Latest Inflation Print and Musk Talks X App

And now she surmires with us. A Goldman Sachs MG Volpi of indexpensures fast we'll get a read on the health of the banking system in the wake of Silicon Valley banks collapse. Aaron Kleine of the Brookings Institution joins with perspective an Elon Musk. He's back in the spotlight, this time with a two hour long Twitter spaces that played out before millions of listeners. We're bringing the takeaways and why American Notprofit Media MPR's quit the platform that

has so much coming up throughout this hour. First has checking on what's happening in the public markets, you know, the catalysts from a macro perspective. The CPI print inflation data actually some soothing of concerns, maybe pulling back a little bit, but not enough to actually really put some

fire beneath these stocks. And the moment, we're flat on the Nasdak but bouncing off of the loads of the day, as we still think that the Federal Reserve will have to hike by twenty five basis points come the next month, but maybe there's more appetite for some of those risk assets. Two year yield flat on the day. For the two year We've been moving around throughout the trading day, but at four percentage points. I'm looking at Goldman and in

particular the Nasdack Golden Dragon. This is just showing that some of the heats coming out of those Chinese stocks today Ali Baba's on the downside. We're seeing JD off as well, some key movement out of Chinese stocks on the day. From their American depository receipts perspective, we're off by three percent. Moving on, let's look at what's happening in the world of crypto. All eyes on the upgrade movement on some months from the merge. We look at

what's happening with the lights of the Shanghai upgrade. I'm looking at what's happening therefore, with E up more than a percentage points, so not that much wire nerves ahead of what could be a bit of volatility around six thirty pm today. Yet, yeah, there are some single tech names moving on cell side sentiment. Netflix actually flat but kind of slightly outperforming the NASTAC one hundred city saying

forget the noise around earnings and the stock volatility. This is a long term by Microsoft price target upgraded at Wedbush durable cloud growth on the horizon for that name. And then Cyrus Logic a number of analysts of concern about this Apple supplier because of a potential redesign around iPhone fifteen that could hurt a name like Cyrus that

stock down twelve percent. Elsewhere, you look at some of the biggest points movers on the NASTAC one hundred, there are names like Tesla that are markedly lowered now or down one point three percent on Tesla as an example. That's a stock that jumped in premarket after the CPI print. And that's where we want to go with this, right. I think Goldman I saw a headline crossing the terminal was sticking with that twenty five basis points call for

the upcoming meeting. But the psychology here changed really quick when the data was on estimates. Yeah, and I think it's on estimate. We're still seeing inflationary pressure, it's obvious, but it is daling back in certain areas. Ed we know it's dialing back perhaps on the price of rent, the price of housing, particularly the grocery prices. I saw that eggs perhaps aren't going to be such an inflationary

pressure going forward. But really this is all about the moon music around risk assets, all around whether or not you want to be holding growth stocks in particular. Right, and it's not just public markets. Right. When you have that narrative around higher rates, that impacts the cost of capital for startups of all sizes. So let's think about the private markets as well and where the impact is there. Perfect guest maasally some eyes with us to talk about

all of that. Just appointed a senior leadership role at Goldman Sachs Private Wealth Unit. SMIs now the global head of wealth management private banking lending in deposits. I've most recently been the cohead of Growth Equity also with us, and we thank her for bringing this interview, as Shinali Bassek, friend of the show, she would an extraordinary environment we all live in, and let's just talk a little bit

about the macro perspective. And I want to go back to your previous role, the fact that you were such a star at raising funds for still a companies startups. Is it good time? Is it still very difficult to raise funds? So I'd say for private companies, particular growth

equity space, there's obviously been a huge dislocation. You've seen public market stocks drop by circus seventy percent, and I think the challenge for these companies is accepting in the private market space that valuations need to need to move along where be reflective and where public markets are, and

many companies don't want to raise in a depressed valuation environment. However, you know, there's a notable exception with Stripe, as have been much talked about, and I think it was very interesting that Stripe was able to raise six and a half billion dollars of funding, which would say that there's plenty of money still available to growth companies in that asset class with for strong talented management teams who are able to utilize transformative technology to continue to scale as

long as they're realistic about the valuation environment or in NI. It's so interesting because you are stepping into this role. This is a business that had two point five billion dollars in revenue last year at Goldman Sachs, a lending business in the private wealth arm where a lot of people are founders, like the ones you've worked with when

you were the growth equity head. And so I'm really wondering with Silicon Valley Bank and the struggles that they've faced, what kind of opening does that create for Goldman Sacks. How much will Goldman be taking on a lot of clients that are maybe being turned away in a market like this. Yeah, this is a really exciting time for the private bank in many ways. I mean, we have what I think is an unparalleled origination channel for this business.

If we think about, in particular, the founders that you're referring to from the growth equity space, the capital markets are essentially closed to them, as we just talked about, and if they don't want to take these depressed valuations and the private markets, you know, life happens for individuals, for entrepreneurs who they may have a tax bill upcoming, they may have a house purchase, they may be going to a divorce, and to create that liquidity, then there's

only really one solution, which is to go down the private banking route and try to get leverage against the collateral that they have or the stakes that they have in their own companies. I think we're very uniquely positioned to pre able to provide that sort of one stop solution for those clients, given we know how to underwrite

those companies. We understand those risks, and we have great relationships with these founders, both from our Alternatives investing franchise, my old business, but also from our world class banking franchise. Now it's interesting. I know this business is much broader than the growth business, but when you think about growth in particular, a lot of these founders they're already highly levered to the point they're learning against assets that are

still fluctuating a price even in private markets. What are the risks that you at Goldman are not willing to take what is too risky to leign too. I think it really is very situation specific. So, as you rightly mentioned, we're very focused on leverage embedded within the companies themselves, So if you're looking to the company to take as collateral, we're very focused on shallow preference stacks, so where there

isn't a lot of leverage on those companies. Also really sustainable unit economics, so a lot of that is driven by stage of company and the ability to sort of navigate through dis cycle. And there'll be things where be looking to have the company cost appropriately, Is there a path to profitability over time? Is there an exit on the horizon within a near term timeframe. I think those are some of the types of things will be looking

for when we have these conversations. And interesting that you say what you're looking for in terms of strength of business and really strength of founder and ability to navigate these turbulent times. What about strength of sector? At one point it was all about crypto. No, it's all about

artificial intelligence. Are you that specific or do you actually step back and say, no, we cannot be as grand nearer as which particular area of technology, which particularly area of innovation or indeed just business building that your founders are in. Yeah. Historically, in the growth equity franchise in particular, we really place a huge emphasis on recurring revenue types of businesses which were really primarily in the enterprise software space.

There's a nice visibility of revenue stream that comes with those types of businesses, and so I think those are always preferred from a lending perspective, because you want that visibility for every news, but it's not always. You know, we're going to have to service our clients needs wherever they come, and so I think we'll be flexible and open minded around that nicely. Hello from San Francisco. I wonder how you, in your former role and your new

role past the data and the FED. If you're underwriting a private market deal right now, how much pressure are you specifically under to seek a lower valuation. I think we saw the headline that Goldman's sticking with that twenty five basis points call for the next meeting. But if this inflation and FED regime stays in place, how do you balance that return against the risk of operating in

private markets in that environment? Yeah, I mean, obviously, when we're looking at lending, we have to take our own view on what we think the business is worth on a spot basis. Part of the reason many of these entrepreneurs might be looking for this alternative source of liquidity is because they don't want to take that valuation risk

in the private markets. So we will obviously be factoring our own views around what a spot capital markets valuation may look like, maybe even be taking a discount to that. But we only need a shortain amount of coverage for our loan to be whole, as it were, so we do sort of overlay our own valuation methodology within the private bank on these companies that we're looking at. I'm really interested in the client base as well, which I'm sure you now have a pretty broad understanding of where

does the demand come from. You know, I've broken a lot of news over the last few years on Rivian, for example, these kind of late growth stage companies. Rivan did go public, but you see names like t row Price, Goldman Fidelity coming in alongside traditional venture capital. Where does Goldman sit in that landscape and where are its clients

pushing for more access to those private companies. So from a private company perspective, I mean our entire growth equity franchise and platform is built around sourcing those companies, investing in them, hopefully scaling them along the way, and creating liquidity events with strategic takeouts. Which where our banking franchise

can be very helpful. So we are, and you know, I would say what we've really seen over the past eighteen months is a bit of a retrenchment of the growth equity tourists, and in fact, this is a great time as a growth equity investor if you have dry powder and have some patience. We think that this will be a great opportunity to be able to continue to invest in world class companies given the valuation environment is

so rapidly changing. I want to talk about valuations a little more here because you did work on Stripe that was pretty fascinating four billion dollar fundraise and a lot of money came from Goldman's own private clients, high net worth individuals, But there was a down round that was associated with a lot of this have we hit rock bottom when you look across the industry, have do we have more to go? When you look at these growth names and how much further down the valuations are headed.

I think Stripe's just a fascinating example because I think they really bit the bullet and did the right thing for the capital structure. They recognized the environment we were in and they wanted to be able to create enough incentives for retention for the employees to be able to continue this journey, this growth journey, even at reduce growth rates, which perhaps you could argue more durable than the hyper growth that they've been experiencing at the peak of the

pandemic in terms of actual valuations. I think what you're seeing as many companies hoping to survive this period by managing costs and expenses and just preserving as much cash as possible at the expensive growth to not have to test the valuation environment. And so I think as an investor, you're hoping that's what Stripe will do is unlock more down round so that you can actually help we capitalize these companies on the next leg of their journey. We

haven't seen that yet. Do you think also that we are indeed in a credit crunch from somebody that's entering this lending business here? The reality is it's not just a Silicon Valley bank. The reality is is that they're investors that are under pressure. Some of the folks that would have gotten into things like strife, they are under pressure. Do you think that there's going to be a lot more pain when companies go out there and look for

more capital ahead. Yeah, I think there's no doubt that we are in a much more challenging macro environment, and you know, you're seeing credit contraction, as you rightfully said, but we're at the very early innings of the credit cycle. You know, you're seeing pockets of pain, most prevalently right now in commercial real estate. There's been a lot of press about that office buildings in particular, So I think we're paying particular focus to clients sort of large exposure

debt exposures to that as a class. But I think this is going to be an environment with as huge opportunities. I mean, you're already seeing in public fixed income markets you're able to earn yields wider than I've seen for the last fifteen years for the same credit risk. That will reflect in private markets too. All Right, Nishi Samayer of Goldman Sachs, thank you, and of course thank you to our own Shhali Bassett for bringing us that conversation

going from growth equity deployment to Goldman's banking. That was an in depth conversation. We're all talking about it. Last night, Elon Muskok to Twitter to talk about Twitter during a two hour long spaces conversation with a BBC that played out before millions of listeners. Musk reaffirmed that Twitter is operating and about break even and actually could become cash

flow positive as soon as this quarter. Yeah. Look, he dodged a lot of questions, pretty simple direct questions, most of them about how he felt about laying people off, but he reiterated this point that if he had not done that, then Twitter would be in a precarious financial situation. He did say the advertisers have started to come back and X is the future of the everything at But beyond that, there wasn't a lot new that we learned, Carrot.

What was interesting is the aftermath, right, and the fact that the BBC was conducting this interview. NPR, which itself is very much an independent media which is not government funded, as they would say, is eventually quitting Twitter today, right

because of the concern over labeling. Yeah, and over the two hours, NPR did not specifically come up, to the best of my memory, BBC did and must discuss about the idea that a more appropriate label might be publicly funded rather than its current label, but didn't sort of commit to when that change would be made. So I don't know if you had any other key takeaways carry what just the length of it and the matter the

manner in which it all occurred. But what's interesting is the competitive threats, right, he's seen the key takeaway was, Look, people are coming back to the platform advertisers even though they lose a key Twitter, which is MPR. But what about that competitive threat in particular coming from new places like substack. Yeah, so subtacts interesting because it's also emerged as this challenger to Twitter because it's a news let the platform. But it's announced this new product that looks

remarkably similar, right, called substack notes. Remember what the CEO Chris Bess had to say on the show about that. So I think all of on my media is basically either going to have to turn into TikTok or is going to have to turn into substack in the next little bit. And substack notes is sort of our way to bring the easy sort of sharing a short form, the ability to recommand anything to the subscription network that is substack, and we're tremendously excited about it. So substack

fancies itself as a competitor. What I would say is that must said, you know, user hours are just surging user uses up. He was pretty bullish about the health of the Twitter platform. We'll have to wait and see. Coming up there, Caroline, We're going to dig him more into the impact of the Silicon Valley bank collapse on the banking system at large. We have Brooking's fellow and economists Aaron Klein on the program. Coming up, this is Bloomberg.

Deposits at JP Morgan, Wells Fargo, and Bank of America are expected to have tumbled twenty one billion dollars from a year earlier, the biggest drop in a decade that according to the analyst estimates compiled by Bloomberg, the coming first quartered disclosures from big US banks could intensify concerns about deposit mix and should lend. This mis expectation set off more inquiries about the health and future of the

industry in the wake of Silicon Valley banks collapse. More on the topic, let's bring in Aaron Klein, economic senior fellow at the Brookings Institution and an expert in financial regulatory reform. You know, immediately following that SVB collapse weekend, Caroline and I were there. We all talked about the winners who took deposit outflows. Now we're talking about the health of this sector. Which is it where they're winners in the banking sector or is the whole industry as

serious risk here? Well, look, I think one of the big problems here is that a lot of the money loved the banking system to money market mutual funds. And you say, why money market mutual funds. They're less guaranteed than bank deposits. Part of the problem here is the Federal Reserve and the Treasury Department have built out money market mutual funds twice, once during COVID and once during

the two thousand and eight financial crisis. So there's a bit of a feeling from investors that there's an implicit guarantee in these money market mutual funds, and then they're searching for yield. So I think in some ways the banking sector is going to contract further as a result

of prior government bailouts offer having a lingering effect. Let's just look at some of your writing now, Aaron, and I've given my production team no help to tell them that we're going to bring up one of the key focuses of your writings from Brookings is the dirty secret

about bank holding company regulation. And I think we think about the repercussions of what time to SVB on amount of deposits and who's winning, who's losing, but who didn't come off well as the regulators here perhaps, do you think there's been enough of a feedback yet to decide on the way in which well, ultimately the FED needs to be think about the way it chanalyzes these banks. Yeah, America has a really strange banking system and a bank

regulatory system that corresponds. The Federal Reserve regulates a bank holding companies, which are the top level parent that have subsidiary banks and other companies. Sometimes that bank is regulated by the FED, as in the case of SVB, other times it's not. There's the occ the FDIC. We have too many bank regulators, in my opinion in the US. But the feed is a rare case where you have this holding company and the bank, Silicon Valley Bank. So far,

all the conversation has been focused on the bank. I'm interested in this venture capital arm, this other arm of SVB and what their relationship were to the depositors, to the companies, the tech companies that were at SVB. Why did the FED allow a bank like SVB to be ninety five percent uninsured deposits? Was there some relationship where when the vcs invested through Silicon Valley Bank or one of their other partners, that it forced the tech companies

to stay and so they wouldn't move out. And I don't think we focused enough nearly on the FED role as a bank holding company regulator. And in my writing you'll see I point out not just SVB, but they are all these other little smaller bank holding companies that seem to not be regulated at all. Meanwhile, they're focused heavily on JP Morgan, Chase, Boa, maryl So what about a First Republic or some of the other lenders that

have been tainted with a right yal wrong me? Because it felt like in many ways Silicon Valley Bank was pretty idiosyncratic. But still we see so much pressure on some of these small lean enders. Yeah. So I think there've been problems at a wide number of lenders through the holding company and the FED just hasn't done anything. I can't explain to you why a company like Dickinson Financial out of Kansas City, which runs a series of banks who do nothing other than milk people for overdraft

fees has been allowed to exist. This is a regulatory strategy that they have at the holding company level because they're all these little banks, armed Forces, bank, Academy bank, all these things do or overdrafts their check cashers, yet the Federal Reserve keeps giving them a clean bill of health. I don't know what it's going to take to stop this and have more serious bank holding company regulation, because so far Congress has not yet held the Feds accountable.

Aaron will go to those banks for comment that you say in your opinion and milking depositors for overdraft fees. Let's end it here very quickly. What's the net result of this regulation, government intervention? What happens? Well, I think the net result is twofold number one. The government's found itself in an untenable situation of having bailed out the uninsured depositors at these handful of banks, and the question

is what are the uninsured depositors in other situations. There's mounting pressure and Congress to raise a deposit insurance cap, which I think would be a mistake, a big transfer of wealth. But that political pressure seems to be snowballing. And the other question is the real economy, and the real economy is going to experience some level of credit crunch because as money moves out of the banking system into other things like money market mutual funds, it doesn't

get recycled the same way. Think of credit like the lifeblood of the economy, and the heart of the system is kind of fluttering. Well, heart of the system that you've been trying to put out four leadership pieces on particularly on why perhaps the FDR limit that ensured deposit limit shouldn't be extended higher. Aaron Klein. Great to have him in the house this time, Economic Senior fellow at

Brookings Institution. It's very important for the regulators to have a deep understanding of the industry, and I can say, without offending anybody, I think that today most regulators don't have industry experience. If you look at the banking sector, many regulators have worked in banks. Today, most regulators have not worked in a crypto company. Before I'll come back

to Bluemo technology. It's very important for the regulators to have a deep understanding of the industry, and I can say, without offending anybody, I think that today most regulators don't have industry experience. If you look at the banking sector, many regulators have worked being backed today, most regulators had not worked in a crypto company before. We'll come back

to newber technology. I'm Karine Hide in New York. That was binarce CEO CZ speaking at the Web three festival over in Hong Kong, and a stick with some Hong Kong related stocks. Right now in the public marko, I'm looking at the Golden Dragon China Index at the moment, off by three percent. In fact, US listed Chinese stocks falling the most well since at least three weeks now. We've got pressure on key names. Ten Cent, a key

investor is perhaps offloading some stock. Will have more on that in a moment about Ali Baba's down five percent JAD to coompdd trip, dot com, you name it. They're on the lower side, even though it's an USA one hundred managers to tread water. Even though there was up higher after the inflation print came in, showing some hope

of some curtailment in those inflationary pressures. Therefore, well, the Fed probably still going to have to hike twenty five basis points in the next meeting, but for now, maybe some optimism. That's that one hundred only up by less than a tenth of a percent, though, and chip stocks on the downside after we see maybe some of the profit daking, after we see him run up in Micon yesterday and some of the other key names in the chip industry. We're off by four tenths of a percent.

But we're also keeping close eye on crypto. I want to keep an eye on not only what's happening in Bitcoin, which has been up, as you said at a moment ago above thirty thousand, but getting a bit into eighth. This is notable because we've got all important upgrade happening about six thirty pm New York time tonight. We expect it to occur, and actually people anticipating maybe a bit

of volatility. Interesting to see a bit. I think everyone is always anticipating volatility when it comes to crypto, so let's stick with it. Venture capitalists have been pulling back, actually from investing in crypto startups and industry that's frankly been plagued by scandals and regulatory uncertainty. Private funding in the first quarter of the year fell to two point four billion dollars an eighty percent declined from it's all time high during the same period a year ago. This

according to data from research firm pitch Book. Now joining us with her insights on VC funding for the crypto space is Kate Lawrence, CEO and founder of Bloccelerate VC. There is a dichotomy. Oh, you're very welcome to the program. There is this dichotomy k between the trajectory of bitcoin, ether and the backward looking data VC money going into

crypto related startups. Why the trajectory of the bitcoin and ethereum has been primarily up this year, Bitcoin is up eighty percent, Ethereum is up sixty percent, Yet the venture capital ins are pulling back investing in Web three, as you said, eighty percent down. It's a really good question. I think that everybody is waiting on the sidelines for the regulators to come in and set clear rules. There's a lot of risk associated with lack of regulatory clarity.

And for the most part, when we look at the venture capital data, we're not specifically looking at the Web three funds. We're looking at the traditional Web two funds investing in Web three. From my experience, we are are Web three fund. We haven't pulled back investing. In fact, we're executing nine deals right now, the record breaking number for US this year, and that's what I'm seeing consistent with other venture funds focused on the Web three specifically

right now. Okay, if you're a VC that's backing crypto and blockchain related companies, do you therefore by default have to be a bitcoin maximalist. No. Bitcoin is an important innovation. Bitcoin is the first use case to the blockchain, similar to email being the first mainstream use case to the Internet. But email is not the last use case to the Internet, and bitcoin is not going to be the last use case to the blockchain. What Ethereum is doing is creating

the TCPIP layer for this new Internet economy. And on top of that TCPIP, we're seeing an explosion of innovation that is happening where developers are coming in and building innovative applications on top of it. And that's where value the crew is happening. So kay still writing checks to this explosion of entrepreneurs who want to build on top of these Absolutely, we are long term mission driven investors.

We started the fun with a fundamental vision. The blockchain is one of the most fundamental technologies that is going to bring trillions of dollars worth of value over the next five to ten years. And we've been through these cycles before. This is not the first cycle that we're experiencing. Yeah, So in fact, we're doubling down on the companies because frankly, it's a better time to invest now. Okay, it's interesting some are anticipating perhaps more institutional interest in eth after

this ending of the upgrade shall we call it. We're hearing its chappella to some Shanghai upgrade to others. But ultimately the moving of proof of workedproof of stake for the ethereum blockchain. How important is today's upgrade the finishing touches. How much could it attract more people too? Eighth and indeed is more staking protocols will stop. It is very important. It's say, a very important day for the industry. In

the entire community is watching this upgrade very closely. Because only fifteen percent of total ethereum in circulation is currently staked. It's thirty billion dollars worth of ethereum, which seems like a big number, but in the grand scheme of things with ethereum market cap being two hundred thirty billion, that's

to drop in the bucket. So what this upgrade opens the floodgate forward is de risked proof of work mechanism, where now not only are you able to stake and generate yield, you can also withdraw the ethereum that you would have stakes. So institutions are waiting for this moment because they've the large part are holding a large amount of ethereum and circulation today. ED is interesting that many holding their breath, many anticipating not much volatility, many hoping

that it will start to bring in more money. Shanghai, Chapella, you name it. They love a good branding of something that keeps the outsiders feeling like they're outsiders. Well, you get this feeling carry that everyone's gonna have a watch party. They kind of all get together digitally or in a living room somewhere and kind of count down the clock like it's New Year's Eve. I mean, Kate, you can tell us whether that's your plan. I guess how closely

do you track technological developments like this? You know, Kara and I talk about the volatility in the market, the regulatory scrutiny or lack of but it just seems like everyone's just waiting for tech upgrades. To answer your first question, I don't have a party plan, but I think that a lot of my fellow Ethereum holders are gathering. I'm

watching the upgrades pretty closely. I've been in Ethereum backer for many years of actually mind Etherium in twenty sixteen twenty seventeen in my apartment in Seattle, taking advantage of

the cost efficiencies at the time. But I think what we can expect is the frequency of upgrade disceller reading after this mean shin high upgrade because Ethereum is becoming a large amountalytic chain where each upgrade actually sends the sharp waves, if you will, to the rest of the development community, which is what we would have expected from a mature protocol like Ethereum. All right, Kate Lawrence, the block celerat V see taking it easy for the big

watch party tonight. Thank you. Let's talk a little bit about artificial intelligence. Open AI, the maker of AI systems like chat GPT, says it could use some more help from its users to spot and report any bugs or unusual glitches on its programs, or even offering as much as twenty thousand dollars to people that find bugs. Bloomberg's resident AI reporter Rachel Metz joins me now in San Francisco.

I want to go into the details of what they're doing, but what I see on Twitter is people saying, hold on, weren't you all about AGI artificial general intelligence. You're supposed to have tools that do all this anyway, do you just not? Or what I mean? I think it's a little bit harder than that, right, I mean where we

are now is not there. And what they're trying to do is do what a lot of tech companies have already done, which is say, hey, we can be better at finding our security issues if we have more sort of eyes on it, looking for different weaknesses in our different products. The APIs that they offer They just started doing plugins for other services like open Table, for instance, Expedia, and people can look for security vulnerabilities in their various products.

This is a bug bounty. Yes, I guess is there anything from chat? GPT is one example that's kind of jumped out as an issue with the platform, A common report on difficulties that uses are having. Well, see, there's like two different things happening there. One would be like issues that people might have with the models, those actually

aren't part of the bug bounty program. So like jailbreak models that people have been using and that we've reported on, those wouldn't be considered things that people are gonna be getting a bounty for or anything that the model makes up for instance, there are ways to report that, but it's not part of this. When this story hit the Bloomberg terminal after our show yesterday, it made me think, we're back to the discussion about how nascent this technology

is really. Yeah, even though it's been in our hands for several months and everyone feels that they interacted with it, and everyone always amazes me, Rachel, with just how unique and creative people can be with using chat, chpt and other products for that end. What about these bounty hunters though, because there's some great writing on jailbreak prompt enthusiasts in particular,

and how are these two things dovetailing together. I mean, you may see some people that are interested in jailbreak prompts, they might also be interested in looking for security vulnerabilities, which they would then report to the company. I mean, just in the last barely twenty four hours, a handful of people have submitted bugs to open AI through bug crowd, which is the partner program or a partner company rather that they're working with and gotten paid out too. I

think over six thousand dollars was one of them. They assign them different priorities depending on a rubric that bug crowd has long established, and according to that you get

different amounts of money. Is this in some way either making them community more involved and in also some way trying to fight back against the concerns around ethics of AI, around the way in which is developing at such a pace, and perhaps bringing in more individuals and humanity to an ultimately computer driven enthusiasm that we will have at the moment.

In a sense, perhaps, I mean this is as I said, this is a program that's pretty common, and as you guys have seen in the past, it's a pretty common thing for tech companies to do. It's also like it can be a very tech effective it could be a very cost effective way to find security issues. And you also could have more eyes on these things than you might otherwise have if you are trying to do all of it in house, which with a product like this that's being used in more and more are ways by

more and more companies can be really difficult. Rachel Matts. It's a great story. Got a lot of pick up across dot com and on Twitter as well. We thank you so much for breaking it all down. I mean, we're coming up more on THESVV fallout and it's impact on startups, but also well the AI investment opportunity. Just talking about open Ai. What are the other areas you can be putting money to work? Mike Volpy, You know, of course of Index Venture is going to be up next. Listen,

bloom Bag all right, Time for the VC roundout. Soft Bank is selling its early stage vcarms soft Bank Ventures Asia after its suffers billions of dollars of losses from failed startup bets. It will be sold to an entity led by Tizo Sun, the younger brother of so Bank founder Masayoshi's son, and shares of Japanese moonlander maker I Space went untraded on a glut of by orders on their market debuts. Investors bet on the startup and the

country's space development effort. Shares were quoted it more than twice the offering price at market close on Wednesday, According to the Tokyo stock exchange. Caroline, what a novel thing ed an IPO or the glutt of a bye orders? What sort of an environment is this at the moment for startups that want to go public? Feels like the market is shot. Mike Volpi is the perfect person to

be asking in today's a VC spotlight. He's, of course general partner and Index Ventures holds three point two billion dollars across its latest funds, and these are IPOs are rare and the moment people are trying to raise funds to stay in business, how much are you seeing an ability a desire to write checks at the moment to the startup community you look at Yeah, Caroline, thanks for having me again. I would say that generally the climate

is falling right now. Twenty twenty two was a really slow year and venture partly because the public markets took a big step back with the higher interest rates and the desire for companies to achieve profitability multiples compressed. We're still generally in that climate, but I think the venture community has found a few green shoots, and in particularly you've talked in the earlier segment about AI. That's definitely an area where we're seeing a lot of green shoots,

but you are seeing some dollars begin to move. Okay, let's talk about the green shoots in AI, perhaps the hype cycle that someone cool it. Where in the area of AI generative AI, where the building blocks do you want to invest at the moment? Yeah, I'd say broadly three categories. One are these so called foundation models. This was what Rachel was talking about earlier. But it is essentially these generative models that are very large, very complex,

and they generate texts. They can help you search and retrieve, they can summarize, and so forth. That's a key area of investment. There's open AI cohere, and he's like that. A second area is is what we generally call picks and shovels for AI. These are basically tools, operational tools, training tools that manage large banks of semiconductors GPUs and so forth, labeling or data enhancement technologies. All of these are used to create foundation models or maybe to help

The third category, which is aipowered applications. So these are applications like Notion or Gong, which essentially use pieces of AI inside them to make the application better. All three categories are very interesting and all of them are drawing reasonable amount of venture capital towards them, and you've already allocated to that space scale AI, of course one of them. Mike met ed, What's interesting is AI just seems to

be an outlier here at the moment. Yeah. You know, you go back to the Pitchbook data, the Venture Capital Association data first three months of this year, you have to go back thirteen quarters or so to get to that low level of venture backed funding for startups. And so I guess my question to you, Mike is why do you go for an industry that's an outlie. What is it that catches your eye when the debt crosses your desk, that thinks tough environment, a better invest in

this though? Just in case, Yeah, I think our experiences index is that there are a few moments in the history of technology where you see something that is truly transformational and has a long term impact. I remember early in my career when I first saw web browser connected to the Internet, I had that feeling, Or when the iPhone came out, I had that feeling, And it is that sense of like, this technology has a very broad reaching,

deep impact, and we better get in early. Sometimes we might not know what the winners are, but we better get in early to take advantage of the consequential significant changes and impacts and transformations that technology is going to have. And that's certainly what AI feels like today. One player bringing impact and energy to the private markets is Saudi Arabia. And I bring that up because this week we've been talking about its pledges of investments in the video game space.

For example, what is Index's attitude towards Saudi You know, I think a sixteen QUA two. They all count Santa Bill as an LP for example. They seem ready to deploy big dollars right now in private startups. Yeah, they've been around in the business for a while. At Index, we've chosen not to take Middle Eastern money as an LP, and that's an important value for us for an assortment of reasons. Others I think particularly want they want to raise large funds, find that the deep pockets available in

the Middle East are useful to them. They are a player. I think fundamentally, though, the venture business is constituted by Western venture capital firms at least in our market, that focus on early stage and growth investing, and I think that's going to be the core of the business for a while, Mike, I mean ed brings up there for a global story of flow of money. You're a global VC investor. We know you're from Europe too, how much so you looking at opportunities in Europe? How much is

the regulatory environment enticing in places like Europe? For our Index ventures, about forty to forty five percent of our dollars that we invest go to Europe. Europe is a very different kind of a market. It's much more distributed than what you experienced in the US. We have a bit of a concentration around the Bay Area and New York, and so it requires a different style of investing. But

we do see continued very interesting entrepreneurship. And you know, at least in Index's history, we'd seen fantastic stories like Adien for example, or far Fetch, which have all come out of Europe and produced fantastic returns for our LPs. Mike, we go back to that data lowest level for thirteen quarters. In the first three months this year, crypto investments dropping.

Are we bottoming out? Though? To your mind and your experience looking at these private markets broadly and in the crypto space, I would separate the crypto from the mainstream VC market. I would say that this whole AI phenomen and represents a coming out of the bottom for VC investing. I don't know that we will return to the peaks of twenty and twenty twenty one, those from pretty astronomical years, but I think we're beginning to see a pullout from

that bottom. Crypto is a very hard one to predict because at the end of the day, it is an up and down market. It has dynamics of its own, and I don't think it's actually representative of the rest of the VC business as much, whereas I see some of the investing that's happening, particularly in AI, but all the other categories that we talked about, a return to normalcy, all right, Mike Volp, General partner in day. It's giving us that global view. When it comes to Denchach Caroline time.

Now we're talking tech ten Cent shares in Hong Kong. They tumble by the most in over two months on signs that it's larger shareholders. Netherlands based Process may extend the selling them it's Chinese tech firms. Stop Process planned to deposit an additional ninety six million dollars in shares into the city's stock clearing systems, typically a precursor to selling.

Job cuts Meanwhile, at Amazon's Twitch division are raising some concerns among former employees and content monitors about the popular live streaming SIT's ability to police abusive or illegal behavior issues that have plagued the business. In fact, the layoffs at Twitch has eliminated about fifteen percent of the staff

responsible for monitoring such behavior. An Apple supplier, Cyrus Logic, fell in training today as analysts highlighted risks to the company's bottom line from a reported design change to the iPhone fifteen. Now the Austin, Texas based company derives eighty eight percent of its revenue from Apple. That's according to

supply chain data are compiled by Bloomberg. One analyst saying that higher end iPhone fifteen pro models will abandon them closely watch solid state button design instead using the classic volume bottom design due to manufacturing challenges. Then another Apples supply chain story with Caroline. That does it for this edition of Bloomberg Technology. You set your alarms for that big ethereum technology upgrade coming this evening wherever you are in the world, and a lot to recap in the

show as well. Carrow, don't forget to check out the podcast wherever you get your podcast, Apple, Spotify, iHeart on our Bloomberg platforms. Three days into the week, tech firmly and focus. This is Bloomberg.