 1: are truly commodities, is that today, neither the SEC or
Speaker 1: the CFTC has jurisdiction in this space. Right What we
Speaker 1: need is Congress to come in and say, all right,
Speaker 1: we have this commodity spot market. Other commodity spot markets,
Speaker 1: like the grain market for example, they don't have any
Speaker 1: regulating federal regulators. So we need to find a new
Speaker 1: federal regulator to come in and regulate the spot market.
Speaker 1: And so I think Congress has a choice. What's interesting
Speaker 1: is that the three major proposals that have been at
Speaker 1: reduced and Congress so far have all pointed to the
Speaker 1: CFTC as being the appropriate regulator for the crypto industry,
Speaker 1: probably because they already have regulate regulatory powers over crypto
Speaker 1: futures um and on fraud and manipulation in the underlying markets.
Speaker 1: So I think that that's probably the place that's going
Speaker 1: to end up. It could also go to the SEC
Speaker 1: as well, but Congress seems to think that they want
Speaker 1: to give this authority to the CFTC. And what does
Speaker 1: it mean for the SEC if more of that moves over,
Speaker 1: because there's so many things that they were looking at,
Speaker 1: n f t s, other securities issuances for potentially here
Speaker 1: do you think the SEC ultimately loses some power over
Speaker 1: these markets as they've already started on the enforcement path. Yeah. Well,
Speaker 1: I would argue they don't have any authority over um,
Speaker 1: you know, sort of the pure crypto commodity markets, right,
Speaker 1: I mean, the SEC has has authority over things that
Speaker 1: are securities, and you can use blockchain based systems to
Speaker 1: issue you know, equity to organized shares of stock um.
Speaker 1: You know, when you have something that's truly a security,
Speaker 1: the SEC is obviously going to have a role to
Speaker 1: play there. I think the problem has been for innovators
Speaker 1: is that there really is a big gray area there.
Speaker 1: It's hard to know when they apply. And what we
Speaker 1: just need is a framework that addresses these concerns. And
Speaker 1: you know, the stakes today are pretty high from a
Speaker 1: regulars very perspective. Right, If you're deemed a security, you're
Speaker 1: regulated by the SEC. If you're deemed a commodity, a
Speaker 1: crypto asset commodity, there's no regulator at all. So I
Speaker 1: think by having a regulator, perhaps the CFTC, to regulate
Speaker 1: crypto commodities, then there's still going to be consumer protection,
Speaker 1: there's still going to be market surveillance, there's still going
Speaker 1: to be uh, disclosures that help give consumers more information
Speaker 1: and investors more information, and so it won't be such
Speaker 1: a high stakes decision if something is a security or commodity.
Speaker 1: So I think that will help pave the way for
Speaker 1: a more constructive dialogue if Congresses indeed give the c
Speaker 1: FTC jurisdiction. All right, christ And Smith, executive director of
Speaker 1: the Blockchain Association, always appreciate you joining us and taking
Speaker 1: us inside these rooms a bit alongside our own shi.
Speaker 1: With NFL season kicking off, we are exploring the intersection
Speaker 1: of sports and technology all week long. Today we're starting
Speaker 1: with sports betting, now legal in thirty one states with Kansas,
Speaker 1: I mean, the most recent to join the field. Draftkins
Speaker 1: and rival FanDuel our position to maintain their leadership of
Speaker 1: daily fantasy sports, a market that has ballooned to four
Speaker 1: billion dollars dollars in terms of annual entroyphees Draftkins predicting
Speaker 1: this football season will be the biggest moment yet for
Speaker 1: sports bettors. Joining us to discuss CEO Jason Robbins himself, Jason,
Speaker 1: great to have you back with us. Give us a
Speaker 1: status update on the numbers and just how much you
Speaker 1: think NFL kickoff, well pick start and already booming industry. Well,
Speaker 1: I mean this is our holiday season, UM. You know,
Speaker 1: to make an analogy, so uh, you know this is
Speaker 1: when everything, all the numbers go up and it's a
Speaker 1: fun time a year. A lot of work from the
Speaker 1: team goes into preparing for this. We've launched a lot
Speaker 1: of new features and products of the last six days,
Speaker 1: including our new Rainmakers football game, which I'm really excited
Speaker 1: about and UM Week one is going to be fantastic.
Speaker 1: I'm really looking forward to. You're also launching a new
Speaker 1: blockchain initiative whereby UM betters will be able to collect
Speaker 1: digital player cards. How old this work and how big
Speaker 1: do you think blockchain and web three will be for sports? Well, Rainmakers,
Speaker 1: which is the product referring to UM, is I think
Speaker 1: one of the most innovative things we've done ever. UM.
Speaker 1: It takes fantasy sports, which you know, the idea is
Speaker 1: you're like a GM and you you know, you have
Speaker 1: players that that you get UM and it immortalizes that
Speaker 1: ownership in the form of you know, an n f
Speaker 1: T on the blockchain, So instead of drafting a player,
Speaker 1: you buy that player's n f T and you can
Speaker 1: play that in a game. UM. So it's really exciting
Speaker 1: because it mixes things that our customers are really interested in,
Speaker 1: which is the game and this sort of you know,
Speaker 1: idea of being able to pick your favorite team or
Speaker 1: your team that you think is going to win UM
Speaker 1: with also a strong interest our our customers have shown
Speaker 1: in blockchain and collectibles. So UM, I think it's really
Speaker 1: a new way of looking at fantasy sports. We think
Speaker 1: it's the future of fantasy sports, and we're really excited
Speaker 1: by some of the early traction we're seeing. There's sales
Speaker 1: that are going off for a big dollars on the marketplace.
Speaker 1: Right now, Vandel seems to have pulled ahead of the
Speaker 1: industry in terms of market share. What's your play to
Speaker 1: counter that, Well, you know, it's definitely seasonal. We typically
Speaker 1: do better in the NFL season where we have a
Speaker 1: big boost of customers UM, and if you look at
Speaker 1: the eye gaming side, we're ahead of them by a
Speaker 1: little bit. So we're just gonna keep trying to have
Speaker 1: the best product UM. You know, for us, we think
Speaker 1: product is the what ultimately will will win the customers
Speaker 1: over UM, and we think the more people that we
Speaker 1: we get to show some of the new things that
Speaker 1: we launch this NFL season, Um, the more they'll be
Speaker 1: excited about keeping their play with DraftKings. So UM, we're
Speaker 1: just gonna kind of keep you know, focusing on product,
Speaker 1: focusing on customer experience. UM. We think being the most
Speaker 1: customer focused and customer centric, which entails having the best
Speaker 1: product and overall experience, is what will win the day. Obviously,
Speaker 1: bigger business has has also meant at times some bigger losses.
Speaker 1: Some of your competitors have said they're going to pull
Speaker 1: back on AD spend this year. How is your spending
Speaker 1: strategy changing as the market evolves and uh, and also
Speaker 1: you know we're heading into a potentially prolonged downturn. Well,
Speaker 1: we've always been very you know, data driven in our
Speaker 1: decisions around spending. So UM, we look for paybacks that
Speaker 1: that meet our threshold, which in case the customer acquisition
Speaker 1: is typically three year payback or less. Um. Same thing
Speaker 1: on new states we launch, we typically look for a
Speaker 1: two to three year path to profitability timeline. So I
Speaker 1: haven't really changed that. I will say though that with
Speaker 1: some of the competitors pulling back, UM, you know, we're
Speaker 1: able to achieve great results without having to be quite
Speaker 1: as aggressive on the advertising promotion front. We're still being
Speaker 1: very aggressive. This is an important time of year, so
Speaker 1: we're making sure that we have, you know, a presence
Speaker 1: out there, and we get in front of customers and
Speaker 1: we get good offers that are interesting to them. But
Speaker 1: I do think the competitive environment is rationalized quite a
Speaker 1: bit year over year. If you compare it to this
Speaker 1: time last year, it's really just a night and day.
Speaker 1: We also got a big election coming up. You've got
Speaker 1: some proposals on various ballots in California. In particular, UM
Speaker 1: California could become the largest sports betting market in the
Speaker 1: world next to the UK. UM you look back to
Speaker 1: proposal that would allow draft kings to offer sports betting
Speaker 1: anywhere in the state in partnership with various Native American tribes.
Speaker 1: There are various other proposals that are countering this. You know,
Speaker 1: what is your polling show showing you about the likelihood
Speaker 1: of your proposal passing? And how much are you prepared
Speaker 1: to spend between now and November. We're seeing really good
Speaker 1: things in the polling. You know, obviously there's a lot
Speaker 1: that's going to occur between now and the election. It's
Speaker 1: still about two months away, but everything we're seeing in
Speaker 1: the data is great, and we think more importantly, UM,
Speaker 1: policy wise, it makes sense. It's something that Californians want.
Speaker 1: Those that are into sports betting in California, most of
Speaker 1: them are already doing it anyway in the illegal market,
Speaker 1: which is generating no tax revenue and has no consumer protections.
Speaker 1: And our initiative will generate hundreds of millions of dollars
Speaker 1: a year to help combat homelessness and mental health issues
Speaker 1: in California. And we also partner with tribes that are
Speaker 1: getting a cut of it as well. It will help
Speaker 1: especially a lot of the smaller tribes, um that you
Speaker 1: know aren't as maybe fortunate as some of the ones
Speaker 1: that the bigger casinos do well and and and really
Speaker 1: will help with education programs and other things for those tribes.
Speaker 1: So we think it's great for the California sports better,
Speaker 1: it's great for those that want to see real help
Speaker 1: on the homelessness and mental health issues, and it's great
Speaker 1: for the tribe. So UM, we're really excited about it.
Speaker 1: We think it's great policy for California. Polling numbers look good, UM,
Speaker 1: but there's a lot of time between now and the elections.
Speaker 1: We just gotta keep getting our message out there and
Speaker 1: hopefully it will resonate with voters. One one word answer, Jason,
Speaker 1: who are you putting your money on for the NFL playoffs? Uh?
Speaker 1: You know, I'm a Patriots fan, so I gotta say Patriots.
Speaker 1: I'm putting my money on them, but I'll be rooting um.
Speaker 1: But you know, there's a lot of great teams this year.
Speaker 1: I'm really excited about the opening game. I think it's
Speaker 1: going to be awesome. And you know, it's a really
Speaker 1: good season, a lot of great play. NFL content has
Speaker 1: never been better. See DraftKings. Great to have you. Thank you.
Speaker 1: We are at Apple tomorrow. You don't want to miss
Speaker 1: our special show. This is Bloomberg