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