From Marhart where Innovation, Money and power Collie in Silicon Vallet NBN. This is Bloomberg Technology with Caroline Hyde and Ed Loudlove.
I'm Caroline Heine Bluemerg's world headquarters in New York, and.
I'm Ed Lovelow here in San Francisco. This is Blueberg Technology.
Ed.
It is a huge day for big tech, earning Spotify already out the gate. We've got Alphabet, Microsoft reporting after the bell with AdSpend AI search engine details front of mind for investors.
Then the European Union says nineteen major online platforms and search engines will be subject to extra scrutiny under its new content moderation rules, including a plan to conduct a live stress test at Twitter.
And that's talking of at Twitter. The app Blue Sky. It's about by Jack Dorsey. It's emerging as possible alternative to Twitter. What makes it different from the competitors. We'll dig into that moment, but first let's check in on those markets. Because once again we are worried about recessionary risks,
we are worried about the macro environment. We are therefore selling off on the Nastak more than a percentage point lower worse than some of the other key benchmarks as we see some of the data, whether it be about consumer confidence, whether it be about housing prices, just showing some slowing in this US economy. Tenure yield therefore a flight to safety six basis points, seven basis points. Hays call it on the downside of the tenure below that
two hundred day moving average. Meanwhile, we're not only risk averse in the US, we're also risk averse for a six straight day in terms of your US traded Chinese names. Why this has a lot to do with geopolitics, said, and the worry that we're going to limit US investment in those Chinese names. And look what's happening in the world of crypto, another bit of a bell weather in terms of risk sentiment. It's back to being a risk asset and we're down by a half a percentage point.
Yeah, earnings the main driver for me on the micro picture. I'm taking a night at GM right. They've raised guidance for twenty three, but there's a lot of analyst concern about how thin margin's going to be as they shift to EV A bit of a public service announcement, they're retiring the Chevy Bolt production will end on that model this year, which is an interesting moment of Eve history.
First Republic also interesting because, as we've been talking about for weeks, so much of our audience were depositors at First Republic, and that's where the concern is, deposit outflow. I are you and I are going to talk about that later in the program. Look at how severe the drop is. A restructuring is on the cards. Strategic obsens
that's the downside. For the upside, we are looking at Spotify out the gate with earnings this Monday, subscribers on the paid side rising fifteen percent, hiundred and twelve million. On the monthly active users, We've actually breached that five hundred million mark, five hundred and fifteen million monthly active
users and narrower than expected loss. There's still questions around profitability long term, but then you look at their outlook for the second quarter revenue growth, subscriber growth, monthly active user growth, and that's what investors like to hear.
Karen, Yeah, all good signs, but let's dig in on whether that path to profitability is getting any closer. Spotify I focus with Sandy Shamah's Third Bridge Senior analyst. So you're reading the positive in terms of the tea.
Leaves here, Yeah, absolutely, Carol and at Pleasure Pleasure beyond. So first off, straight off the bat, pretty good, a good performance across the board, and we saw fourteen percent revenue growth, we saw consistent grasp offit margins, and yes EPIT prafitability was down as well, but again this is
sort of in liner what we've expected. But I think a big thing over here is that, you know, when it comes to Spotify across the entire board, they've been focusing so much in what they show to investors, which is subscriber growth, and again that shows in the ways in which they've reported their numbers across But what retail and institutional investors really seemed to be focused on, a world really focused on in twenty twenty two was that
path to profitability. What that's led to is sort of a mismatch or inability to come up with a unified, coherent equity story for the business, and that perhaps has been responsible for what some could argue to be a relative under performance for a company of this scale. So, yes, we're seeing positives across the board, but the experts we've
interviewed at Third Bridge. It really appears as if the longer term sustainable profitability might be something the company can hit right now, it's maybe a story mode about market shared attention and market share gains as a whole.
So right now, market share, mark share. Let's talk about technology as well.
Though.
What I find is so interesting is there's a lot of option out there. We were talking on this program about Apple, for example, raising services prices with Apple Music. Spotify is growing its subscriber base. Why is it podcasts? Is it the music library? There must be a reason that they're continuing this growth narrative at least.
No absolutely, So you know, I'll probably try and split that down into two components. That becomes a bit more clear so we can see the emerging picture. Let's move in to the developed markets first and look at the premium subscribers that first off Spotify. The one thing that's been able to do in a fantastic way is have very strong brand equity across the board. It's got a powerful first mover advantage and it's also developed. It's also been so ingrained into how consumers tend to user product
that Spotify. For a lot of people becomes the go to that they end up using. It's easier for them to acquire those customers and have them on. So in the premium of the space, you know, they're doing quite well over there as opposed to other players who will ruddle in the market. But if you're looking at it from the perspective of emerging markets, you know, some of the interviews we have done where we've looked at Spotify in the Middle East and North Africa and India, Latin America. Again,
they spoke about that Latin American performances earnings. They are going very aggressive in terms of their marketing spend over there. We'll talk about that praft ability consideration, but Spotify appeers to have realized that longer term. Again, longer term, yes, if they're able to craft these developed markets, that's how they're going to be able to get that praftability and scale.
Hey, Caroline, the big theme of this earning season is artificial intelligence. When I open Spotify, the platform knows what I want. It's red hot chili peppers every time. But what's the really clearly when it comes to Spotify is the big question.
Yeah, and really the investments is making in technology and that actually remember the AIDJ that we got to play with a little bit earlier in the quarter ed and suddenly to your point, therefore are they making the rights investments because many felt that they were having to dial back some of that spending, particularly in this overall focus of podcasts. But they're still having to spend to deliver us the content we want in the right time.
Absolutely, and so here's a big theme, right. I think Daniel lact came out in twenty twenty two and he mentioned that we're going to see reduce spending at that particular time. The experts we have interviewing across the board the reader has been that this is not necessarily going to be the case. If you look at the ad supported dear first off, you know, in terms of just that ability to give the targeted advertisements, Spotify hasn't been able to crack that just yet. It's sort of more
over the counter, so to speak. So it really needs to invest further in terms of the ad dech there. On top of that, we saw them go ahead with more podcast acquisitions and again with more acquisitions in terms of the tech there, it really needs to build out a more sophisticated targeted meaningful system to do this. So again more spending in that element, but it is spending
in the right direction. But again spending is required onto the flip side, moving into the audiobooks that I'm a fantastic decision across the board, but right is evident that
the company still needs to spend over there. So sort of the twenty twenty two narrative that we are going to slow down in terms of our investments is not ideally going to play out over the course of the next year a year and a half while they buff up that technology throw an AI into the mixtup now being an increased focus on that.
Sandy Shama fir Bridge senior analysts, like many Cara one of those that says profitability will come with scale, kind of this catch twenty two situation.
Anyway, today we're going to get.
Results from Microsoft and Alphabet after the bell. For that, we bring in Bloomberg into intelligence senior analysts and rag Rana and rag let's start with Microsoft. What is it that you want to see from this company? What is it that's going to bring you some potential outside surprise.
So I would say the comments would be most critical because you know so far we have seen a downward trajectory in cloud sales, infrastructure sales PC. I mean throughout the tire ecosystem. You know, we are looking at slow down and demand. You know, any comments about even stabilization would I think be welcomed by investors.
What's interesting, Ana Argus, We've almost moved away from fundamentals with Microsoft a little bit. It's caught up been the hypeer AI. How much do you want to hear about future revenue addition from this investment or are you looking more than in the here and now it's not really prevalent.
See if they give a guideline that, you know, they should start seeing some kind of a revenue upside maybe next.
Quarter or the quarter after that, people will like that.
But frankly speaking, this is so much in the test phase right now that the addition to cloud revenue or other areas, it's going to be a while before we see that. So I think the big growth factor or the big factor today is where is enterprise tex spending and what should we expect over the next couple of quarters.
If we're going to try and read across the entirety of learning season, what I take away from your preview decks is the bread and butter businesses are under the spotlight. What we want to see is some of the other sides of their business perform. You take Google as an example search we're worried cloud could be a boost.
Yeah.
See for Google, for example, the cloud business is small but growing very well. I mean, I think this is an area where they have differentiated compared to rivals, and I think you know they have their space in the top vendors. I mean, Amazon's never going to lose their top spot in our view, Microsoft's going to remain the number two player there, but Google is going to be a very strong number three contender for cloud infrastructure services, and I think they have done a good job about it.
Overall. How is the market positioned for these numbers, do you think? I mean, have we ridden on hype for both names, and we're worried that overall we could see a knee jerk reactions we tend to in after hours, but then we start to drift through and really decide where the growth potential is for these names.
I think the guidances obviously is the biggest key at this point, because the numbers are going to be what they have, and the guidance comes on the call, and the question over THEATA is we are all expecting numbers or guidance to be slightly down compared to what people are expecting. But if it's really bad, then I think
it's going to be a bad day tomorrow. If they go out and say, you know, we have seen some stabilization in new growth, and then you know it's going to be the exact opposite of that.
I'll see, of course, ed how cost cutting comes into all of that as well.
Yeah, we will do in Gosh, what a busy we've got ahead of us. Bloom meg Instelligences, Anna rag Rana, thank you.
Now some nineteen major online platforms and search engines, including YouTube, Facebook, Instagram, Twitter, Well, they're going to be subject to extra scrutiny and potential fines under new content moderation rules set by the European Union. Bloomeg's Amy Tonson joins us. Now just update us on will remind us what is the Digital Services Act?
Sure?
Yeah, the Digital Services Acts get rolled out by the European Commission last year and it's all about raining in what big tech companies can do with your data. So it includes things like bands on serving ads to minors, bands on serving ads based on what the Commission calls sensitive personal characteristics like sexual orientation. It's got rules about combating this info. It's got additional reporting requirements and transparency requirements that these guys are going to have to follow.
Hey, Amy, there's nineteen companies technology names potentially impacted, some more than others. Which are those names caught by these rules and sort of the strengthening of the rules.
Yeah, it's nobody.
Who'd surprise you. I think it's anybody with more than forty five million monthly.
Active users in Europe. So it's all the big guys.
It's a number of Google's platforms, it's Metas platforms, Facebook and Instagram, it's Snapchat, it's TikTok, it's Amazon, it's Apple, a lot of the big international tech companies.
So getting getting caught up in this, and that's what it was meant for.
Really.
Yeah, and the penalties for some of those names potentially quite severe as a proportion of global revenue. Thanks to Bloomberg's Amy Thompson, who's leading our tech coverage in the Emia region. Now, speaking of Twitter, some Twitter users are growing weary of using the platform. Since Elon Musk's takeover, others are turning to Blue Sky as a possible alternative. That's if you can make it off the waitlist is account Saisia Counts joins Us, Bloomberg News, Social Media Report Asia.
What is Blue Sky? Where's this come from?
Yeah, it's a Twitter alternative. As you mentioned, right, in the wake of Elon muss taking over Twitter, a lot of people have not been happy with the platform, whether it's from a colientent moderation perspective, all the changes of verification,
and so blue Sky is another alternative. It looks very similar to Twitter if you see it, and it's got the backing of Jack Dorsey, who obviously was really involved with Twitter from the early days, and so that's giving people some confidence to want to try out the platform.
Yeah, what is it about? Quarter of a million iPhone downloads so far? I mean, nowhere near Twitter's overall use case. But Ayisha, how is it distinct not only from Twitter, but distinct from other competitors out there? I'm thinking of Masteredon, which also wants to be some sort of decentralized social platform.
I mean that's the challenge, right, is how do you differentiate. A lot of them are very very similar to Twitter. They're going to look very similar on the feed right now. Blue Sky has a waitlist, so in some ways they're trying to control how many people can be on the platform. You mentioned trying to have sort of a decentralized open protocol. If you think about massed on, they have different servers, so you have to be on a server to follow someone,
and so that gets a little bit more complicated. Blue Sky's a little bit more straightforward in terms of onboarding, but it's really going to be that's going to be the question moving forward. How do they differentiate when they're all very similar.
I mean, Caro, they look identical to me. I don't know about you.
Like Paragagrowell, for example, is believed to have gone to Blue Sky. People have been sharing screenshots of his profile on Twitter, but when you're scrolling through, it just looks like Twitter.
Yeah, but maybe that's not surprising given it was basically born out of Twitter, right as I mean, its history is that it was backed in many ways and sort of a startup within the company.
Right, So it's not super surprising. And you see the same thing with other alternatives. There's an alternative called T two that was created by former Twitter employees. Like all of them are sort of playing off of what Twitter
did because it was successful at what it did. The question will be will they be able to really convince users to come on in a massive way As you mentioned right, two hundred and twenty five thousand or so downloads, and you think about Twitter which has five hundre million monthly active users according to US, So it's going to really be a challenge to scale. I think that's what we're going to see over the coming months and years.
I think it's important nations go back to the two big changes of the Twitter platform recently, which is subscribers and also verification. Just remind us what the latest on both those fronts are.
Yes, So if you think about verification, you have to sign up for Twitter Blue, which costs about eight dollars per month, have a display name, a photo, and a number, and then you get your blue check mark. Obviously, that's been really challenging because you have established organizations from news institutions to political figures, to athletes and celebrities that lost their legacy checkmerks. So it's not about being notable anymore. So that's one huge change. Part of that is subscribing
to Twitter Blue. But then there's also a new feature release where you can actually subscribe to an individual person and get access to additional content. There's been a ton of changes on the platform. But what's the challenge. It's really hard to tell which accounts are authentic or are not, and so that's really been one of the main sticking points.
As Disney will attest earlier this week, Asia counts. Thank you so much, brilliant reporting as always. Meanwhile, coming up, there's another win for Apple in the fight over its app store policies. We'll dig in from New York, San Francisco. This is Blomberg.
Time for Wall Street Beat Karen.
Today we're focusing on First Republic Bank, actually San Francisco, California based bank after the collapse of Silicon Valley Bank. Were that that chart says it all. They've reported earnings. Depositive flight is a huge concern. The shares down ninety percent year to date now, and their strategic options is the word that they're using.
I mean, there is the year to stay chart that's just so painful. I mean, all of this, the fact that they missed the analyst expectations for consumer deposits. They plunged forty one percent worse than expected, even after the rescue attempts. Are the big banks here in the US they lent them thirty billion of their own cash deposited.
That so really the fact that we're hearing that they're going to have to cut people, it doesn't seem to put an end to its own what seemed to be quite idiosyncratic issues now ed for.
That bank, particularly an injection of capital, but it was supposed to be an injection of confidence. And as it relates to our audience, venture capitalists startups were banking with First Republic. But last night on Twitter, just so many people talking about how did we get here? How did it get even worse?
Yeah, and the fact that they so focused on big mortgages to big wealthy people. And yes, they moved elsewhere. Let's talk about something else, moving away from the world of well Wall Street to the world of key tech, which is Apple. And in fact we're talking legal here. It's just one and appeals court ruling upholding its app storece policies, and then a trust challenge that the course
was brought by Epic games. Remember the maker of Fortnite tes bring in Blueberg's intelligence is Jennifer Ree, who, Well, it had already sort of self imposed some changes here, been trying to see these headwinds coming on it. But the fact that the courts sort of upheld its side of the story we surprised.
You know, not too surprised, somewhat, I think, you know, I heard the argument on appeal, and it was really hard to call what the justices we're going to do because the lower court opinion was somewhat controversial, well thought out, but somewhat controversial. When you had this three panel, the judges, three of them, and you need two out of one out of the three to vote. One spoke a lot, seemed to be for Apple, one spoke a lot seemed to be epic, and the third one didn't say a word.
So it was a little bit hard to predict, you know. But at the end of the day, they basically pretty much affirmed everything that the lower court had done. They disagreed with some things, but they said where they disagreed it was harmless, meaning even if the judge had done it differently, it still would have come out the same.
The ultimate outcome so it doesn't really matter and they don't have to go back to her, and they sent it back to her on just a little issue of whether or not Epic has to pay some of Apple's legal bills, just a very minor thing, really not the main aspect of this litigation. But for the most part it holds, and Apple's walled garden still survives.
So jen Apple came out after this decision and said it was a resounding victory. I think they literally used those words because nine out of the ten claims were settled in their favor.
But to the point you just made, one was not Can you explain that to us?
Was there any positive that Epic in particular could take away?
You know, the most interesting thing is that the one claim that was against Apple wasn't really something Epic asked for.
So what that was was an abolition on what are called anti steering war, and these are rules Apple had imposed on developers that didn't allow developers within the apps in the app store to push consumers somewhere else outside of the app store, Let's say, to buy the app for less expensive price, or make in app purchases or less expensive expensive such as going to the developer's own
website or app. What the court said is these don't violate antitrust rules, but they do violate a California's state law against unfair competition. So Apple, you have to let these developers steer users if developers choose to do so. And now was somewhat good for Epic and somewhat bad for Apple, though Apple was kind of already going in that direction.
What's interesting and is all of this is y US focused. We're talking about state law, we're talking about federal law, but actually it's Europe in many ways that is changing the business model of Apple.
I would feel, well, that's right, Jenn, because I think they're responding to the Digital Markets Acts requirement and they're basically opening the doors to outsiders in that market, right, and.
We understand Apple's already working on that in Europe and they have to. I mean, this is going to go into effect in twenty twenty four. Apple's going to have to allow alternative app stores on iOS mobile devices, which is exactly what Epic was pushing for in the United States.
And also there was some legislation that was pushing for the same thing in the US had traction last year you know, I'm not so sure it'll have traction going forward now that we have this divide in Congress, but we'll see, because maybe this court decision could sort of light some fires here in the United States, and maybe they'll push forward legislation that does the same thing the Digital Markets Act does.
End of the day, Global Companies, Global floor restrictions. We thank you as always, Bloomberg Intelligence, Jennifer Regius, so on the money, then welcome back to Blouebad Technology. I'm Carolin hid in.
New York and I made lot low in San Francisco.
Caroline, that's going to check on the markets because I think earning season's main driver. Right look at then as that one hundred, we're off by a percentage point.
Spotify is kind of bright spot.
But actually across some of those indices, a lot of names are disappointed moving to the downside, underperformance and semiconductors, and you talked about it earlier, Caroline, And as that Golden Dragon Index, this basket of US listed Chinese tech companies down three percent. We're in a November low. We're down for a sixth consecutive session. There's not that much out there in way of headlines, but I think there's
a lot of geopolitical risk being priced in here. You look at the ten year old, we're off seven basis points three point four percent. In terms of specific movers, we're looking at earning seasons the main driver here right now. You know, we're talking about expectations for investors that across the technology sector are kind of really focused on a drop in earnings year on year because of all the pain that we're going through right now in advertising, in
a slow down in corporate spending. So that's where we'll check in over the next five days.
Yeah, risk sentiment a bit low, but there are still deals being done maybe in the private market too. We're going to talk about just that z in here. It's an insurance data and technology firm backed by Eldridge Industries. It's just agreed ed to buy digital insurance marketplace policy Genius.
The deal, which is actually first reported by Bloomberg, is now official as of today, So we thought we'd talk about it with the Zinny CEO, Michelle Trony for more alongside our very own Shnali Bassack, who as always brings us such great interviews and we thank her for it. Michelle nice British accent. We're about to hear from you. Tell us about what you're trying to do here sort of the consumer facing with the back end. What do you provide that's different in the market.
Sure, thanks so much for having me. Yeah, so, Zinya is really all about giving access to consumers, making sure that they have education, that they have the right content, they understand what insurance policies are right for them, and then ensuring that the buying, the motion of buying, all the way through the life cycle of owning the policy and claim is a phenomenal experience end to end.
Hey, Michelle, talk us through the logic behind Policy Genius. What was the motivator and also in this environment, was it hard to get done?
Look, I think there's never a bad time to do There's never a bad time to do.
A good deal.
And you know, when we found Policy Genius, we felt like it would fit together super well for us and accelerate the journey that we're on. You know, they were some of the earliest insure tech pioneers. They built a phenomenal consumer facing marketplace, has great technology at the heart of it, goes everything from lead to fulfillment. We do
everything from issuance to claim for policies. Bringing those two businesses together, we have a vision of open insurance, making sure that it can really transform the life cycle of insurance. We're a tech provider to carriers, We're a tech provider to distributors, and now we're a tech provider and a resource to consumers.
Now I'm kind of curious to tap into your expertise here because you are using technology to really attack and problems here. You've seen in the insurance industry, but you've also been the CIO at UBS for five years, work there for twenty five years. You're still on the board of Deutsche Bank today, where you focus on technology. If you look across finance, where are some of the most compelling places that you can see technology being used to really reinvent the wheel?
Here?
Sure, so look, you know at Deutsche Bank, can at UBS and honestly across the whole insurance industry. Simplification is at the heart of everything that we're trying to do. These are old companies that have been around for decades. You know, I have a lot of empathy for that. I was a CIO for a long time, and you know, you've got a lot of siloed information, which makes it very difficult to give a phenomenal experience to your customers.
You know, when you look at you know, people's balance sheets, Having great technology, having great data that sits you know, in immutable type of smart contract platforms like we're building it's in here, really gives you know, a different focus for the technology spend that you then do. So when you're if you're if you're on the cloud, if you've got you know, cloud native applications, you can really focus on things that differentiate your business and not on recon stiling things all the time.
Why smart contracts, I mean, I'm curious because when people think about the new transformative technology, they more explicitly say blockchain or other kind of you know buzzwords terminal, yeah, exactly that have become popularizers over the last couple of years.
You know, we have industries that are coming, you know, highly regulated right where data privacy is like at the heart of you know, whether people will trust you or not. And smart contract technically, smart contract can live on top of any type of technology, right we are building on top of distributed ledges. I think the banks are also
doing the same kind of thing. What we're really talking about is an immutable data asset that then all the processes and the capabilities can come to that data as opposed to you know, you having to move data around an organization, which is very costly. So you know, macro trends move to the cloud, it's still massive. I've been hearing a lot of people saying, you know, that's slowing down, certainly not for the big, big financial institutions and insurance
businesses that I work with. And obviously, you know, AI is becoming more and more you know, relevant, available and exciting for our industry.
Okay, so let's go there to the next new bright thing of buzzwords. How are you thinking about it within sinnia. How you think about making sure that mL and AI is just an easy to access and building productivity for your companies exactly?
Well, that's the word productivity, right, So we really see, you know, where the AI capabilities and generitive IAI right now,
it's the start of this. It's about making us more productive, but getting insights quicker, getting insights the customers quicker, making everything flow better end to end, you know, and then as we get more comfortable with the privacy and you know the regulatory requirements, so we'll expose that through our client interfaces and just make the whole process more productive.
Michelle, you're being nimble in the market with this deal. I think what both eyes this all together is that coming out of the SVB collapse, your industry kind of acknowledges that global finance needs to modernize, whether it's through AI or there's opportunity to move from sort of traditional banking to look at the offerings from fintech. Has that given you momentum your industry fintech more broadly.
I think so.
I think that people realize when you know, whether it's a regional banks or you know, any other part of the banking system that isn't operating in an efficient way, you know a lot of times behind the scene there that it's poor data, it's you know, too much technology. You know, it's an environment with one of everything, and it makes it very difficult to kind of, you know, see the wood for the trees right. When you have like clean data, clean technology, you know, you can manage
your balance sheet properly. You can see what your drivers have costs are, you can see what your margin is, and you understand the impact of the products that you're serving up delivered to your consumers. So, you know, I think it's behind a lot of that ed and I think it will give a lot more momentum to people really saying that we have to step back and actually create like the technology and the infrastructure for the future,
not just kind of you know around the edges. And you know, insure tech is you know, well behind fintech. They're on their second innings now, and you know, and we're hoping to be some of the pioneers of the insure tech industry to do the same thing as.
Someone who's seen very many cycles of this, what are the limitations particularly to AI in financial services.
Look, I think it's all about privacy and security, right. It's you know, with everything that we do from a technology perspective, working with regulators to make sure we all are talking the same language people understand you know, what are we doing to secure data? You know, what are the risks that we're running, How can we recover you know, cyber threats and attacks, et cetera.
All of those.
Things are think is that we have to work you know, hand in hand, whether it's with regulators or honestly with shareholders or customers to make sure they're comfortable we're taking all the right steps that we can use these great technologies that improve service and capabilities, but don't you know, don't compromise their security or their privacy.
Dinier CEO Michelle Troney.
Great to have you add in New York and Bloomberg shn Ali Bassek, who Caroline continues to bring us conversations at the intersection of finance and technology.
We love it.
Right now, coming up, we're going to talk about the trends to watch in the venture capital world. Generative AI, creator economy. Guess who with carrot Light speeds Mike Minano. Time for the VC roundup. So I think with the new net zero emissions initiative for the first time, a group of twenty three VC firms are banding together to
figure out how to decarbonize their portfolio. Through this Venture Climate Alliance, member firms pledged to cut or net zero out their own greenhouse gas missions by twenty thirty or earlier. And former Salesforce co CEO Keith Block is launching a venture capital firm, targeting four hundred million dollars for its first fund. Smith Point Capital will invest in enterprise software,
particularly at the growth stage. Among those investing in the fund are Kranini, Melon and billionaire David Tepper.
Caroline, I think we got some breaking use.
First Republic came out with its earnings disappointing on deposit outflows. Now we understand it's weighing selling up from fifty billion to one hundred billion dollars in assets. We're talking here, long dated securities, we're talking mortgages.
Ed.
All of this is about an asset liability mismatch that for the overall First Republic, California based bank has at the moment, Maybe they sell those to US Bank said, maybe it's about incentivizing them to buy them above their market value. We know the impact that had on Silicon Valley Bank, the fact that we've seen price destruction in long dated bonds. So maybe you get a warrant preferred ex to do that. And all of this, of course, said, is about trying to stop being seized by the FDIC.
Yeah, and I go back to what we discussed earlier in the show. When earnings hit last night, the seriousness of the situation of this bank. Everyone was discussing on Twitter because they couldn't believe after many of the larger industry peers stepped in, that we would find ourselves at this stage.
Yeah, let's discuss all of this with a perfect voice, because well, it's been quite the time to be a VC. At the moment, it's time for VC Spotlight. Mike mcnano is with us. He's likes to be Adventures as partner last year, focusing on investing in generative AI and create a supply chain. Also, of course, you used to lead podcast live video businesses over at Spotify. So much news to talk about. I wanted to start off with Spotify. But how much of an impact is the still bank
instability at First Republic. Have you felt that your portfolio companies and yourself have diversified enough.
Yeah, Look, I think you know if you're a founder, whether you're banking in twenty twenty three or twenty nineteen when I was building my company, I think it's always good practice to diversify across several different banks, just like anyone would with any investment strategy. If you're a startup, you might be carrying a lot of cash and it's
always a good idea to be responsible about it. And that's the advice that you know I would give to a founder today or back then when I was starting my company.
Hey, Mike, I'm going to jump in here. Welcome to the program. It's good to see you. Thanks Ed, Thanks Ery, course, it's good to see you. Because things are difficult right now. You know, one hand, we just told you that news about Keith Block starting a new firm and raising funds, and then on the other hand we hear founders absolutely desperate for cash to get rounds closed across your portfolio companies.
What is the situation for you?
Look, I think it really depends on what you're building and what customers you're building for, and how they're responding to what you're building. Obviously, you know there are always going to be cycles to different markets. Certain categories are more exciting than others right now. Obviously, generative AI is a category that is very exciting to startup founders, customers
and venture capitalists as well. There's a massive shift ongoing right now, and I think as a result, that sector of the market is extremely exciting.
At the moment.
Okay, so let's stick in there. Let's go to the silver lightning amid all of this, Because you, of course have been investing in companies that deploy AI, whether it's Granola, whether of course it's also tone And some of these companies are getting big valuations. How are they adding to productivity in the here and now?
Yeah, Look, I think you know, every decade or so, there's a massive shift in technology. Back in December, I was really vocal that I believe the generative AI would be as consequential to consumer technology as the iPhone would.
I feel even more strongly about that now.
In fact, I think it's potentially even more consequential than the Internet, and it is already changing the way that we work, that we live, that we socialize, that we learn, that we create. And that's an area in particular that I get really really excited about. If you look back at the history of the Internet, all forms of media, all forms of creativity, end up getting democratized by technology.
Technology makes it easier to create.
Generative AI is accelerating that trend by decades, maybe centuries, by enabling anyone to create anything with the tap of a button. You know, like you said, I found at Anchor, the podcasting platform. We would have killed to have access to this technology even just a couple of years ago. And so I think, you know, all these areas that I mentioned stand to be vastly accelerated. But I'm very excited by creativity in general.
Michael, possibly before your time, but light Speed was a firm that over recent years went to its LPs and hard sold crypto.
Crypto is it?
This is the big thing until it wasn't anymore. Now light Speed is going to its LPs. And I guess saying the same thing about AI, it's the next big thing you talked about once in a decade technological change. What's the risk that you see the same cycle we saw with crypto.
Look, I think with crypto, there you know, there was a lot of value generated from crypt and there still stands to be a lot of value generated from crypto. And know we continue to make investments in the space, especially on the infrastructure side. I think with generative AI, it's hitting consumer applications right now.
So take TOME as an example.
You mentioned Tom Caroline and also touching on the intersection with creativity, Tome is disrupting a massive, massive market of presentation software. Presentations are one of the most ubiquitous creative formats in the workplace, but they're really, really hard to.
Create, right.
It takes a lot of skill, a lot of effort to make a lot of time to make a beautiful PowerPoint presentation, and once you do, you're stuck with a sixteen by nine grid that you can't even really.
Look at on your mobile phone.
Tom takes that whole process. They make it instant, immediate, beautiful, just with a few tap of a button.
Taps of a button. Through generative AI, now anyone can make a beautiful, beautiful presentation.
And as a result, they are literally the fastest growing productivity company of all time. They're going faster than Slack did at this stage, They're going faster than Dropbox did revenue, in terms terms of user growth, in terms of user growth, they are just exploding in users because the value is undeniable, and that's what we see across the board for so many different applications of generative AI.
At the moment, it's got to monetize it. We thank you, Mike great having time with him, which we had longer lights to be a ventures partner. Mike mgnano. There, we've got to get back to some of the breaking news, and of course First Republic Bank saying that it might well be looking what's calling to people familiar potentially assessing selling off some assets who want to bring in Shinali bassec And this is about mortgages, this is about long
data securities. Is this about stopping FDIC taking it over?
Yeah? Absolutely.
We've known for a while that this is something that the bank its advisors have wanted to avoid. They can find another solution, as they believe it. And now we are learning over here at Bloomberg that they are exploring divesting fifty to one hundred billion dollars worth of those long data securities and mortgage as part of this rescue plan. Now, there may be sweeteners for potential buyers here, that's part of the deal here. Potentially warrants are preferred equity as
an incentive to buy some of these assets. Remember when we looked at First Republic, which is down thirty percent on the day, about ninety percent on the year, certainly in dire territory here, loans at the end of the quarter were one hundred and seventy three billion, but deposits
were one hundred billion. There are a lot of concerns about the strength of the balance sheet here, but the hope here is that by getting rid OF's massets, selling these assets at above market value, there can be something here for the buyer to hang on to and help First Republic albe at a much smaller bank make it through the worst of this crisis for themselves.
Sinnati, one of our sources, saying that if that is the case, the US government might need to come in and facilitate the negotiation. The conversation goes back to last night in strategic options, I mean, what were the strategic options on the table as it was outlined by First Republic Listen.
Selling some assets is something we've not only seen First Republic potentially explore at this point, but we have seen other regional banks also already sell some assets or considered doing so as well. There are not that many buyers in the United States that could be buying books of this size ed and so the question is are these big banking buyers that are taking on books are their private buyers that can be taking it on. Will the FDIC allow those things to happen? Yes, the idea here is.
To avoid receivership.
But to the extent that really large books of business are sold here, then the government does take a look at this depending on whose hands it goes into, if there are books of business this large.
Indeed, Snali jumping on the breaking news with us, of course, First Republic banks still very much under pressure in terms of share price. Now let's pivot because we've got to talk about artificial intelligence again. We've got to talk about some news actually coming out of Cisco, just talking about how AI software like Chatchiput will make phishing attempts much
harder to detect, requiring companies to adopt new defenses. In contrast, well, Barmin muft Is, co founder Balistic Ventures and former president of Matint Cybersecurity Department, recently told us how AI could help in the fight against cyber attacks. Just take a listen.
You can apply AI to automating threat detection, incident response, and removing the scarce human capital resources that are available so they can focus on higher important things. Having said that, though you can't rely on AI to completely automate your business.
Let's get to a current AT and T exec. The chief operating officer no less, Jeff mckelfresh, is with us your view on all things to do with the future security. We're ramping up to their RSA coverage tomorrow of course, Jeff, and well, is chat GPT, is AI going to be a help or hindrance? Do you think for security overall?
Caroline, thanks for having me. Look, I think for our enterprise customers when they think about keeping their workloads and their employees safe and secure, you know they need better network solutions that are software enabled in order to defend against a thread that is invariably likely to be dynamic and changing quicker every day. As Barmak just mentioned in this previous episode in the announcement with Cisco, the tools that make us more productive can be used for good.
They can be used for bad.
And what I'm excited about at AT and T and what we're hearing from our enterprise customers is that you know, the perimeter that they have to defend is getting more complex. And not only have a hybrid cloud environment and on prem applications, but their end users are also in a hybrid environment, connected either at home doing productive work or
on the go. And so really what the industry is looking for is the expertise that AT and T brings and providing an integrated converged solution across both fixed and mobile networks in an architecture that enables them to respond quickly to this very dynamic, changing landscape.
Jeff, I'm looking forward to being on the ground at RSA here in San Francisco. I think a pretty obvious question is why is AT and T that and interested in cybersecrity. You went to the enterprise side of your business. If you think about it as a network, the large body of customer data that you're responsible for, it must be a pretty big stress for you making sure you are safe and secure.
Well, it certainly is.
I mean, we operate one of the largest networks in the United States and what we do at AT and T is important not only for all of our customers, but also for the nation our broadband infrastructure and keeping it safe and secure as a top priority and part of our one hundred and forty seven year heritage. And so in that the reason why we are engaged personally
or internally for our own network itself. I mean, we have heavy lifting and work that we do day in and day out keeping our own network safe and secure. And we've done this ed with network innovation in three areas. The first we've actually embedded security capabilities native into our network. We couple that with the ability to see across both
the fixed in the mobile networks. You know, the end customer, they don't really discern between how they are connected to the Internet, whether they're a large enterprise customer or a consumer. But what they know is they need that information to be secured and here at AT and T our priority is to make those connections fast, reliable and secure.
Jeff, we asked our audience how top of mind cybersecurity is right now, and actually almost seventy percent of respondents said that it is a big concern. You know, you added few and new customers this quarter that compared with a year ago. You kind of you turned on the change of heart with home internet services. Is cybersecurity? What makes you competitive in those fields? Would you have work to do?
We I think we as an industry have work to do, But I think AT and T has a marquee advantage here in fact, I mean we added a lot more
customers than just the post paid fund netad customers. When you think about the number of connections for our connected cars that we enable across the nation, you could only imagine that you would want those interfaces to be secure, especially in a day of self driving and autonomous vehicles and the promise of what we're bringing to life with five G. I will never say that the work is complete.
It's a very dynamic landscape. And I would tell you that our enterprise customers and our consumers, who once ranked coverage as high as possible in terms of performance, have now elevated security almost equal to the core network performance. It's important for our entire customer segment.
All right, at and T is Chief operating Offici Jeff mcalfrish, thank you for joining us, Carol.
Let's just go back to the breaking news at First Republic Bank. Now at session loads, we're quite thirty one percent. Remember this is a stock that's already collapsed ninety percent in terms of market value so far this year. The reason, while we're worrying about the viability of the bank this time, we understand according to exclusive Bloomberg reporting, and up to one hundred billion dollars in assets sales. We're talking long dated securities said, we're talking mortgages and all of this
hopefully to be above market value. They've got to offer some incentives though to US banks to sell them.
Yeah, and steep, steep declines here today ninety percent I think that does it for the show.
Caroline and has this.
Edition of Bloomberg Technology Tune in tomorrow. We've got so much special coverage coming from U ed RSA of course, a MANI and CEO for example, this is the Bloomberg