Speaker 1: I'm Caroline Hyde at Bloomberg's world headquarters in New York
Speaker 1: and then made Lovelow in San Francisco. This is Bloomberg
Speaker 1: Technology and it was a tough first day of trading
Speaker 1: for the year, especially for Tesla shareholders to stop falling
Speaker 1: by the most after deliveries they miss and Sam bankman
Speaker 1: Fried pleads not guilty as the ft X founder faces
Speaker 1: trial in October. The same day, the top US banking
Speaker 1: watchdogs send a warning about crypto activity and the slowdown
Speaker 1: in ad spending will continue to shake up Silicon Valley
Speaker 1: giants like Google and Meta. That's as Netflix and TikTok
Speaker 1: come into play. We bring you expert analysis. But first
Speaker 1: on this first day of three trading, editor is good
Speaker 1: to be back with you, and we talked about it
Speaker 1: all with Dana Hall, where Piece of Station joins us
Speaker 1: to kick off this new year's show. These new glasses
Speaker 1: as well, whether we love them, but down people don't
Speaker 1: love the numbers that came out of Tesla. What is
Speaker 1: it four hundred, five thousand, two hundred seventy eight vehicles
Speaker 1: in the last three months. Why was that such a
Speaker 1: shock to the four hund and twenty that they promised, Well,
Speaker 1: you know, it's always about expectations. A beat is a beat,
Speaker 1: and a miss and a miss is a miss, and
Speaker 1: this is a clear miss. I mean Elon Musk spent
Speaker 1: the last earnings call talking about Tesla is going to
Speaker 1: have this epic year end, and we saw on social
Speaker 1: media that Franz, the chief designer, was at the delivery
Speaker 1: center helping to hand over the car. So everyone was
Speaker 1: kind of expecting that the numbers would be pretty close
Speaker 1: to consensus, but they missed consensus by a mile, even
Speaker 1: the company's own the consensus. And you can't, you know,
Speaker 1: you just can't be that way when you're this kind
Speaker 1: of a company. In the SNP five, I mean, people
Speaker 1: are expecting things to be better. The other thing is
Speaker 1: that over thirty or four thousand cars were quote unquote
Speaker 1: in transit, and so it's like Tesla is this big
Speaker 1: company now, and yet they still have this logistical problem
Speaker 1: in terms of getting cars into the hands of customers
Speaker 1: at the end of every quarter, third consecutive quarter of
Speaker 1: missing delivery estimate this thing I'm right and saying. And
Speaker 1: then the other kind of thing that jumped out with
Speaker 1: me your story is that they didn't quite make that
Speaker 1: fifty percent average annual growth rate. A lot a lot
Speaker 1: of analysts of cut price tuggets. I mean, what is
Speaker 1: the picture now for Tesla going forward? In well, they
Speaker 1: report earnings later this month, and the big question is
Speaker 1: the hit too margins? So you know, they cut all
Speaker 1: these prices to try to make to try to make
Speaker 1: the delivery target. That didn't work, So now there's gonna
Speaker 1: be a great hit to gross margins. And I think
Speaker 1: the big thing too is guidance, Like why didn't Tesla
Speaker 1: lower their guidance? You have Elon Musk selling shares of
Speaker 1: his stock in the company mid December when he clearly
Speaker 1: had a clear look at what demand was like for
Speaker 1: the quarter. So he unloads his stock. Everyone else is
Speaker 1: holding the bag. And then they missed by several units.
Speaker 1: And so going into earnings, everyone's cutting their targets and
Speaker 1: everyone wants more conservative guidance for the going You're going forward,
Speaker 1: all right, Bloomberg's Dona Hole, Thank you very much. Want
Speaker 1: to continue the conversation is stick with Tesla with all convests.
Speaker 1: Chief futurist Brett Winton. Brett, we'll get into two arcs
Speaker 1: long term call around Tesla shortly, but just first your
Speaker 1: reaction to the fourth quarter of deliveries miss and as
Speaker 1: we were discussing with Dane of the third consecutive miss
Speaker 1: for deliveries for Tesla, I think it's ironic that you
Speaker 1: qualified as a miss when a company delivers year in
Speaker 1: your growth against an auto market that's declining. Eight. I
Speaker 1: think it's very clear from our perspective that electric vehicles
Speaker 1: are going to become the dominant drive trains um for
Speaker 1: um for automotive over the next five years. And we
Speaker 1: think there'll be sixty million evs sold in and Tesla
Speaker 1: will take a plurality of that. Uh, and so they
Speaker 1: have a huge tail wind behind them. Uh. You know,
Speaker 1: equities are priced on the basis of future expectations of
Speaker 1: cash flow, not the quarterly delivery results. And so I
Speaker 1: expected over the you know, long term, this will resolve
Speaker 1: and will be seen as just a blip in the
Speaker 1: company's trajectory. Right, you called it ironic. What I'm saying
Speaker 1: is that, you know, we need a yard stick, a
Speaker 1: benchmark by on which to go by. Right, it's three
Speaker 1: consecutive quarters of miss against consensus. But you also mentioned
Speaker 1: that and your growth Tesla set out once again in
Speaker 1: two hopes of reaching a fift annual average growth target.
Speaker 1: They didn't hit that either. Do you expect them to
Speaker 1: hit it going forward? Yeah, Then whether or not they
Speaker 1: hit their growth target is a function of production, not demand.
Speaker 1: And so right now the market is talking a lot
Speaker 1: about demand. I think it's probably um true that consumers
Speaker 1: are confused by the u S regulation and which evs
Speaker 1: will qualify and what mix and models will and so
Speaker 1: there is probably a demand kind of hiccup as people
Speaker 1: tried to assess and wait out kind of tax guidance
Speaker 1: for for getting money off the vehicle starting in the
Speaker 1: new year. But ultimately it's a question of whether or
Speaker 1: not Tesla can scale production, and they've demonstrated over time
Speaker 1: that they can, and and I think that's the you know,
Speaker 1: we're making a huge transition from one drive train to another.
Speaker 1: Tesla is is at least three or four years ahead
Speaker 1: of the industry and driving that transition. And we believe
Speaker 1: they're going to continue to scale drive down costs of manufacture.
Speaker 1: And and that's not a scenario where you end up
Speaker 1: with a problem on on even margins as as as
Speaker 1: Dana mentioned, who knows what the margins will look like
Speaker 1: this quarter. I think over time, the company has delivered
Speaker 1: an ability to expand gross margins and and operating margins
Speaker 1: as they have this incredible tailwind of demand for electric vehicles,
Speaker 1: which is the way in which we're going to ride
Speaker 1: around to us. Though about the competition, of course, you
Speaker 1: say that what ahead of it? But competition is coming,
Speaker 1: and it's coming firstly bred sure. So Tesla released the
Speaker 1: Model three in sen and it basically took the industry
Speaker 1: four years before there was a range and cost competitive
Speaker 1: vehicle with the Model three. With that Model three, and
Speaker 1: their cars haven't stayed the same. In March, we think
Speaker 1: that Tesla's gonna announce a new vehicle platform and that
Speaker 1: the cost of manufacturer for that vehicle platform will be
Speaker 1: roughly half the cost of the Model three. If you
Speaker 1: look at what happened when they released the Model three,
Speaker 1: they had a massive gross margin expansion and massive unit
Speaker 1: volume expansion over multiple years. I think the same thing
Speaker 1: is going to happen with the new vehicle platform they
Speaker 1: announced in March, and so they're gonna set the standard
Speaker 1: for the industry again. The industry will again be four
Speaker 1: or five years behind UH and for shareholder it's it's
Speaker 1: a great outcome. Uh. You you end up with a
Speaker 1: company establishing a strategic footprint in in a massive, literally
Speaker 1: trillion dollar plus market UH and UH and and likely
Speaker 1: to dominate and soak up all of the profits out
Speaker 1: of that industry, as as the rest of the competitors
Speaker 1: struggle to catch up. Well, I mean, China's a slightly
Speaker 1: different UH market than than the US and Western markets.
Speaker 1: I think that Tesla will remain at the higher end
Speaker 1: the Chinese market and UM and clearly they have a
Speaker 1: beneficial and synergistic relationship with the government in China, and
Speaker 1: that they're providing demand for the Chinese battery ecosystem and
Speaker 1: and releasing a product into the market that the Chinese
Speaker 1: domestics really enjoy and love. UH and that market is
Speaker 1: likely to be more competitive just because costom manufacturers so
Speaker 1: much lower. There right, brett Arc has a sort of
Speaker 1: long term call on the stock hundred dollars per share,
Speaker 1: which you expect to materialize in six I asked Twitter
Speaker 1: users and our followers, our audience on the show kind
Speaker 1: of what they wanted to ask you. Many wanted to
Speaker 1: ask about that call if it's still is intact. But
Speaker 1: they also wanted to ask how much of it is
Speaker 1: reflective of the promise of full self driving away from
Speaker 1: just the simple business of selling vehicles. Sure, so, just
Speaker 1: just a note that forty dollars to show that was
Speaker 1: pre stock split, so you have to make in a
Speaker 1: split for the stock split, for the for the for
Speaker 1: the UH. You know, current adjusted UH share price expectation,
Speaker 1: though our expectation hasn't um changed UH and in fact,
Speaker 1: we're going through the process of of updating our numbers
Speaker 1: right now, so keep an eye out for that as
Speaker 1: well as our overall EV forecast and and in our
Speaker 1: Big Ideas report that will release later this month. UM
Speaker 1: the roughly a third of the value of the business
Speaker 1: is the EV manufacturing the business in our view, and
Speaker 1: two thirds of the value of the business is expectations
Speaker 1: for GROBOTAXI. And that's a really important consideration here. People
Speaker 1: act like, oh, this unit number in matters tremendously in
Speaker 1: in the the scheme and scope of of the business model.
Speaker 1: If they can deliver full self driving, that will transform
Speaker 1: the company. You go from getting one time profitability from
Speaker 1: each asset sold to ongoing cash flow generation from every
Speaker 1: asset in field per annum. On a go forward basis,
Speaker 1: as these um individually owned vehicles that are used you know,
Speaker 1: five percent of the time and spend their time part
Speaker 1: turn into robotaxis that can take you know, five or
Speaker 1: ten people around in a day uh and and deliver
Speaker 1: ongoing returns to shareholders. So it will be a business
Speaker 1: value transformation if and as they deliver it, and the
Speaker 1: evidence on the ground is they'll be able to. I mean,
Speaker 1: I use it every day. It makes driving safer less stressful.
Speaker 1: Uh and and I'm less tired after driving. It's a
Speaker 1: great product. And by the way, it improved yesterday while
Speaker 1: it was sitting in my driveway. The car I owned
Speaker 1: today is better than the car I owned yesterday. There's
Speaker 1: almost no other vehicle in the world you can say
Speaker 1: that about. And so I think that the promise of
Speaker 1: that transformation to the business models is really extreme and
Speaker 1: you don't need to assume it's going to happen in
Speaker 1: order to underwrite a really material return for the company. Right. Well,
Speaker 1: certainly the bill case, we thanks for you for having
Speaker 1: new on and do come back with the updated numbers.
Speaker 1: It's the pragmatic case. I mean, like, let's be honest,
Speaker 1: this is a world class um product that people love
Speaker 1: and that makes them safer and gets them to and
Speaker 1: from places faster and easier. Uh, and I don't expect
Speaker 1: it that that hasn't changed, and so we expected to
Speaker 1: continue of arc. We thank you, hands up, have a
Speaker 1: great start to twenty three. Thanks for coming on. All
Speaker 1: things tess are all things pragmatic, or some would say,
Speaker 1: in all case, what to expect from tech stocks? Of course,
Speaker 1: more broadly, next to you bull more generally, we're gonna
Speaker 1: be asking, ever core I s I Senior Imagine Director
Speaker 1: and head of Internet Research, Mark Mahaney, that's next is
Speaker 1: a bloomberg. These take investors really haven't had to focus
Speaker 1: on business fundamentals for a long period of time. They've
Speaker 1: been writing this lower inflation rate cycle and riding the
Speaker 1: right you know, the rising in stock prices that come
Speaker 1: as a result of that. So tech investors are now
Speaker 1: actually having to do the work that we have been doing,
Speaker 1: you know, as active stock pickers our entire career. So
Speaker 1: that's why we think there's a lot of opportunity there,
Speaker 1: But you really need to be stockpickers. Franklin Mutual Advisors
Speaker 1: portfolio manager Katrina Dudley. There was some tough love tech investors.
Speaker 1: As we entered this new year, let's continue the conversation
Speaker 1: with a man who does a lot of fundamental analysis,
Speaker 1: Mark Mahaney of ever Core. And it's great to start
Speaker 1: the year with you, Mark and talk to us about
Speaker 1: what was cautious and muted two now turns to constructive
Speaker 1: after a brutal last year. Mark, some of your best
Speaker 1: ideas and one of them is Uber. It's interesting we
Speaker 1: just finished a conversation had on the heels of Tessa robotaxis.
Speaker 1: What fundamentally looks nice to you with Uber? Mark? Well, Caroline,
Speaker 1: thanks and happy new year to you. It's nice to
Speaker 1: see you again. The this last year wasn't terrible year.
Speaker 1: There was the worst performing year for stocks, especially for
Speaker 1: growth equities since two thousand and eight. So yeah, that
Speaker 1: was that was very challenging. I'm going into this year
Speaker 1: we try to be tactically constructive, which means we're looking
Speaker 1: for companies that are somewhat recession resistant and I don't
Speaker 1: cover a defensive space, so somewhat recession resistant, maybe have
Speaker 1: new revenue streams and then have taken cost actions because
Speaker 1: you need to do that at demand is going to
Speaker 1: soften and that leads us to like to two stocks
Speaker 1: in particular. You mentioned one Uber, the others Netflix Uber.
Speaker 1: I just think that the ride sharing part of the
Speaker 1: business is more for utility than a discretionary spend environment.
Speaker 1: We still need to commute, We still have our weekend outings,
Speaker 1: and we still have some airport trips, and leisure demand
Speaker 1: trends seem to be holding up very well. So I
Speaker 1: just think that that part of the business holds up well.
Speaker 1: Company has taken a lot of costs out it was
Speaker 1: forced to, and it was probably to its own benefit. UH.
Speaker 1: And they've now turned a corner on free cash flow,
Speaker 1: and I think they'll be able to continue to grow
Speaker 1: free cash flow. So I think it's that as the
Speaker 1: story changes from a growth at all cost company to
Speaker 1: a im positive free cash flow company. I just think
Speaker 1: that you know, you're going to find a lot of
Speaker 1: valuation support for the name UH and that's why I
Speaker 1: think the stock and outperformed this year. It's interesting just
Speaker 1: there already you're getting to the nuts and the bolts
Speaker 1: of fundamentals and decisions while you're picking certain companies to
Speaker 1: perform over and above others. Do you think it's true
Speaker 1: that a lot of technology investors out there haven't done
Speaker 1: the fundamental analysis or indeed aren't able and set up
Speaker 1: for an environment that is completely out odds with what
Speaker 1: they've been used to, which is basically lower rates for
Speaker 1: longer there's no question and easy money time, you know,
Speaker 1: with with practically zero interest rates allowed multiples for one
Speaker 1: to get in times very aggressive, and it kind of
Speaker 1: there was a fools follow fools, and I was certainly
Speaker 1: one of those fools. From time to time on certain stocks.
Speaker 1: We all make mistakes. I've made fit more than my
Speaker 1: share of them. But in terms of the fundamentals, you know,
Speaker 1: I still stick with those, and I think a lot
Speaker 1: of tech investors do. I don't think. I don't think
Speaker 1: that's hot rising interest rates. So this caused names like
Speaker 1: Amazon or Google or Meta to underperforming stocks. I think
Speaker 1: there are other issues, including now increasingly cyclical risk. In
Speaker 1: case of Meta, there are these Apple privacy changes. In
Speaker 1: the case of Amazon, there's also some MISSE execution on
Speaker 1: the airport, and then also just full exposure to inflationary concerns.
Speaker 1: So there really were a lot of issues besides just
Speaker 1: rising rates. Rising rates really affected those long term profitable,
Speaker 1: near term profit less companies, and that would be more
Speaker 1: names like a Shopify for example, and that's why you
Speaker 1: saw names like that with the highest multiples correct the
Speaker 1: most last year, Mark, Caroline and I spent a lot
Speaker 1: of the last few weeks of the year talking about
Speaker 1: layoffs or hiring freezes, cost cutting. I'm trying to summarize
Speaker 1: all of your your points that you seem to be
Speaker 1: suggesting that all the pain is gone, like it's been done.
Speaker 1: We we we we We've gone through it, We've d risk.
Speaker 1: Is that your conclusion going into this year? No, I
Speaker 1: I wouldn't go that far, wouldn't be that bold. US
Speaker 1: multiples have been de risked. Could multiple still fall, of
Speaker 1: course they could, but they have fallen pretty dramatically. And
Speaker 1: you've got a good number of these large cap internet
Speaker 1: names that I look at that are trading at five
Speaker 1: year trop multiples. Doesn't mean they can't go down further,
Speaker 1: but a lot of the risk has been taken out.
Speaker 1: The same thing with estimates, and one of the things
Speaker 1: that it's caused estimates to come down are these companies
Speaker 1: taking costs out of their business. The six percent riff
Speaker 1: reduction enforce at door Dash, the riff production enforce at
Speaker 1: Meta these companies and Amazon did this to There are
Speaker 1: companies that have yet to do this, though Google is
Speaker 1: one where I just think they had five quarters in
Speaker 1: a row of accelerating in record high employee ads up
Speaker 1: through the September quarter of last year. It's really kind
Speaker 1: of a little bit shocking in hindsight. I'm surprised that
Speaker 1: the company didn't start tempering down it's number of new employees.
Speaker 1: I think they're gonna have to start, you know, reducing
Speaker 1: that employee footprint or else margin is gonna be under
Speaker 1: a lot of pressure. Mark we took to twin at
Speaker 1: to Oscar already it's how they see three. We asked
Speaker 1: are you bullish on tech or you barish on tech? Vs?
Speaker 1: Are the results will bring them up for you mostly
Speaker 1: bullish respondents bullish? What would it take to make you
Speaker 1: bullish on technology broadly going into the rest of the year. Well,
Speaker 1: I'm actually surprised that the survey was that bullish. Frankly,
Speaker 1: I'm I'm surprised by that. So, uh, you know, I
Speaker 1: want to be tactically constructive, and I tell you one
Speaker 1: thing I still want to get across the point here.
Speaker 1: I think demand trends are going to continue to soften
Speaker 1: they did in Q three. I think when the Q
Speaker 1: four results come out over the next month, we're going
Speaker 1: to see the revenue trendsfer online retail, online advertising, cloud
Speaker 1: computing companies. Those are all continued to soften, and I
Speaker 1: think they will continue to in the middle through the
Speaker 1: middle of twenty three. Then I hope and the market hopes,
Speaker 1: that fundamental trends stabilized, revenue growth starts to re accelerate.
Speaker 1: If that happens, you'll start seeing multiples go up. And
Speaker 1: especially with cost taking out, you have revenue growth reacceleration
Speaker 1: on a lower cost base, you get this EPs slingshot opportunity.
Speaker 1: That's what's going to cause these stocks to work well.
Speaker 1: So the market is sort of hoping thinking that that
Speaker 1: will happen in the back cap of twenty three. And
Speaker 1: the question we all need to ask ourselves is is
Speaker 1: the market going to be too early or too late
Speaker 1: on that call? All right? Mark mehadia ever call a
Speaker 1: day one three in the bag, Thank you. It was
Speaker 1: Sam bang Winfried's day in court. The ft X founder
Speaker 1: appeared before a federal judge in Manhattan and pleaded not
Speaker 1: guilty to criminal charges he's now set to face a
Speaker 1: trial in October. Stood outside, this is the one the
Speaker 1: only Asian hallibus joining us from the courthouse, and we'll
Speaker 1: where next Shannani. What a day it's been, Caroline, Because
Speaker 1: in addition to him playing not guilty as we had
Speaker 1: expected to eight criminal counts here, there's a lot else
Speaker 1: that happened. A trial date has been set for October. Second, now,
Speaker 1: if everything goes correctly, and that does indeed happen on
Speaker 1: October seven A second, Sorry, this is expected here to
Speaker 1: take a number of weeks to play out in terms
Speaker 1: of the trial that we made too later this year.
Speaker 1: In the coming weeks, we expect the US to start
Speaker 1: presenting their evidence, to present evidence at greater scale on
Speaker 1: the charges that they have made. And remember, then there
Speaker 1: is a process by which Sam Bangmun freed and his
Speaker 1: lawyers set forward their motions. So there is a process here,
Speaker 1: and again things could change before October, certainly, but we
Speaker 1: did get a lot of information today about the nature
Speaker 1: of what we'll play out ahead and the timelines in
Speaker 1: which we are preliminarily operating on. Now. I will also
Speaker 1: say there was contention in the court. Sam Bangmun freed
Speaker 1: came in wearing a suit north face backpack that was
Speaker 1: his arms crossed as the prosecutors asked to amend the
Speaker 1: terms of his bail package. Now this is very interesting
Speaker 1: because Bloomberg is separately reported Aba Beny Morrison for US
Speaker 1: has broken that US prosecutors are separately investigating this idea
Speaker 1: here of money being transferred out of FT and Alameda wallets. Remember,
Speaker 1: the part of a THEIL amendment now is for them
Speaker 1: to seek the spf SA. Magma Freed himself cannot be
Speaker 1: taking money. It cannot be taking any cryptocurrency assets or
Speaker 1: any other assets from Alameda and f TS wallets. Now
Speaker 1: he himself has tweeted as we know that he has
Speaker 1: not done so, but the prosecutor had said the assistant
Speaker 1: attorney has said that this is something that they've seen
Speaker 1: him lie about before in general, and so again a
Speaker 1: point of contention here. But we will see this play
Speaker 1: out in real time, all right, thanks to bloombergs Snali Bassett.
Speaker 1: October seems a long way away, given that that story
Speaker 1: is dominated headlines for the last two months. Welcome back
Speaker 1: to Bloeveog Technology of Caroline Hide in New York alongside
Speaker 1: at Ludlow in San Francisco and big text we out
Speaker 1: of the world of hedge funds in fact today, Yeah,
Speaker 1: it was really interesting because throughout the day this was
Speaker 1: one of the most read stories on the Bloomberg terminal
Speaker 1: and online. It's about Serga cap okay debut Tuesday. It's
Speaker 1: the first or biggest launched by a woman led hedge
Speaker 1: fund one point eight billion dollars in assets under management.
Speaker 1: And I found this so fascinating because we've been writing
Speaker 1: a lot of Bloomberg about how hedge funds suffered in
Speaker 1: two Those that kind of looks more to private markets
Speaker 1: fed a little bit better. But this is really interesting
Speaker 1: based on what Serga Cap is going to be focused on.
Speaker 1: Malagan caused the founder. She's kind of this alumni of
Speaker 1: Lone Pine Capital and according to sources, this is interesting Caroline.
Speaker 1: She's going to be using data science to invest in
Speaker 1: themes that look at how technology can improve pretty bog
Speaker 1: standard areas. So how technology enhances financials, industrials, healthcare is
Speaker 1: enterprise data. But really the why we care here is
Speaker 1: that this is the largest debut of a woman led
Speaker 1: hedge fund in the industries here streak given all of
Speaker 1: the volatility literally around this industry and the under performance
Speaker 1: of two. It was a headline that caught my eye,
Speaker 1: and certainly this is a name that we want to
Speaker 1: keep an eye on going forward. Historic day, it would
Speaker 1: seem there's some history being made in politics as well.
Speaker 1: If I briefly want to bring you the headline after
Speaker 1: Macarthury suffered a historic rebar remember and a pretty drawn
Speaker 1: out speaker vote, they are going to be a journeying
Speaker 1: now until tomorrow Wednesday noon, after failing to elect a
Speaker 1: Speaker of the House. Of course, that's in the United
Speaker 1: States politics. So for now we see an adjournment after
Speaker 1: three rounds of votes to elect a Speaker of the House.
Speaker 1: But let's get back to our bread and butter. Let's
Speaker 1: get back to technology. Let's get back to in fact
Speaker 1: precede investing as well, and in this environment, many saying
Speaker 1: that's still the area that's going to be humming along
Speaker 1: quite nicely. My al gave as with our CEO of
Speaker 1: tech Stars. It is invested in Get This more than
Speaker 1: three thousand three early stage startups, making it one of
Speaker 1: the world's largest precede investors, having written early checks to
Speaker 1: companies such as Uber and Twilio. It is wonderful to
Speaker 1: have you here in York. And how are you feeling
Speaker 1: as we enter twenty three? How are the companies which
Speaker 1: you help fund feeling. I think three is going to
Speaker 1: be one of the trickiest year on record since the
Speaker 1: dot com the dot com bubble, for both investors and startups,
Speaker 1: and mostly because there are so many things happening at
Speaker 1: the same times. On one hand, you have valuations going down,
Speaker 1: found raising lasting much longer I p O not happening,
Speaker 1: and as a result of that, we expect a lot
Speaker 1: of companies are going to fail. At the same time,
Speaker 1: we're seeing an influx of early stage ideas and a
Speaker 1: lot of entrepreneurs on the back of some of the
Speaker 1: tech layoffs that have met the headlines. And then on
Speaker 1: top of that you have the VC industry which is
Speaker 1: going through a fundamental restructuring and what looks more and
Speaker 1: more like a pretty deep consolidation. So trickier for everyone. Tricky,
Speaker 1: many say, from the ashes rise the roses and and
Speaker 1: d We saw that perhaps in the thousand and seven
Speaker 1: eight after the financial crisis, we saw the birth of Uber.
Speaker 1: We all the birth of Airbnb, and there likes. What
Speaker 1: do you look for at the moment in the people
Speaker 1: that you're wanting to be helping, wanting to be mentoring,
Speaker 1: want to be giving money. How we started to see
Speaker 1: a focus on perhaps the profit side of the equation.
Speaker 1: So we we've been investing in early stage for fifteen
Speaker 1: years and we have continuously looked for the same thing.
Speaker 1: We want resilient, unstoppable founders who are working on really
Speaker 1: innovative ideas and big markets. And the reason why three
Speaker 1: four early stage investors like us is really exciting is
Speaker 1: because we see a lot again talking about the tech
Speaker 1: li off, a lot of tech workers coming and being like,
Speaker 1: I want to be an entrepreneur, and they come with
Speaker 1: very big idea and then when you look whether it's
Speaker 1: by geography or by industry, there's like massive pool of
Speaker 1: innovation happening. And so I don't think there's ever been
Speaker 1: a better time to be an early stage investor. Actually,
Speaker 1: mail one of the conversations Caroline and I were having
Speaker 1: towards the end of two was about the positives that
Speaker 1: come out layoffs. Obviously incredibly tough losing your job, but actually,
Speaker 1: if you look back at prior recessions, the dot com
Speaker 1: bubble t eight, a lot of those laid layoffs. Laid
Speaker 1: off go on to be entrepreneurs in their rights start
Speaker 1: their own companies. Do you agree with that the school
Speaker 1: of thoughts absolutely, and we're seeing it right now. The
Speaker 1: number of entrepreneurs who are peaching us to become their investors,
Speaker 1: who come from the midle of this world, the Google
Speaker 1: of this world, has increased dramatically, and so that's extremely positive.
Speaker 1: And again across multiple industry and multiple geographies, we're seeing that.
Speaker 1: The other positive that is not always talked about is
Speaker 1: for early stage companies UM there was a lot of
Speaker 1: pressure on compensation to hire tech workers, and with the
Speaker 1: layoff that have happened in the pressure on compensation has decreased,
Speaker 1: and it has been a lot easier for a lot
Speaker 1: of our portfolio companies to hire the head of product
Speaker 1: that they had always dreamed about, or the c for
Speaker 1: that they had always dreamed about. I find text I
Speaker 1: was really interesting. You've got about a billion dollars in
Speaker 1: assets under management, right, but you look at precede, that's
Speaker 1: very different size and scale to the industry. As I understanding.
Speaker 1: You know, lots of players in the seed stage or
Speaker 1: precde have tens or maybe a hundred million dollars. It
Speaker 1: makes me think about consolidation and this idea that actually
Speaker 1: small venture capital firms are all trying to buy for
Speaker 1: similar promising names. What do you expect the industry to
Speaker 1: experience this year. So, because we are one of the
Speaker 1: major deal flow to the venture world, we talked to
Speaker 1: thousands of investors every year, and we are seeing now
Speaker 1: something that is not yet reflected in the data. We're
Speaker 1: seeing an increasing number of emerging managers. Managers will have
Speaker 1: less than a hundred million dollars of assets under management,
Speaker 1: will have raised one, maybe two fonts, telling us behind
Speaker 1: closed door, we're not going to raise our next FONT.
Speaker 1: And so we expect that the number of small venture
Speaker 1: capital firm is going to decrease dramatically, potentially up to
Speaker 1: fifty of the venture capital firm that exists today seizing
Speaker 1: practically to function in the next few years. May your
Speaker 1: background also really fascinating And we speak here as a
Speaker 1: lot of Europeans basically around a table talking about US opportunities,
Speaker 1: but go global for us. You're someone who's led businesses
Speaker 1: and in Russia, in Europe, your farm of course France.
Speaker 1: What what a the global opportunities here? Is everything going
Speaker 1: to revert to the mean, the normal of Oh, we're
Speaker 1: going to back tech entrepreneurs out of Selicon Valley and
Speaker 1: they're kinda gonna look like US. I don't think so.
Speaker 1: I think what's what's happening right now is a lot
Speaker 1: of other places creating very vibrant ecosystem. Uh. Look at
Speaker 1: the Middle East and Africa right now, it is booming
Speaker 1: a lot of entrepreneurs, lots of capital flowing their big
Speaker 1: market that are completely untapped. Even Europe, where we're both from,
Speaker 1: like Paris, has done a phenomenal job at at creating
Speaker 1: an extraordinary ecosystem, and so we are textures are very
Speaker 1: bullish on opportunities. Not just in the US obviously the
Speaker 1: US remained the leading market for tech entrepreneurs, but also
Speaker 1: Middle East, Africa and Europe for sure. Male the I
Speaker 1: p A market ground to a halt last year. Will
Speaker 1: it revive this year? I don't think so. It looks
Speaker 1: like it's going to flatlock, continue to flatline. Um. The unknown, obviously,
Speaker 1: is around a few of the big I p O
Speaker 1: which are supposed to be in the pipe, things like
Speaker 1: Insta carts or or Stripe and not made changed. The
Speaker 1: sentiments on the market, but as of today, we advise
Speaker 1: or portfolio companies to look at alternative We tell them
Speaker 1: that if they're desperate for an exit, they probably already
Speaker 1: lost the battle and that they should be focusing on
Speaker 1: alternative option down round of venture debts or M and
Speaker 1: A as an alternative to I P. We we do
Speaker 1: get a little bit hung up on I P O
Speaker 1: s right, this kind of north star that you look
Speaker 1: to to go public but actually precede seed stage. You
Speaker 1: have options, right, strategics can acquire you. You can you know,
Speaker 1: basically shop yourself to a bigger party. What are some
Speaker 1: of those options? I mean, do you see M and
Speaker 1: A broadly taking place in absolutely and again behind closed
Speaker 1: door Because of our large portfolio, we have a lot
Speaker 1: of conversations with a lot of people in the market,
Speaker 1: and what we're seeing is an increasing number of large
Speaker 1: companies looking at M and A. Because the valuations are
Speaker 1: going down, it makes it more attractive for them, and
Speaker 1: because the founders are struggling to found raise from the
Speaker 1: VC world, there are more amenable to have this conversation.
Speaker 1: So I would expect a lot more M and A
Speaker 1: this year and next year. Let's talk industries or problems
Speaker 1: looking to be fixed right now, because you talk about
Speaker 1: M and A, and a lot of the issues about
Speaker 1: M and A is sometimes regulatory in their minded people
Speaker 1: can't make the acquisitions they perhaps would like to. What
Speaker 1: are the problems that people want to fix that they
Speaker 1: would like to fix right now? What are you seeing
Speaker 1: from these entrepreneurs who perhaps getting laid off at some
Speaker 1: of the big companies that can't do the purchasing right now.
Speaker 1: So Number one climate climate tech, and it's a It's
Speaker 1: at a point right now where I'm starting to wonder
Speaker 1: whether there's not going to be a big bubble specifically
Speaker 1: in climate tech. But the market is hard, lots of innovation,
Speaker 1: lots of capital, and look objectively big problems to solve,
Speaker 1: So that's an interesting market. We're also seeing a lot
Speaker 1: of things happening in foot tech and arctech UM in
Speaker 1: particular following the war in Ukraine and the problem was
Speaker 1: supply chain, so I think a lot of people have
Speaker 1: started realizing that actually, um, we needed to be more
Speaker 1: focused on creating food for the world. And then health
Speaker 1: tech is also booming. Lots of things happening in that environment, uh,
Speaker 1: especially in developing countries where people are starting to get
Speaker 1: access to better healthcare. Really good to have some time
Speaker 1: with the head. Yeah, well, you know we're very focused
Speaker 1: on that. You know that what I would call the
Speaker 1: sexy end of the startup curve. Right, we talked all
Speaker 1: about these growth stage companies. Actually, everything you and I
Speaker 1: have heard in recent weeks says look at seed and
Speaker 1: presead stage because that's where we'll see some activity. Ine
Speaker 1: mile Garv, CEO of Textiles, will find out over the
Speaker 1: course of the next twelve months if you're right. Thank you. Now,
Speaker 1: coming up from the I p O drought to the
Speaker 1: ads drought, how will Matter and Google fair as the
Speaker 1: advertising market moves out of their favor? What does that
Speaker 1: mean for media? This is Bloomberg. I want to bring
Speaker 1: you some headlines that cross the terminal. This our Twitter
Speaker 1: is easing its political ad policies in an effort to
Speaker 1: boost revenue. Will dig into that as we get more information.
Speaker 1: But a slowdown and advertising markets could present a big
Speaker 1: problem for tech. This year, US advertising growth is expected
Speaker 1: to have from ten percent to five three according to
Speaker 1: an analysis published Tuesday by Bloomberg Intelligence. Here to discuss this,
Speaker 1: Mark Douglas, CEO of Mountain a software to help companies
Speaker 1: launch direct response campaigns on television in particular Mark, Let's
Speaker 1: start with that forecast, the idea that broadly the ad
Speaker 1: markets growth will slow from ten per cent to five three.
Speaker 1: Does that reflect what you're seeing? Um? Yeah, And it's
Speaker 1: occurring for a couple of reasons. I think in when
Speaker 1: you look at like paid search and paid social, especially
Speaker 1: paid social like we're talking Instagram, TikTok, those kind of
Speaker 1: platforms which you're seeing there, I think it's a lot
Speaker 1: of concerns about brand safety around the political discourse on
Speaker 1: these platforms, and also just a sheer performance. Apples changes
Speaker 1: did wind up having an impact. Their changes in terms
Speaker 1: of identification and device did wind up having an impact
Speaker 1: in particular one Meta and Snap and others. The other
Speaker 1: thing that's affecting it when you look at the television market,
Speaker 1: there's just a supply demanding balance. You have a lot
Speaker 1: of inventory coming online from Netflix, Disney Plus and other suppliers.
Speaker 1: And while brand advertisers are literally not spending more, they're
Speaker 1: spending less. So that's going to create a price war
Speaker 1: and you're gonna see declining prices. The two of those combined,
Speaker 1: they're having a pretty negative impact UM in the near term.
Speaker 1: Oneis markets, but I think you'll see more growth in
Speaker 1: the second half. Two was just packed with news and
Speaker 1: a significant events. And you think about two February in
Speaker 1: the start of the war in Ukraine, the impact that
Speaker 1: had on advertising, in the shock that Meta gave us
Speaker 1: in February, and then by the end of the year
Speaker 1: we're talking about add supported tiers for Disney, for Netflix,
Speaker 1: and the markets changed its conversation. How important were those
Speaker 1: sort of big ticket items in two in shaking up
Speaker 1: the landscape and advertising. Yeah, I don't think that kind
Speaker 1: of news. I mean, obviously the war in Ukraine then
Speaker 1: affected the stock market. So I think what we saw
Speaker 1: is over the summer, advertisers just somewhat panicked and didn't
Speaker 1: know what to do, you know, so, but they that
Speaker 1: started to recover in the second half of the year,
Speaker 1: at least in our business, we ended the year with
Speaker 1: record breaking months, So you know, if that's any indication
Speaker 1: of larger market UM, advertisers, like I said, panicked over
Speaker 1: the summer, and I think once they got in the
Speaker 1: holiday season, they realized, look, if we're gonna grow up business,
Speaker 1: we're gonna have them spend money to reach consumers. So
Speaker 1: I think ultimately the market, the market in the second
Speaker 1: half kind of stabilized. But again these macro forces, you know,
Speaker 1: especially like price war is coming from so much supply,
Speaker 1: those kind of things are just having a big overall effect.
Speaker 1: I think it will create a better future though, and
Speaker 1: meaning that there's no longer this duopoly of Jet, Google
Speaker 1: and Meta, you know, dominating advertising. I think television is
Speaker 1: now digital is going to really have a big impact
Speaker 1: on the overall market. Okay, so who wins that mark
Speaker 1: from your perspective in terms in terms of TV, it's
Speaker 1: the big players. I think you're likely to see a
Speaker 1: lot of M and A. So what's gonna happen is
Speaker 1: there are new advertisers coming in the market. I mean
Speaker 1: TV is now The way to think of this is
Speaker 1: there what's this duopoli between Google and Meta. They now
Speaker 1: control less than half of the advertising body, so that
Speaker 1: their overall controllers applient as other areas have grown. And
Speaker 1: so what has happened is television with connected TV streaming
Speaker 1: is digital also and it's now benefiting in the same
Speaker 1: way that digital advertising benefited Google and Meta. And so
Speaker 1: you see this growth occurring there more customers coming into
Speaker 1: the market, They're spending more. It's diversifying the customer base
Speaker 1: away from just a thousand or two thousand advertisers to
Speaker 1: many more. And so television is coming on strong as
Speaker 1: this third big scale channel that's now a true digital channel.
Speaker 1: And I don't think that means Men and Google lose,
Speaker 1: but it just kind of means that they no longer
Speaker 1: dominate in the way they have in the pass and
Speaker 1: that's really good overall for avertis for the advertising industry,
Speaker 1: and there's new sort of rules of the game. The
Speaker 1: load of the companies need speech. You have to learn,
Speaker 1: particularly when it comes to maybe Disney Plus not wanting
Speaker 1: to advertise you're thinking of alcohol if they give a
Speaker 1: politics and just have the headline about Twitter perhaps going
Speaker 1: a little bit more into political advertising. But how are
Speaker 1: some of the clients you speak to how companies and
Speaker 1: advertises marketers thinking about where they place the ads, how
Speaker 1: they place the ads. Yeah, I mean, so the advertising
Speaker 1: market is splitting the brand advertisers and that you don't
Speaker 1: sell alcohol like over the internet, right, so so so
Speaker 1: you certainly and so you know the brand advertisers that
Speaker 1: everyone thinks of when they watch sports and what and
Speaker 1: watch other TV there there's not actually that many of them.
Speaker 1: It's about you know, thousand and two thousand and but
Speaker 1: it's what everyone thinks of. It's the direct response advertisers.
Speaker 1: I mean, Meta has ten million customers advertising on their platform.
Speaker 1: Those are numbers they in nown school Goal has an
Speaker 1: equal or higher number and so and now you're seeing
Speaker 1: a lot of those advertisers come to television and so
Speaker 1: those advertisers really don't care about those rules. It's the
Speaker 1: brand advertisers that worry about how their brand is being perceived.
Speaker 1: The direct response advertisers that really truly dominate advertising. Um
Speaker 1: that they're like, if you think of the direct response
Speaker 1: market the US is three times the size of the
Speaker 1: brand average sizing market and television. Those direct renaissance advertisers,
Speaker 1: they just want to reach consumers wherever they are. They're
Speaker 1: not worried about rule, you know, they're not thinking of
Speaker 1: those rules. So so you know, all of these things
Speaker 1: you're seeing in terms of the you know, rules like
Speaker 1: that that really just pertains to to the advertisers that
Speaker 1: are not directly measuring the response the ads, which is
Speaker 1: what we mean when we say direct response advertising are
Speaker 1: great to get your direct analysis with us on direct
Speaker 1: response advertising and all of the gamute maybe sensitability there,
Speaker 1: Mark Douglas, we thank you so much, CEO Mountain. Meanwhile,
Speaker 1: well from advertising year ahead to perhaps your own resolutions
Speaker 1: around work, what about perhaps we have fewer meetings? He
Speaker 1: d e commerce giant shopper fight. Did you hear it's
Speaker 1: clear today putting an end to unproductive meetings saying look,
Speaker 1: employees just say no. They're currently saying, look, we are
Speaker 1: calendar purging right now. We were removing all recurring meetings
Speaker 1: if we can't remember why or if they started. And
Speaker 1: also they're reupping the ruler that on a Wednesday tomorrow,
Speaker 1: not a single meeting to we had. That's quite a
Speaker 1: commonplace thing here in on the West Coast, you know,
Speaker 1: Twilio Meta have no meeting Wednesdays. When I read this story,
Speaker 1: I thought, how are they going to make this happen?
Speaker 1: You and I are calendars are full of meetings right
Speaker 1: And in the story they say that there will be
Speaker 1: a boss to enforce this. So every time somebody organized
Speaker 1: as a meeting, you get this bot pop up and
Speaker 1: say a reminder. You know you don't need to have
Speaker 1: this meeting. Right, it's bizarre, It's completely bizarre. But it's
Speaker 1: also like the opposite effect of the pandemic. Right, we
Speaker 1: all worked at home but then became so accustomed to
Speaker 1: doing constant zooms or meets or whatever it is, and
Speaker 1: it's a money suck. Basically, the University of North Carolina
Speaker 1: are saying a hundred million dollars on average is lost
Speaker 1: by a big company because everyone spending their time of meetings.
Speaker 1: And it's the opportunity cost. It's what you're not doing
Speaker 1: when you're in that meeting that perhaps didn't need to
Speaker 1: be arranged. You're not being productive and perhaps being a
Speaker 1: bit more stressed. I can hear the producers in my saying,
Speaker 1: don't think about it. You're already late enough as it
Speaker 1: is to our meetings, all the meetings, all the time
Speaker 1: going viral and outcoring of support for Damar Hamlin, the
Speaker 1: twenty four year old Buffalo Bill safety who suffered from
Speaker 1: cardiac arrest on Monday night. Football Hamelin is unsurprisingly gaining
Speaker 1: support with well wishes, but he's also gaining support in fundraising.
Speaker 1: His go fund me page, astonishing it was from to
Speaker 1: purchase toys for underprivileged children. Barely at that point a
Speaker 1: cross two thousand, five hundred dollars. The goal was without two.
Speaker 1: Now the fund has more than four and a half
Speaker 1: million dollars, more than three million donated to the fund
Speaker 1: in a seven hour period from more than seventy five
Speaker 1: thousand donors. Really, the outpouring here is substantial, and indeed
Speaker 1: from some key executives. I know you've kept any on. Yeah,
Speaker 1: I mean, this is our going viral segment, right, and
Speaker 1: it's fair to say that in those moments after it
Speaker 1: happened on the field, it did go viral, particularly on Twitter.
Speaker 1: An example, Bob Iger, the returned CEO of Disney, took
Speaker 1: to Twitter and said, you know, tonight we should all
Speaker 1: be praying for Deamar Hamlin. But that for me. You
Speaker 1: and I have been covering Twitter in particular, but social
Speaker 1: media broadly for weeks months, and this is the first
Speaker 1: moment where I saw a very widespread um support, sympathy,
Speaker 1: empathy which has been missing from that platform for some time.
Speaker 1: And what was so fascinating to me, Carrow, is how
Speaker 1: many people tweeted please do not share the footage of
Speaker 1: the incident itself, which is very interesting. Yeah, there are
Speaker 1: times where humanity comes together, and in many ways, social
Speaker 1: media can be a divisive, sometimes sport like environment where
Speaker 1: people have their teams and they go against one another.
Speaker 1: In this moment, there were no teams, there was no division,
Speaker 1: and it's just everyone coming together to try and tosform
Speaker 1: one individual. Yeah. I meanwhile, that does it. From this
Speaker 1: edition of Bloomberg Technology tomorrow, we have the so far
Speaker 1: ahead of Investment Strategy Liz Young. Yeah. Then don't forget
Speaker 1: of course, to check out our podcast. You can find
Speaker 1: it on the terminal, on Apple, Spotify, and on iHeart.
Speaker 1: This is Bloomberg