Speaker 1: I'm Caroline Hyde of bloom Ugs weld tadquarters in New York,
Speaker 1: and I met Ludlow in San Francisco. This is Bloomberg
Speaker 1: Technology coming up. SVB Silicon Valley Bank. It suffers its
Speaker 1: worst ever intra day drop as a CEO begs clients
Speaker 1: to stay calm. Well, this reflects about startups, about venture
Speaker 1: capital firms and tech focused lenders, and the chat platform.
Speaker 1: Discord turns to you've guessed it? Open AI to look
Speaker 1: at integrating AI into the platform. Will discuss. Then the
Speaker 1: FED creates a crypto oversight team to overlook stable coins.
Speaker 1: We discussed with the co found of DM stable coin program.
Speaker 1: For first, let's check in on the markets, because what
Speaker 1: a down day. What a worry that we're getting surrounding lenders,
Speaker 1: banks in general, and of course a lot of those
Speaker 1: our tech focus and nature NAZAC off by two percent,
Speaker 1: KBW Bank condext I shine a light on this index
Speaker 1: because the banking index is having its worst day since
Speaker 1: June of twenty twenty, off by seven point seven percent,
Speaker 1: and it's all regarding SVB and indeed silver Gate. I
Speaker 1: look at a ten year treasury yield that gets bid.
Speaker 1: This risk of sentiment means money pours back in to
Speaker 1: US treasury is yields stopped by eight basis points. Let's
Speaker 1: move it on. Let's look at the world of crypto,
Speaker 1: because the worry, the contagion, that implications of a silver
Speaker 1: Gate unwinding, and indeed what SVB really talks about in
Speaker 1: terms of risk sentiment around technology, Crypto absolutely being battered
Speaker 1: after the liquidation of Silvergate. We're off by more than
Speaker 1: Rod and Ed. Just dig into that a little bit
Speaker 1: for us, the implications of what now feels traditional finance
Speaker 1: meets decentralized finance looks certainly. Sentiment depressed all day long
Speaker 1: when it comes to bitcoin is an example because of Silvergate.
Speaker 1: There's also some stuff out there about who being coucoin
Speaker 1: and what the New York Attorney General is looking at.
Speaker 1: But here are the concerns right, SVB Financial parent group
Speaker 1: of Silicon Valley Bank down sixty percent, Silvergate capital down
Speaker 1: forty two. The concern here is that the impact of
Speaker 1: higher rates has hit the froffiest corners of the market.
Speaker 1: Where are the froffiest corners of the market, Caroline, crypto
Speaker 1: and technology. The story with SVB in particular is that
Speaker 1: who are their clients clients, technology companies, startups who are
Speaker 1: facing cash burn. They don't need cash in the bank,
Speaker 1: they needed at hands. They're making basically withdrawals deposit outflows,
Speaker 1: and Silicon Valley Bank is having to react in order
Speaker 1: to plug the gap. Just to make the point even further,
Speaker 1: let's look at this terminal chart really quick and just
Speaker 1: look at the drama. Biggest drop on record for this
Speaker 1: stock and is lowest level since September twenty sixteen. Let's
Speaker 1: get more details. Bloomberg Shnali Bassak joining us out of
Speaker 1: New York. A lot of stories to cover, But how
Speaker 1: core is that Silicon Valley Bank client based tech to
Speaker 1: this story? It is a big part of this story.
Speaker 1: But you can also talk about balance sheet management here
Speaker 1: being an issue when it comes to Silicon Valley Bank.
Speaker 1: When you look at the Wall Street view on what
Speaker 1: has happened here, part of the issues were exacerbated not
Speaker 1: just because of their client base, but because they had
Speaker 1: to sell securities at a loss. That is something we're
Speaker 1: not seeing just unique to Silicon Valley Bank. But I
Speaker 1: will put some contacts here because the point you're making
Speaker 1: here this not so long ago, a year ago, This
Speaker 1: Bank was the envy of the industry of many many banks,
Speaker 1: from Goldman Sachs to JP Morgan. They loved what Silicon
Speaker 1: Valley Bank was doing, to the point the you have
Speaker 1: to wonder, now, is Silicon Valley Bank going to eventually
Speaker 1: become an acquisition target or is there too much weakness
Speaker 1: here to make it so? What happens next, I think
Speaker 1: is the major question that's looming in the market. First
Speaker 1: of all, val and I think some of the threads
Speaker 1: that we're going to weave, and I know way want
Speaker 1: to imply that subs stop drop immediately means that we're
Speaker 1: going to see what happened with silver Gate. But ultimately
Speaker 1: two companies, two banks, are currently facing the headwinds of
Speaker 1: high interest rates, and both got very focused on certain
Speaker 1: parts of the market. Yeah, and that is certainly what
Speaker 1: is in common here. And by the way, there are
Speaker 1: other banks that also have similar worry around them. Think
Speaker 1: Signature Bank, where the deposit base was not so loaded
Speaker 1: to crypto about fifteen percent according to Anile ass estimates
Speaker 1: its deposits. We're kind of tied to the crypto industry
Speaker 1: more broadly, but Signature ninety percent through September. We're really
Speaker 1: tied of its deposits to the crypto industry. To the
Speaker 1: point you're making the issues in crypto are not the
Speaker 1: same as all the issues in technology. But what you're
Speaker 1: seeing here is this exposure to the industry more broadly
Speaker 1: becoming a worry for firms like this. I will say
Speaker 1: one other thing. Remember concurrently they also announced the capital raise. Yes,
Speaker 1: this is a market in which the reasons in which
Speaker 1: you're raising capital are very, very very sensitive. And that
Speaker 1: is another thing that is a concept of dilution and
Speaker 1: why you're raising money is a big warning sign for
Speaker 1: anybody raising money. Ahead suddenly saw that being really shown
Speaker 1: out through the KBW Bank indext performance. Today, we really
Speaker 1: want to function nati bast at the moment for all
Speaker 1: things weaving together what is happening with the likes of SVG,
Speaker 1: but also what happened with Silvigate, and we want to
Speaker 1: dig into Silvigate and crypto a little bit more now
Speaker 1: with ABA Lab's president John Woo, John, we turn to
Speaker 1: you for your expertise because you have announcements to make.
Speaker 1: You are still building in a space, but ultimately you
Speaker 1: are currently a man who is trying to digitize the
Speaker 1: entire and ultimately trying to digitize world's assets for traditional finance,
Speaker 1: for asset managers. How hard is that when we see
Speaker 1: Silvigate having to unwind, or clearly it's going to be
Speaker 1: a lot harder when all the intermediaries and seemingly all
Speaker 1: the intermedioris and the on ramps for institutions and individuals
Speaker 1: into the crypto ecosystem are one by one getting removed
Speaker 1: either through regulation through bad actors or risk management bad
Speaker 1: fundamentals like in silver Gate case. So it's not easy.
Speaker 1: It makes it harder, but you continue to build and
Speaker 1: continue to get partnerships. John, you're operating in an ecosystem,
Speaker 1: in an industry that still wants to build, have access
Speaker 1: to capital, needs banking services. Just very quickly give us
Speaker 1: some insight into the conversations you're having with industry peers
Speaker 1: about silver Gate, about what this industry is going through
Speaker 1: right now. So when things get better, the issue is
Speaker 1: if there are no on ramps, no intermediaries to help
Speaker 1: new institutions come into the space, that'll delay the growth
Speaker 1: of the space. The other problem is even healthy balance
Speaker 1: sheets in this space, they need little things. Banking services
Speaker 1: like crypto is a fintech business and legitimate businesses need
Speaker 1: banking services to pay people to do things that every
Speaker 1: other company does. If we remove the banks that help
Speaker 1: these companies do that, you're removing companies desire to be
Speaker 1: on short and unfortunately, US companies will move offshore for
Speaker 1: banking services and other things that they need to just operate. Caroline,
Speaker 1: I just want to go back to the point you
Speaker 1: and I are making a top of the show, right,
Speaker 1: which is if you put silver Gate side by side
Speaker 1: with SVB, what's they have in common. It's a discussion
Speaker 1: around what the impact of higher rates has been on FROTH,
Speaker 1: whereas the froth it's in crypto and it's in technology
Speaker 1: more broadly, we're just seeing a delayed reaction, it seems,
Speaker 1: and I've seen this, yeah, in my career, my first
Speaker 1: part of my career, as in the financial markets. Every
Speaker 1: time the fed raisers rates, things break, and the first
Speaker 1: things that break are usually the bad actors and the frauds,
Speaker 1: and then at the tail end of that bad risk management,
Speaker 1: bare fundamental and driven company's break. So if there's a
Speaker 1: silver lining here is now we're at layer two, yeah,
Speaker 1: and then when things stabilize, hopefully we go back to
Speaker 1: a stable environment. John R. Regulates turning to you for
Speaker 1: advice they should. I was down in DC and talking
Speaker 1: to senators and talking to other agencies. Are our general
Speaker 1: counsels constantly down there talking. I think we need to
Speaker 1: open up a healthy dialogue. It can't be just one way.
Speaker 1: And if that happens, you'll bring a lot of the
Speaker 1: capital markets back and a lot of the innovation bank. Otherwise,
Speaker 1: like I've been saying, things are going to continue to
Speaker 1: move off short because a certainty in rules and regulations
Speaker 1: is happening in Europe, is happening actually even in Asia.
Speaker 1: What's so fascinating is, of course, at the same time
Speaker 1: as we worry about silver Gates implications, we think about
Speaker 1: what's happening with Silicon Valley Bank at the moment. It's
Speaker 1: exposure to technology to startups. John just want to bring
Speaker 1: our audience and breaking news that interestingly, the Founders Fund,
Speaker 1: which a key VC player, is advising that its own
Speaker 1: companies should withdraw funds from Silicon Valley Bank. Now we
Speaker 1: know the CEO of Silicon Valley Bank has been out
Speaker 1: there trying to reassure clients as to what the stock
Speaker 1: drop means, what the conservation of its capital. At the
Speaker 1: moment is trying to signify, but ultimately we are going
Speaker 1: to see some concerns being built. I founders found R
Speaker 1: indeed advising their own portfolio companies to withdraw funds from SEB.
Speaker 1: Can I ask you, as a founder, John, do you
Speaker 1: have money in traditional finance? Do you have money with
Speaker 1: Silicon Valley Bank? Well, Silicon Valley Bank is one of
Speaker 1: the banks that we use, as well as some of
Speaker 1: the other ones that were mentioned, So I think the
Speaker 1: right thing, the prudent thing we've learned is counterparty risk.
Speaker 1: Once these things start, this is a classic bank run,
Speaker 1: and when the blank run starts, you don't want to
Speaker 1: be the last guy there and wondering what happened. Unfortunately,
Speaker 1: this is the way banks work. They rely on trust.
Speaker 1: When they lose that trust, their things really will happen.
Speaker 1: John S. I know we have so much to discuss
Speaker 1: about AB and what's happening with Avalanche, but but we
Speaker 1: have to stick with this story because it's happening in
Speaker 1: before our eyes. What do you do in this situation?
Speaker 1: Do you follow the advice of names in the valley
Speaker 1: like Founders fund and pull the money? Do you stick
Speaker 1: with it. I mean, I have to just point out
Speaker 1: there were a number of names that Bloomberg cited in
Speaker 1: its reporting that said, what we're seeing in Silicon Valley
Speaker 1: Bank is not the same as silver Gate, and actually,
Speaker 1: long term they have a completely solid future. What would
Speaker 1: you do in this circumstance, Well, hopefully there's enough. What
Speaker 1: I would do is you have to diversify out and
Speaker 1: maybe not pull everything, We'll pull some. We experiened this
Speaker 1: back in the Great Financial Crisis, where you have to
Speaker 1: diversify your prime brokers. Luckily, we have already diversified, so
Speaker 1: we're less exposed and we were literally just a few
Speaker 1: weeks or months ago. Okay, And I think ultimately we're
Speaker 1: going to continue to dig to ask questions. Has it
Speaker 1: been easy to gain that sort of information from Silicon
Speaker 1: Valley Bank at the moment? Or relying on analyst reports
Speaker 1: that we get, and indeed some of the reporting coming
Speaker 1: from our own journalists. You're relying on your own interactions.
Speaker 1: The operator always has a better view, you know, the
Speaker 1: cadence of responses and how things are working, the size
Speaker 1: of transactions. All of those little subtle hints is what
Speaker 1: we're relying on. As an operator by the time you
Speaker 1: read it in the news or something. Unfortunately, it's probably
Speaker 1: a little bit late. I just want to ask a
Speaker 1: little bit. Of course, you are there trying to ensure
Speaker 1: that your banking is secure, that where your money is putly,
Speaker 1: your business is on solid footing, and I'm sure you
Speaker 1: have done it. As you said, you've already diversified. You're
Speaker 1: also diversifying your business. And just very briefly, John, we
Speaker 1: bought you on the show because you've done this new deal.
Speaker 1: You're bringing Web three to gaming in particular. How hard
Speaker 1: is that to sign these new sort of documents, get
Speaker 1: on board the likes of TSM and blitz up when
Speaker 1: people are questioning the overall Web three trajectory. Great question,
Speaker 1: and that's the fun part. By the way, no doubt
Speaker 1: it's harder, especially with US companies, but the cadence and
Speaker 1: foreign companies is actually happening in this TSM case. Just
Speaker 1: so people know, this is one of the largest gaming franchises,
Speaker 1: the TSMS equivalent of a esports team. It's like the
Speaker 1: Yankees for esports, and they're going to provide their gamers
Speaker 1: with some of the requests the gamers want, which is
Speaker 1: to get more liquidity for their in game items through
Speaker 1: Avalanche based wallet. Right now, the world works as gamers
Speaker 1: have closed, loose systems where they buy in game assets
Speaker 1: on one place that they can't sell and move to
Speaker 1: another very quickly, or they have to pay large fees
Speaker 1: to convert back to US dollars. So they're going to
Speaker 1: create a wallet on Avalanche where all these different games
Speaker 1: will have interoperability and make their lives better. John will
Speaker 1: continue the conversation on the partnership with blitz TSM going forward.
Speaker 1: There's something happening here right now in Global Silicon Valley,
Speaker 1: and we're grateful for your insight on it, the lads,
Speaker 1: President John will thank you very much. How chat gptwo effect.
Speaker 1: We have this thing called Erica, which is a virtual
Speaker 1: artificial intelligence, virtual assistant natural language processing predictive technology that
Speaker 1: we've been running four or five years and eighty million
Speaker 1: customers use it one hundred forty five hundred fifty million
Speaker 1: times a quarter, so we're used to it, but this
Speaker 1: is now a new one that could change the game
Speaker 1: of America. CEO there Brian moynihan, And well, let's stick
Speaker 1: with CEOs who love all things AI. Because messaging platform
Speaker 1: Discords just announced its expansion of its own AI offerings,
Speaker 1: including guess what open aiyes technology they're incorporating into functions
Speaker 1: like it's chatbot, it's moderation systems, let spring blooms. Cecilia
Speaker 1: at Dnastasio, who has the story at an event, just
Speaker 1: tell us about where they think this will be additive. Sure. So,
Speaker 1: Discord is a chat apps that one hundred and fifty
Speaker 1: million people use every single month to discuss everything from
Speaker 1: video games to anime to classical music. And now Discord
Speaker 1: is integrating open aiyes Chat GPT technology, which creates kind
Speaker 1: of human like conversations using AI, into one of its bots.
Speaker 1: The bat's name is Clyde, and Clyde has existed for
Speaker 1: a long time. It's kind of Discord's mascot. But now
Speaker 1: Clyde will be able to tell users things like the
Speaker 1: weather or time in another country, or even suggest a
Speaker 1: playlist for a Discord server using AI chat technology. All right, Bloomberg,
Speaker 1: Cecilia Dnastasio, thank you so much for your reporting. Caroline.
Speaker 1: I've got to bring you some more breaking news headlines
Speaker 1: crossing the Bloomberg terminal. Our sources now telling us that
Speaker 1: why Combinator is advising its companies in its portfolios to
Speaker 1: limit their exposure to SVB Financial y Combinator. The latest name,
Speaker 1: according to sources follows founders Fun just in the last
Speaker 1: twenty minutes, those after our declines on Silicon Valley Bank
Speaker 1: or SVB Financial Group now really accelerating down six percent
Speaker 1: or so. We'll continue to track the names that are
Speaker 1: adding to this story blow by blow. We're going to
Speaker 1: get back to generative AI though. And let's keep talking
Speaker 1: about this with Dion Nicholas, who's the CEO and co
Speaker 1: founder of four four to generative AI company for customer
Speaker 1: support Automation which guess what carry They also recently announced
Speaker 1: integration of open AI technology with the launch of their
Speaker 1: own polls GPPT platform. I saw you smiling. Absolutely, I'm
Speaker 1: super excited to be here. Let me ask you this,
Speaker 1: why why open AI? Why not your own tech? Yeah? Absolutely? Well,
Speaker 1: to clarify, four thoughts been around for four or five
Speaker 1: years now, applying AI to help customers and help businesses
Speaker 1: serve their customers better, and so with support GPT, we're
Speaker 1: launching today the world's first generative AI platform for customer
Speaker 1: support automation. The real big thing and the real answer
Speaker 1: to why why now is that in November, Chat GPT
Speaker 1: changed the name of the game. For the customer experience
Speaker 1: and for consumer expectations, we've been building for four or
Speaker 1: five years, and we've been very focused on correctness, very
Speaker 1: focused on building a generation of AI that actually can
Speaker 1: help customers solve their problems. And what we're seeing now
Speaker 1: is that it's become mainstream for consumers and that experience,
Speaker 1: that expectation has risen with Chat GPT, and so we've
Speaker 1: combined that and we're building out. We're launching support GPT
Speaker 1: for customer support. So this is not a marketing exercise
Speaker 1: or a PR stunt. No, absolutely not, And that's one
Speaker 1: of the things that we wanted to be sure about. Sure,
Speaker 1: it's about solving problems for our customers. We actually already
Speaker 1: have customers of betaing and using our support GPT platform.
Speaker 1: Folks like upwork, the world's largest talent marketplace, are already
Speaker 1: leveraging this technology in production. Carol, We as we do
Speaker 1: every day, we asked our audience what they think about
Speaker 1: just endless announcements of partnerships between tech companies and open AI.
Speaker 1: You know the results as well as I do, Caroline,
Speaker 1: respondents think this is a pr stunt broadly what we're
Speaker 1: seeing right now in the industry. Yeah. And meanwhile, don
Speaker 1: you say, look, this isn't this is about servicing your clients.
Speaker 1: I'm just really interested in help me understand here. You're
Speaker 1: already a leading generative AI company. You're already building your
Speaker 1: own large language model. What was it that open ai has. Ultimately,
Speaker 1: you couldn't build a house. So most customers when they
Speaker 1: interact with customer support, they don't necessarily want a chit chat.
Speaker 1: They want their problems solved first and foremost. And that
Speaker 1: was the premise that we launched forethought on all of
Speaker 1: those years ago, was to use AI to help people
Speaker 1: to solve their problems. One of the things that people
Speaker 1: have seen with chat chypt, hundreds of millions of people
Speaker 1: have used it, from writers to bakers, to friends, family, everything.
Speaker 1: They have now seen what it's like to interact with
Speaker 1: a chatbot that's empathetic, that's human like. That really raises
Speaker 1: the game and raises the name for customer experience. And
Speaker 1: that was one of the things that we saw and
Speaker 1: our customers saw. We actually I started getting texts from
Speaker 1: heads of customer support saying, hey, our customers want this
Speaker 1: kind of experience, and we're betting on forethought, and that
Speaker 1: was actually the spark that actually helped us to realize, hey,
Speaker 1: there is actually something new here. There is not It
Speaker 1: is not just a publicity son, It is not just
Speaker 1: you know, the next fad. It is technology. And we
Speaker 1: ad forethought, have been all in on AI since day one,
Speaker 1: and so we are staying we've always been on the forefront.
Speaker 1: The expectations from customers have risen and we're rising, and
Speaker 1: we're launching support GPT to go and meet those expectations
Speaker 1: and bring customers that next level of customer support. Oh
Speaker 1: is your competition, ben Dion, because we're seeing other key
Speaker 1: companies that are very close to supporting sales people, supporting
Speaker 1: other areas of client facing individuals, and they're also using
Speaker 1: open Ai. Yeah, the big competitor for us, quite frankly,
Speaker 1: is the legacy chaplot. There have been hundreds, if not thousands,
Speaker 1: of legacy chaplots that have cropped up over the last
Speaker 1: decade or so of innovation. And one of the things
Speaker 1: that you notice about chapblots is that one we've all
Speaker 1: experienced them, and we've all found that they are super
Speaker 1: clunky right, their manual, their decision tree base, and they're
Speaker 1: more artificial than they are intelligent. And so we've set
Speaker 1: out to actually really transform the way customer s has done.
Speaker 1: And it's really that host of chap our companies that
Speaker 1: we're trying to out innovate and that we've been out
Speaker 1: innovating over the past few years. Yeah, we've got to
Speaker 1: go to some more of this breaking news right around
Speaker 1: Silicon Valley Bank. Can I just for our audience ask
Speaker 1: are you a customer or client of Silicon Valley Bank? Yeah,
Speaker 1: it's interesting. Silicon Valley Bank is one of the banks
Speaker 1: we actually use here at for though we obviously work
Speaker 1: with a few banks. So it's interesting hearing the news
Speaker 1: go out live these days, so really interesting. Thanks. We
Speaker 1: don't want to put you on the spot, but I
Speaker 1: think you appreciate why we have to ask those questions,
Speaker 1: right Caroline, that this is happening before our eyes. Yeah,
Speaker 1: and ultimately I have to ask you more on the spot. Therefore, Dion,
Speaker 1: are you going to be thinking about your relationship with SPB.
Speaker 1: We're seeing that the shares are extending their postmarket to
Speaker 1: climb down why more than ten percent at the moment
Speaker 1: and a lot of venture capitalists and I know you're
Speaker 1: back by VC asking their portfolio companies to cut their ties. Well,
Speaker 1: it's a really dynamic situation. We're definitely evolving and adapting
Speaker 1: as we go. But what I can say is, you know, again,
Speaker 1: we work with multiple banks here at Forethought, and our
Speaker 1: goal at the end of the day is to best
Speaker 1: serve our customers, which is again why we're launching this
Speaker 1: support GPT. But again, there's a lot happening in the space,
Speaker 1: and yeah, we're excited and watching what's going on, excited
Speaker 1: for AI, watching what's going on with SVB. We'll let
Speaker 1: you go and get attention to both of those things.
Speaker 1: Dean Nicholas, we thank you, CEO and co founder of
Speaker 1: Forethought and all things AI and indeed Silicon Valley Bank.
Speaker 1: Let's bring you where the market is currently telling. The
Speaker 1: concern is AD and it's in Silicon Valley Banks parent company.
Speaker 1: We're currently off by more than ten percent after hours
Speaker 1: as you break the news that we are seeing yet
Speaker 1: further moves coming from why Combinator advising its companies to
Speaker 1: limit SVB exposure at the moment, and indeed, we'd already
Speaker 1: heard it from the Founders Fund advising its companies to
Speaker 1: withdraw funds. SUV we remind of you as they currently
Speaker 1: bank about forty percent of all US VC backed companies,
Speaker 1: according to its own website from New York. From San Francisco,
Speaker 1: this is Bloomberg. It does business with nearly half of
Speaker 1: all venture backed companies in the United States, said Silicon
Speaker 1: Valley Bank, the parent company, falling further after hours after
Speaker 1: of course, it worn the market earlier today that it's
Speaker 1: hame to shore up its own capital, selling off assets,
Speaker 1: doing a share sale, and ultimately, now seeing this talk
Speaker 1: of confidence, the ultimate depositor is moving away from them.
Speaker 1: VCS are advising their portfolio companies to cut ties. Yeah. Look,
Speaker 1: look this is really accelerating after hours with down seventeen percent.
Speaker 1: Now we haven't even got to the reporting that. According
Speaker 1: to a source, Greg Becker, the CEO of the bank,
Speaker 1: held a call with VCS earlier today basically saying keep calm.
Speaker 1: A lot more to come with this story thus far
Speaker 1: not keeping calm. We currently see course Founders Fund and
Speaker 1: Why Combinator advising their portfolio companies to consider ending their
Speaker 1: relationships with Silicon Valley Bank. So much more on this story,
Speaker 1: there's a Blomberg. I want to know how tough it
Speaker 1: is out there for startups. Look no further than Silicon
Speaker 1: Valley Bank that, as the name might suggest, it's a
Speaker 1: lender to venture backed startups. And well it's just announced
Speaker 1: the trouble that it's in. Its shares have plummeted the
Speaker 1: parent company of it the most since nineteen ninety eight.
Speaker 1: Why is it struggling, Well, because the companies that it banks,
Speaker 1: those startups currently are struggling to get new funding. They
Speaker 1: are burning through cash and therefore they're having to withdraw
Speaker 1: some of their deposits. So q SVB having to sell
Speaker 1: more shares, having to sell off some of its asset portfolio,
Speaker 1: and ultimately trying to shore up in some own capital position.
Speaker 1: This just comes one day after the crypto focused lender
Speaker 1: silver Gate announced that it was winding down, that it
Speaker 1: was liquidating after its own customers had to withdraw deposits
Speaker 1: because crypto prices tumbled. Look what is to blame here?
Speaker 1: Interest rates? They're rising as the Federal Reserve raises interest
Speaker 1: rates to tackle inflation. Suddenly, boring old safe US government
Speaker 1: bonds are pretty appetizing. They actually give you some yield,
Speaker 1: So why take a riskier bet on a crypto company
Speaker 1: or a startup that may or may not pay off.
Speaker 1: This ultimately is the end of free money. It means
Speaker 1: that valuations are sinking and it's hurting certain lenders in
Speaker 1: companies that bet everything on these tech and crypto sectors.
Speaker 1: Let's get more into this unraveling story. As the shares
Speaker 1: continue to drop after hours for Silicon Valley Bank, We've
Speaker 1: got putting bogs, Max Rays, who's been across this story
Speaker 1: and just talk to us. Ultimately, now it seems to
Speaker 1: be the venchure capitalists who we're getting the cools from
Speaker 1: the CEO all of the slicon Valley Bank to calm
Speaker 1: and stay calm. And now I'm not saying Colm in
Speaker 1: tending their portfolio companies to cut ties. Yeah, I think
Speaker 1: that's a great way of putting it. I think again,
Speaker 1: the thing to keep in mind is what the interest
Speaker 1: rate environment is doing to these banks that I've decided
Speaker 1: to really push into particular sectors. Silicon Valley Bank and
Speaker 1: Silvergate have a lot of differences. Obviously, Silicon Valley Bank
Speaker 1: has been building out the specific franchise for decades, while
Speaker 1: Silver Gates pushing to crypto. It's relatively more recent, but
Speaker 1: the similarity is that they took a bet on a
Speaker 1: very very specific sector of the US economy, and as
Speaker 1: interest rates continue to climb, as you know, they're the
Speaker 1: areas that they focused on their backyards as it were
Speaker 1: sort of dried up, they've been forced to reckon with that. Obviously,
Speaker 1: that led to Silvergate to make some decision to wind down.
Speaker 1: We're still seeing how this is playing out for Silicon
Speaker 1: Valley Bank right but clearly client and investors are worried
Speaker 1: max to recap the reporting twenty one billion dollars off
Speaker 1: their securities portfolio. They're selling at a loss. According to
Speaker 1: a source, Greg Becker met with venture capitalists and clients
Speaker 1: to kind of reassure them what's going on. I do
Speaker 1: want to show what Greg Becker had to say today
Speaker 1: about the actions that Silicon Valley Bank has taken. We're
Speaker 1: taking these actions because we expect to continue higher interest rates,
Speaker 1: pressured public and private markets, and the elevated cash burn
Speaker 1: levels from our clients as they invest in their business.
Speaker 1: You reported that actually in the market, many do not
Speaker 1: believe that this situation with Silicon Valley Bank is the
Speaker 1: same as with Silvergate, explain that to us correct, and
Speaker 1: again it goes back to the idea of the franchisees
Speaker 1: being different in terms of their value and in terms
Speaker 1: of what happening. Right, I would say that folks expect
Speaker 1: Silicon Valley Bank to have more kind of more strength
Speaker 1: in its franchise because they've been doing the longer. They
Speaker 1: have more capabilities as a bank, while silver Gate wasn't
Speaker 1: really interested in being a bank by any traditional sense. Right,
Speaker 1: Silvergate's value was that it was a willing to touch
Speaker 1: crypto or at least Fiat currency from cryptoclients, and that
Speaker 1: I was giving them a way to exchange with those
Speaker 1: funds with each other as part of their trading activity,
Speaker 1: which is not really, you know something, the normal course
Speaker 1: of banking. While Silicon Valley Bank, even though it likewise
Speaker 1: took a very narrow approach, does use both sides as
Speaker 1: its boundary. You know, it does lending, it does deposit taking.
Speaker 1: It's not just trying to gain one side of it
Speaker 1: or the other. So that's why folks are kind of
Speaker 1: rooting for them and expecting them to pull through this
Speaker 1: with more confidence than they did silver Gate. Let's therefore,
Speaker 1: talk about next step smax. What do you look for
Speaker 1: to ensure that Silicon Valley Bank can whether this current storm.
Speaker 1: The fundamental question going forward is going to be how
Speaker 1: many more of these clients ought to pull their deposits
Speaker 1: come more withdrawals we see, and how that affects the
Speaker 1: bank capitalization. What ended up killing Silvergate, right, but the
Speaker 1: fact that even though it could honor the withdrawals that
Speaker 1: we're seeing, it was no longer as capitalized as well
Speaker 1: as it had been due to that, right, and there
Speaker 1: are various ratio of capital ratios and the one we
Speaker 1: need to satisfy as a regulated financial institution. So that
Speaker 1: was one of the key sort of issues affecting silver Gate.
Speaker 1: Going into it again, investors, people who watch the market
Speaker 1: see key differences between Silvergate and Silicon Valley Bank, But
Speaker 1: that is what people will be looking for. How will
Speaker 1: the franchise fair as its continued max rays tterriffic reporting.
Speaker 1: I think it's probably just the start of this story.
Speaker 1: We'll track it in the days to come. Now let's
Speaker 1: get to the world of crypto kind of more broadly.
Speaker 1: Today the FED announced plans to form a crypto oversight team.
Speaker 1: This has FED Vice chair for supervision. Michael Barr discuss
Speaker 1: the impact of stable coins on the financial system, listening
Speaker 1: consider their consequences if a stable coin not subject to
Speaker 1: appropriate supervision and regulation were to be adopted as a
Speaker 1: widespread means of payment, which some stable coin developers state
Speaker 1: as a goal. Stable coins have the potential to scale
Speaker 1: quickly because of network effects. An unregulated, unsupervised deposit like
Speaker 1: acid could create tremendous disruptions, not just for financial institutions,
Speaker 1: but for people who might rely on the coin if
Speaker 1: it were to get wide adoption. Let's talk about the
Speaker 1: network effects as stable coins with Morgan Bella. She's the
Speaker 1: co founder of Facebook's DM stable coin program, but also
Speaker 1: partner at NFX, a VC focused on network effects. One
Speaker 1: point one billion dollars of deployed capital assets under management.
Speaker 1: You heard there what the fed vice share had to say.
Speaker 1: Are you convinced by it? Thank you so much for
Speaker 1: having me And yes. At NFX, which stands for Network
Speaker 1: effects on the board, we are believers in network effects.
Speaker 1: There's a creator of DM unbeliever in stable coins. So
Speaker 1: hearing Michael Barr acknowledge stable coins in that way, I'm
Speaker 1: trying to stay net optimistic, but I am admittedly a
Speaker 1: bit nervous that oversight could maybe go too far. I
Speaker 1: don't necessarily see network effects and these assets taking off
Speaker 1: quickly as a bad thing, which definitely feels like he's
Speaker 1: coming at it with a negative tone. And of course
Speaker 1: that was the ultimate demise of DM when it had
Speaker 1: to sell itself, I have to say, ended up selling
Speaker 1: itself to the likes of Silvigate Bank in and of itself,
Speaker 1: some of the assets because they had to be and
Speaker 1: went on into unwine because ultimately the didn't feel the
Speaker 1: regulatory environment was ready for that. What are you hoping
Speaker 1: to hear from regulators that they do indeed recognize ultimately
Speaker 1: the importance of stable coins because you've written an essay
Speaker 1: on this. I did write an essay on this. Thank
Speaker 1: you for reading it or commenting on it. I'm hoping
Speaker 1: to hear that the US government recognizes that stable coins
Speaker 1: are a huge asset. So dollarization is an effort that
Speaker 1: the US government has been trying to push for over
Speaker 1: two hundred years, and not necessarily in scalable ways, like
Speaker 1: the US government to this day backs up physical trucks
Speaker 1: of cash into villages around the world. If you believe
Speaker 1: that the future of money is more digital than it
Speaker 1: is physical. Stable coins are a real tool to further
Speaker 1: push dollarization, which as an American is pretty awesome. And
Speaker 1: not all stable coins are created equally. I've said there's
Speaker 1: fifty shades of stable coins, but there are what we
Speaker 1: coined as safe stable coins, which we define as assets
Speaker 1: with digital representations of actual dollars. So let's say a
Speaker 1: safe digital US dollar has a physical US dollar in
Speaker 1: a bank account somewhere, and the US government should see
Speaker 1: that as a great tool. So I'm hoping that the
Speaker 1: US government realizes that stable coins are really not an
Speaker 1: issue or a matter of crypto first, It's really an
Speaker 1: issue and matter of dollarization and US hegemony first. Yeah,
Speaker 1: financial works is second, and crypto is just kind of
Speaker 1: the infrastructure of which is built. But when you have
Speaker 1: of course, bas saying they scale quickly due to network effects,
Speaker 1: and he warned that therefore if they go unchecked, ultimately
Speaker 1: there's a risk they're a tremendous risk. Is the risk
Speaker 1: really ultimately for him? That well, it gets bigger than
Speaker 1: non digital cryptocurrency. I really just want to shake him.
Speaker 1: If he's listening, I'd love to shake you. So we'll
Speaker 1: message him. The risk, yes, thank you. The risk where
Speaker 1: I will admit and see your risk is that there
Speaker 1: are fifty shades of stable coins, as I mentioned, and
Speaker 1: they're not all quote safe in that people are using
Speaker 1: the three letters USD and tacking it onto various assets
Speaker 1: which could be misleading to consumers. And the onus is
Speaker 1: on the consumer to do the homework on their own
Speaker 1: to decide if you know this version of digital USD
Speaker 1: is is this one not etc. But if they are
Speaker 1: regulated for which there are some issuers for which there
Speaker 1: are actual physical dollars, like at least one in a
Speaker 1: bank account for every digital version, Like if that takes
Speaker 1: off quickly, like I don't, that could be a good thing.
Speaker 1: Like again, the US government has been trying to push
Speaker 1: dollar hegimony for two hundred years and not quick and
Speaker 1: scalable ways, and this could really really be a great
Speaker 1: tool for that. Morgan DM the association's assets sold to Silvigate.
Speaker 1: You a co founder of DM, What is your reaction
Speaker 1: to what you're seeing happen with silvi Gate. It's all
Speaker 1: kind of disbelief. So I was not at DM for
Speaker 1: I left right around when that's it was being negotiated
Speaker 1: so I wasn't there for that, but I will say
Speaker 1: that I was. Even though DM did not take off
Speaker 1: or succeed in the ways that we had hoped and dreamed,
Speaker 1: I was excited to see the assets live on with
Speaker 1: the hope that another entity, not Facebook, would potentially help
Speaker 1: bring these ideas to life. So it is a bummer
Speaker 1: to see that not be the case with silver Gate.
Speaker 1: But yes, a great partner at the time, and they like,
Speaker 1: we were happy to find the home. But it's all
Speaker 1: kind of surreal, Morgan. We have to ask as well.
Speaker 1: The other big piece of breaking news is SVB Financial
Speaker 1: Silicon Valley Bank. Are you a deposit client of that bank?
Speaker 1: We're showing a chart on the screen, biggest drop on
Speaker 1: record this Thursday. I have a friend visiting who got
Speaker 1: to the office today and was like, you didn't tell
Speaker 1: me this guy would be falling. And I thought he
Speaker 1: was referencing a reigning in San Francisco, but he was
Speaker 1: referencing Silicon Valley Bank. So definitely still in shock and awe.
Speaker 1: Their NFX is a client of SVB. To be honest,
Speaker 1: they've been a great partner to us, as they've been
Speaker 1: a great partner to everyone else. In Silicon Valley, in
Speaker 1: the broader tech world, and they've really been a pillar
Speaker 1: of industry in a really positive way to date. So
Speaker 1: this is deeply upsetting to see we don't know much.
Speaker 1: We're watching it like everyone else is watching it, and
Speaker 1: as information unfolds, advising both the portfolio and ourselves accordingly,
Speaker 1: but more good enough. Will you have to ultimately advise
Speaker 1: your portfolio clients, even if they are a great partner,
Speaker 1: to set their links to pull their deposits. Then that's
Speaker 1: like the multi billion eller question of the day. If
Speaker 1: we do feel that it is unsafe and puts our
Speaker 1: companies at risk, we will do so. But we will
Speaker 1: tell for that what would be the signal that you
Speaker 1: then think it's unsafe. The biggest question that we're asking
Speaker 1: is how will this impact our portfolio companies from operating
Speaker 1: their businesses in the day to day. And I don't
Speaker 1: think we're worried about everything vanishing, you know, overnight, but
Speaker 1: we are worried about our companies being able to access
Speaker 1: working capital that they need to run their businesses today,
Speaker 1: tomorrow and over the next few months. So it's unclear
Speaker 1: exactly what the objective sign is that we are looking
Speaker 1: for but that's kind of the question we're looking to answer. Morgan,
Speaker 1: thank you so much for coming on for talking all
Speaker 1: things crypto, all things traditional finance, and make so clear
Speaker 1: with us. We appreciate it. ANFX partner, Morgan Bella coming up. Walmart, Well,
Speaker 1: it's narrowing the gap with Amazon for wealthier online shoppers.
Speaker 1: We'll dig into it next. This is Bloomberg. Walmart Plus
Speaker 1: launched in twenty twenty, and it's beginning to creep into
Speaker 1: the crucial demographic dominated by Amazon Prime, wealthy shoppers. New
Speaker 1: data shows that the share of Walmart Plus subscribers with
Speaker 1: an income of above one hundred and fifty thousand dollars
Speaker 1: actually rose thirteen percent in the past year alone. But
Speaker 1: it's a long way to catch up to Amazon Prime
Speaker 1: seventy seven percent control of the demographic. Let's get to
Speaker 1: spend the SOAPA who covers all things e commerce for us,
Speaker 1: and ultimately there is a flywheel effect going on here. Yeah.
Speaker 1: So Walmart Plus launched in twenty twenty and it's starting
Speaker 1: to pick up some steam. And what we are seeing
Speaker 1: is just like Amazon early on back in two thousand
Speaker 1: and five, minutes to launched Prime, the whole prospect there was,
Speaker 1: let's offer a really good selection, really good prices, bringing
Speaker 1: more customers, and it all feeds on itself, and we're
Speaker 1: starting to see some of that with Walmart. But the
Speaker 1: real interesting thing was these more affluence shoppers that they're
Speaker 1: getting more people in that one hundred and fifty thousand
Speaker 1: plus a year annual income area that you normally associate
Speaker 1: with Amazon, and we're starting to see Walmart get more
Speaker 1: of them. All right, Bloomberg Spencer, SOAPA Triffic Rapporting, Thank
Speaker 1: you very much. South Korea is pushing to be a
Speaker 1: major player in space exploration by twenty forty five. With
Speaker 1: treaties that are limiting tech capabilities. South Korea's rocket scientists
Speaker 1: turned to the Internet to find an engine that they
Speaker 1: could mimic. Chief North Asia correspondent Stephen Engel got exclusive
Speaker 1: access to South Korea's rocket launch program. Have a listen.
Speaker 1: South Korea has lofty goals for its fledgling space program
Speaker 1: that needed one giant leap of faith in a search
Speaker 1: engine to get it off the ground. Treaties between established
Speaker 1: space powers like the US, Russia, and France prohibits certain
Speaker 1: tech transfers to aspiring space club nations like South Korea,
Speaker 1: leaving its small team of pioneering rocket scientists discour the
Speaker 1: web for ideas. We looked up on the internet to
Speaker 1: compare and find a suitable launch vehicle. La I was
Speaker 1: a SpaceX Falcon Merlin engine. We developed Nuri looking at
Speaker 1: the picture and using it as a point of reference
Speaker 1: to design. Carol Sin is a fuel tanker. This is
Speaker 1: an actual Nuri three stage launch vehicle, not a replica.
Speaker 1: And Bloomberg News got an exclusive and unprecedented tour of
Speaker 1: the entire Naro Space Center where the first two Nouri
Speaker 1: rockets were launched, including the first successful test mission last year.
Speaker 1: What did you feel when it launched for the first time?
Speaker 1: My Harneyson feeding festive and praying please. The next launched,
Speaker 1: perhaps by as early as this may, will deploy actual
Speaker 1: commercial satellites powered into orbit by those SpaceX inspired but
Speaker 1: locally made engines, and they're nearly three hundred tons of thrust.
Speaker 1: We're trying to build a SpaceX like company. It's a
Speaker 1: model that Mary's elon must cost efficiency with South Korea's
Speaker 1: prowess in advanced chips. At present, the Nuri costs about
Speaker 1: eighty million US dollars per launch, compared to sixty seven
Speaker 1: million for the more powerful, larger payload Falcon nine. That's
Speaker 1: largely why later this year, South Korea's government run Kari
Speaker 1: will transfer its commercial rocket launching to a private company
Speaker 1: rocket engine maker, Hanwa Aerospace. We're seeking to see if
Speaker 1: Karnach can make the Neuri rocket profitable, but it's a
Speaker 1: very hard task. Elam must have made a very type
Speaker 1: market for other companies. This is South Korea's main launch
Speaker 1: center and launch pad for the last two Nuri rockets
Speaker 1: and the next one that will be launched sometime later
Speaker 1: in twenty twenty three. But over here they're going to
Speaker 1: expand it because they have larger ambitions for destinations further afield,
Speaker 1: including the Moon and beyond and liftoff of Artist one.
Speaker 1: Namely participation in the NASA led Artemis program to return
Speaker 1: man and payloads to the mood. National security too will
Speaker 1: be a key driver at a time when North Korea
Speaker 1: is improving its rocket capabilities and the sanctioned Russia means
Speaker 1: one less rocket launch provider available to South Korea. It's
Speaker 1: important to find cheap launch vehicles from a business perspective,
Speaker 1: but I think it is very important for the country
Speaker 1: to have the ability to put satellites or things like
Speaker 1: this into space when we want to to get into
Speaker 1: the once fairly exclusive but now increasingly crowded global space club.
Speaker 1: South Korea may emulate another American accomplishment, the Kennedy Space Center,
Speaker 1: to transform these sleepy islands in the nation's south into
Speaker 1: an aerospace industry epicenter. Stephen Angel Bloomberg News at the
Speaker 1: Narospace Center, go Hoong, South Korea. From South Korea and
Speaker 1: space to the here and now on the ground. When
Speaker 1: it comes to financials, let's look at Silicon Valley Bank
Speaker 1: still tumbling after hours after of course says concern about
Speaker 1: companies starting to pull their deposits. Yet further from this
Speaker 1: particular lender, Hannah Miller is with us and of course
Speaker 1: a key component of lending too VC back to US companies.
Speaker 1: But down now, Wollman twenty percent. What are you hearing
Speaker 1: from some of the venture capital companies. Yeah, so we
Speaker 1: know that there's a lot of concern among venture capitalists.
Speaker 1: We know firms are pulling funds from Silvergate and advising
Speaker 1: their portfolio companies to do the same from SVBS from SVB, Yes,
Speaker 1: that's correct. We know that there is a call this
Speaker 1: morning where sbb CEO advised the clients, which included venture capitalists,
Speaker 1: to remain calm. He said this multiple times. But still
Speaker 1: there's a lot of concern here, and this is a
Speaker 1: developing story that we're keeping closehauts on. Just give us
Speaker 1: a sense of size and scope. Basically, most of Silicon
Speaker 1: Valley uses this as their banking of choice. Yes, this
Speaker 1: is a key component in Silicon Valley. We know venture
Speaker 1: capitalists gravity towards this bank. We have big names connected
Speaker 1: to Silicon Valley Bank and ultimately Hannah, we're hearing, you know,
Speaker 1: the Greg Becker. This CEO is saying, you know, stay calm,
Speaker 1: but when you've got founders fund of course, confounded by
Speaker 1: Peter Teal saying that there's no downside to removing your
Speaker 1: deposits when you've got why Combinator perhaps advising their companies
Speaker 1: to do the same. Feels like this is going to
Speaker 1: be a crescendo effect. Yes, that's what we're keeping tabs on.
Speaker 1: People are nervous. Yes they're being told to stay calm,
Speaker 1: but that seems to be sparking even more anxiety among investors.
Speaker 1: So we have portfolio companies on edge. We have vcs
Speaker 1: on edge. This is a very intend of story, very
Speaker 1: very quickly. What do we not know? What's still to
Speaker 1: find out? We need? We are certain that more people
Speaker 1: are pulling funds from SVP. We don't know what's going
Speaker 1: to happen here. In terms of getting them know right
Speaker 1: side up, we of course put out our feelers and
Speaker 1: we are in constant conversation with Silicon Valley Bank. We'll
Speaker 1: bring you any up to date information from that particular lender.
Speaker 1: But Hannah Miller, we thank you so much. And that
Speaker 1: does it. From this edition of a very breaking news
Speaker 1: heavy bloom Bag Technology. Yeah tomorrow, Twitter spaces twelve Eastern
Speaker 1: nine MS. I know what you and I are going
Speaker 1: to be talking about. This is erupted into a huge
Speaker 1: story around Silicon Valley Bank. This is Bloomberg