From Marhard. We're Innovation, Money and Power Collie in Silicon Vallet NBN.
This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline head of Bloomberg's world headquarters in New.
York, and I'm Ed Lovelow in San Francisco. This has been Bag Technology.
So FI shares are surging after posting its first have a profit. Our conversation with the CEO, Anthony Noto that's coming up.
Plus shares of I Robots slump as the Amazon deal is scrapped and the CEO steps down, details on why the acquisition was terminated, and a.
Real sign that tech companies are throwing their hats into the twenty twenty four IPO market revival ring.
We talk about reddits public.
Market plans and its potential valuation, but first we'll let's check in on the companies that are already public and where they're trading, because right now we are waiting on so much economic data of a Federal Reserve rate decision, of course, whether we'll be selling more debt here in.
The United States.
There is a lot to digest, not to mention the ten trillion dollar valuation of companies that are be coming out with their earnings this week, so we pause, we wait, We see then awst that basically up only about ten points. We're seeing the tenure yields actually just falling down about three basis point. It's interesting as we do anticipate the overall treasury to be signaling that they will be issuing yet more debt, but we are down by some three
basis points. So a little bit about purchasing. Now, remember this is a mid yet more geopolitical tension. Maybe there's a flight to some sort of safety, as we see actually oil on the downside by a percentage point. We have been tracking higher after those concerns of increased tensions in the Middle East, not to mention, of course US
personnel being killed over in Jordan. Were focus in on what's happening in geopolitics, but we move on what's happening in one key risk Asseler choice here at the technology show, we.
See a little bit of a spike higher in the world a bitcoin.
We're up about one point six percent forty two thousand tround and sixty eight.
We are clawing our way back ed after what has been a bit.
Of a sell off post of course, the Bitcoin Spot ETF coming in fruition.
What have you got on the micro.
Though, the big text story of the day is Amazon walking away and scrapping its acquisition of iRobot. Treading water on Amazon shares because I think we knew this was coming right based on all the reporting of late but I Robot is down significantly because adding to the fact that Amazon has walked away, and this is a case of Amazon jumping before it was pushed by EU regulators, I Roboteo Colin Angle is stepping down and they're cutting jobs.
This is a pretty big situation. We're going to go to Brussels later in the hour speak to our reporter there, and then we'll go to Seattle and get the Amazon side of this story halfway through the show as well. Keep watch on this and as I said Amazon shares, look at the kind of muted reaction, we think that this was coming. The other big mover to the upside is in the earnings context, and that is so FI actually on track for its biggest jump since late July,
first week of August. Why profitability for the first time on a net income basis. This is the milestone that the street was looking for. There's a lot going on on the technology side of sofar's business and a lot going on on the lending side and finance side of its business as well.
Who do we speak to?
The CEO Anthony Notto joins us now and Antie. We've been through this process psychologically that first profit with a number of companies before. What were the main contributing factors to you, guys hitting profitability on a net income basis? And how confident can the street be that you continue on this arc of increasing profitability and.
Thank you for having me on.
The main contributors to the profitability is that we finally reached the scale in our non lending businesses that they are now profitable.
And so we have three profitable segments.
When I joined the company six years ago, we're primarily a lender.
That's a very profitable business for us.
We've entered the technology platform services business where we enable one hundred and forty million accounts throughout the United States and lat Am to do payment processing as well as core banking technologies and a number of other financial services technologies that we use at SO, but we also sell to others. And then our third segment is our financial services segment, which consists of products like Sofi Money, which is a checking the SAME's account, so Fi invests, so
Fi credit card, Sofi Protectors's insurance. Those businesses required a significan amount investment over the last six years. But we've now reached the point where they're forty percent of our revenue in the fourth quarter compared to lending at sixty percent,
and they're profitable. And so that inflection point hit this quarter, and as we go into twenty twenty four, we believe the businesses will be fifty percent lending, fifty percent tech platform of financial services, and with all three being profitable, the profitability is sustainable.
I'm trying to understand that guidance. So you're basically saying fifty percent compound annual growth on the financial services business over kind of this pretty wide window twenty twenty three through twenty twenty six. What gives you the confidence that you can see that far into the future in terms of how your company will grow that segment?
Sure, just to clarify for viewers, I always suggest that will have fifty percent of our revenue from lending in twenty twenty four and fifty percent of our revenue from the two other divisions combined the technology platform segment and the financial services segment. In terms of our longer term revenue growth outlook, we are forecasting seventy five percent growth in the fincial services segment in twenty twenty four and
twenty percent growth in the tech platform. From the twenty twenty three through twenty twenty six time period, technology platform will come down to fifty percent and sorry, technology platform will be mid twenties and the fincial services segment will come down to fifty percent.
And the reason we could see.
That is because we understand our customer acquisition costs, how much we spend on marketing, and that drives the adoption of the products and then they monetize at a rate that we've seen over the last couple of years, and so they're pretty strong meeting indicators of what the future brings from a growth perspective.
One thing, of course, on your call, that you made clear to analysis. Let's face it, no economist has got this economy right in the last couple of years.
How do you feel about the macroeconomy.
Anthony, Yeah, we're very conservative about the macro outlooks. Specifically, I don't believe it will be the case that we could have six rate cuts, which is what the forward curve.
Shows, and a strong economy.
I think if we actually get the six rate cuts, it's because we're likely with unemployment above five percent and likely with contracting GDP. I think it's more likely that we'll have fewer cuts and maybe a stable economy. But coming into October, many market pundits we're talking about higher for longer. Ninety days later, they're talking about six rate cuts. It's such a bifurcation of views. It's really hard to
know what the real outlook is. And so we're taking a very conservative view, and we can do that given the diversification that we have on the lending business and with.
The other businesses.
So we're going into next year with tighter credit and also lower expectations. In fact, we're really just forecasting maintaining our revenue and lending, not growing it, and the other business is driving the growth that I mentioned.
And with that sort of growth, you still have that go all of a thirty percent return on equity, You still have that goal of being in the top ten in terms of financial institutions here in the United States. What gets you there in terms of your underlying investments that you now need to make company sure.
In twenty twenty three, we were able to grow our revenue thirty five percent. We just hit our long term EBIDAD margin of thirty percent, which is what's required to get to the return on equity of thirty percent. Now we just have to scale the EBADAD dollars against our book value.
We grew tamsible.
Book value by more than three hundred and forty million dollars this year, and we're looking to grow it even faster next year at three hundred million to five hundred million, and so the profitability of the business is there. Now, it's about just scaling the revenue, which will scale the returns on equity to that thirty percent level that you mentioned. We've been in these businesses now for four to six years and we have pretty good leading indicators of what
it takes to drive their growth. And that's what's giving us the confidence in our forward outlook.
Anthony, our colleague Paid Smith on the Fintech team is talking about your technology business. Our colleagues at the Bomberg Intelligence they're talking about your technology business. This is the Bloomberg Technology Show. What are we talking about when we say that so far is a tech company, what is the strength that you have there?
Sure, obviously we have to build our own technology.
We're a financial services company with no physical locations and so the only way our products are delivered is through the mobile app or desktop services. So by definition we have to have technology to do that. In addition, we have to have processing capabilities and operating systems.
We use for processing.
A company that we bought, Galileo, back in twenty twenty. Galileo is powering about one hundred and forty million accounts in the United States to do payment processing on debit in ahrails. But also it's developed a whole suite of APIs that allows a developer to tap into those APIs and build account opening or a direct deposit or two day early paycheck or payment risk platform. In addition to that, we have a technology platform that's a core banking technology
called Technical. It's really the operating system for products. It's a multi product platform. We use it for so far by now pay later. Those are the two main products that we sell to third parties, and as I mentioned, servicing about one hundred and forty million accounts in the United States and lat am.
Today, Anthony, I think we've got to talk about the share reaction. Right your gains are holding at around twenty three percent. You know I talked about that psychological, psychological milestone of net income profit. But do you finally feel like you're getting some credit Because you've been talking about this plan for a little while, I have a sense of deja vus. We're talking about the same things now as the two previous times you've been on the show.
Sure, I think that the inflection point in this quarter is one hitting our long term margins of eb adout thirty percent, so that gives people a longer term view on what our profitability could be. Second is forty percent of our revenue came from the technology platform business as well as the financial services business, which means sixty percent came from Monday, and so as we go into twenty twenty four, we're calling for that split to.
Be fifty to fifty.
As I mentioned, that's also an inflection point. People been waiting for that for a while. And so while there's a lot of talk and debate about the loans and fair market value accounting versus cost accounting, the reality is that our business is much more than that, and we're starting to get the perspective from investors about that broader diversification.
And it's not by accident.
We embarked on a strategy to be a one stop shop six years ago for all your financial services needs.
Our mission is to.
Help people achieve financial independence, which means we have to help them get their money right, and we can't just do that in one product. We have to do across borrowing, saving, spending, investing, and protecting. And what you're seeing in our results is that strategy playing out in diversified revenue and high profitability six years later.
Interestingly, not in crypto anymore.
But interestingly, what I'm taken with on a daylight today where we see the Amazon I robot merger have to be put on ice. With your background as someone who help lead the overall investment man King offering over at GOLM and Saxon kN to TMPT when you're thinking of your own acquisition strategy. Can deals get done at the moment in the world of Tear Company, I.
Think they can get done. We're not focused on doing deals that so far. We're focused on our strategy and executing organic growth. We feel like we've reached the point now where it's ours for the taking, and the opportunity for us to be the winner. That takes most is completely up to our execution. But more broadly, I do believe there's still M and A that will happen across
both technology and financial services. I think financial service is probably a little bit more challenged because of the regulatory backdrop than technology is per se.
But deals are getting done.
They're just harder to get done, and they're going to courts, But in court people are winning. I think what you've seen at some of the breakups is really about business performance, not about regulation, and businesses underperforming relative to expectations and therefore buyers being able to get out of those deals.
Nothing like some bars remorse, but for now, we really appreciate the time that you spent talking us, your own numbers and your focus. Anthony NOTO so far, CEO, We thank you.
Amazon has scrapped its plan one point four billion dollar acquisition of I Robot after clashing with European union regulators who had threatened to block the deal. I Robot announced that CEO Colin Ango would also be stepping down as the company implements a restructuring plan that will result in three hundred and fifty jobs being cut. Here with the
latest is Bloomberg. Sam Stulton out in Brussels and Sam, you know, earlier in the show we kind of framed this is Amazon jumping before they were pushed, because we know that the Commission was looking at this very closely and probably would have blocked the deal. What did Amazon outline in their regulatory filing?
Hi ed, well, good to join you here from Brussels this afternoon. Yes, indeed, we were just days away from a potential European Union veto over this one point four billion dollar acquisition from Amazon. The news was really that last week Amazon had held a meeting with EU Commission officials and the EU had signaled that it was its intention to block the deal. There was a deadline of February fourteenth for the EU to come to a decision.
But Amazon seems to have jumped the gun now and decided that it's not worth risking that negative publicity from the European Commission and it's withdrawn from the acquisition.
And of course we've heard from Margaret Vestia before about concerns surrounding Big M and A deals, about where they take it. She just take a listen to what she told the show a few weeks ago.
In any merger, it is so that if we have concerns, it is for the businesses either to address these concerns by debunking them or by addressing them by coming up
with remedies that will solve the problem. If a companies say we will not come up with remedies, well, then of course we expect that they have good arguments that our concerns should not be sustained, and we are still in the process of assessing our concerns compared to a situation where we do not have a remedy to the concerns that we have drawn up.
Sam, it was interesting. We were just talking to Anthony Notto.
He used to be the head of TMT Investment Man can co head over at Goldman.
He's now, of course CEO are so far, but.
He was saying, look, deals that aren't getting done are largely because there's buyers remorse. It's not so much that deals can't get done from your perspective in the Brussels, do you think that's true.
Yeah, I think to a certain extent absolutely. I mean in cases such as Amazon I rode, but the European Commission really needed something almost symbolic to say that it could rub a stampless deal and give it the green lights, and as we heard from Maghareet de Vestaga just said, it clearly wanted some sort of a remedy to be
filed in this case. The deadline for that remedy passed a couple of weeks, and Amazon in fact offered nothing to appease those original concerns from the European Commission when it said back in November that this deal could result in a distortion of competitions on the market for robot vacuum cleaners and also result in higher prices for consumers. So Amazon decided not to come forward with an olive branch or any form of concession in this case, and
really from that point on the deal was dooms. Now going forward, it creates a lot of uncertainty in the boardrooms regarding these large technology mergers. This isn't the first time that companies have withdrawn from a potential deal after getting intense regulatory scrutiny. You may recall recently that Adobe walked away from their twenty billion dollar merger with Figma after getting similar scrutiny over that deal, and indeed they had to pay a one billion dollar walkaway fee in
that case. For this time, Amazon's fee is a bit cheap. It's just ninety four million dollars, but I'm sure it's not lunch money at least.
And certainly not for a company like Hi Robot that now is having to lay off three hundred and fifty people thirty percent of the workforce. And the CEO he goes Sam, absolutely brilliant to get the update from you, Sam Stotton over there in Russell's we thank you me.
While coming up, well, we're going.
To dig into companies that, oh maybe are still in growth mode and wanting to prove it to the public markets. Equity Zen head and market Insights Rihanna Lynch is going to be joining us to discuss on what twenty twenty four holds and whether Reddit is going to make a debut,
and and what valuation this is bruly met technology. Could twenty twenty four finally be a bit more of a year for tech IPOs well look Reddits weighing some feedback already from early meetings, with potential investors coming being advised to target at least a five billion dollar valuation if it goes public.
That's according to sources.
Let's bring in someone who's at cutting edge of what valuations look like on the secondary market, Equity Zen, head of Market Insights, Prean and thench it's great to have you with us, Brian, and well, look, this was a company that raised money, and I think a ten billion dollar valuation going to eke out five billion by some of the maths that you're saying.
It'll be interesting to see.
I think the key here that we don't have the answer to yet is whether or not Reddit is profitable. So when they first made plans to go public in early twenty twenty two, talking about even a fifteen billion dollar valuation, they were not yet profitable. Scrap those plans coming to the market again, and I think that's going to be the crux for where this valuation plays out.
When we look at the cohort of tech IPOs in late twenty twenty three, so the Klavio, Instacart, arm Group, these were all profitable companies and they still had lackluster performance. So at a minimum, I would assume that Reddit is near profitability, but there's no to be.
Learned from their s one profitability key Also, perhaps talking up artificial intelligence, is that what's going to dictate where the companies could come in any sort of window that opens in twenty twenty four.
Yeah, I think any company that can play into the AI buzz will obviously use that. Whether that's a marketing tactic or a key part of their business. Is you know a separate question. I would say, when we're looking at Reddit, we're really talking about their advertising business. You know, as a core social media platform, they generated over eight hundred million dollars in revenue from advertising last year. That's
up twenty percent from the prior year. But there's a lot of competition with TikTok and Meta and others in the space. But I would also say that there is investor interest for these social media platforms. We haven't seen one of them go public since Pinterest back in twenty nineteen, and you know, those stocks have really rallied. Pinterest debuted at ten million dollars and is now training at a twenty five billion dollar valuation, So perhaps they're hoping to jump on some of that momentum.
Brian, how much emphasis do you put on the idea if Reddit does this pulls the trigger, It opens up a broader IPO window for everyone else that's waiting in the wings.
I think a lot of private companies have been waiting for the hero company to come out and have this vastly successful IPO and welcome others to follow. Obviously, we haven't seen that yet. So the companies that are choosing to go public now are taking on a bit of
a leadership role and hoping to play that part. But what we're hearing from the heads of NASE and NASDAC are that there are lots and lots of companies who are starting their roadshows, putting their pieces in place because they feel the pressure to IPO and they're ready to IPO. You know, when you look at Reddit, for instance, this is a nineteen year old company. There is both a liquidity need for early employees and shareholders and just an
investor access need from retail investors is well. So if a Reddit goes well, I think there'll be other companies that look to follow.
Let's spare a thought for Reddit, right, Yes, you talked about their business.
They have a premium subscription tier.
But lots of companies go public because they want their name out there. You know, I don't think we've really been talking about Reddit for a little while. Do you think that that's a good strategy to go to market with?
And I think it's a strategy that could really benefit them, especially given who their platform is. Their Subreddit, Wall Street Bets really started the whole memestock frenzy. So there is a core part of their users and their platform that is around investing, and in particular retail investing. So I think one interesting thing about this IPO to watch will be if those redditors get on board, will you know, redd.
It become the next meme stock?
That would be kind of meta.
But at a minimum is their investor interest from these platform users. So I think, you know, from marketing and brand perspective, this ipo chatter is helping to get their name out there, and whether or not they will translate to investor interest, we'll see.
Brian Lynch, head of market insights at Equisyzen, thank you so much. As we point out, five billion would be half the ten billion they raised that last year.
I'll come back to Bluemore Technology.
I'm Caroline hard in New York and I Ed Lovelow in San Francisco, carry you mentioned earlier in the show. We're kind of treading water on the Nasdaq one hundred right because it is a mega week for megacat tech earnings. That is what your calendar looks like for this week. Join us on bloombog Technology every single day because we will look ahead and we will review ten trillion dollars of market cat reporting this week, and those are the names that move the needle right across everything from the
ad space, consumer tech enterprise. It is going to be really massive, and the AI story I'm sure will be weaved within that. Amazon's trusting Thursday, but they're in the new cycle right now. Looking at the shears, we are completely flat on Amazon stock as they scrap that one point four billion dollar deal with iRobot.
Or to acquire ier Robot.
We kind of knew this was coming, right, Bloomberg's done a lot of reporting on the European Commission probably likely to block this deal anyway. Amazon moved first, but from iRobot's perspective, the CEO Colin Angle is departing and three hundred and fifty jobs or so will be cut. I guess the question is, well, does Amazon lose anything by not acquiring iRobot. That's a tough one.
Answer.
Well, we've got the right person to ask right on this scrap deal. Let's go to Spencer Soper, who covers Amazon for US. And Spencer, the idea is that maybe this deal didn't get done because there's a bit of a buyer's remorse here.
Do you feel that that's the case.
Yeah, I think that's definitely a sharp point. Like if Amazon felt it was worth fighting for it would fight for it.
They fight for things.
So the fact that they're walking away and of course they're going to take their wipe the at the regulatory agencies and you know, while they're doing it, but really just looks like maybe the enthusiasm around this deal is softened. If you think several years ago when they were really going heavy on their on their connected devices and Alexa and there was all this buzz around the connected home and that sort of thing. A lot of it's just kind of faded, you know, these things seem more fetish.
You know, I don't know.
I've got one of these robotic vacuums in my house. It just sits in the corner.
We never use it.
It makes a racket it, you know, I just say give me, give me the vacuum. I'll do it myself.
I got too you know, and I was always always being deployed.
Yeah, it takes, it takes too long. So I do think that there's there's something too that Amazon. I was kind of happy to have a reason to walk away from this one.
Okay, sus Spencer, You and I always try and think holistically about Amazon. When they do something, it's often to bring it into the wider ecosystem on Prime or Alexa. That's harder to see with iro robot. But your latest place on Bloomberg is about ads and turning televisions into shopping carts.
Explain your thesis.
Yeah, well, so Amazon turned on as on Prime Video. They're expecting us to reach one hundred and fifteen million people in the US each month, and they're they're kind of a late comer to the ad supported connected TV, but they'll be a big player.
And they'll sell a lot of ads. But if they're really going to.
Win here, it's going to be to get people to engage with their TV. And that's where Amazon is in a stronger position than anyone else because it's got the online store behind it.
It can you know, feature all.
Kinds of inventory, and potentially if you get people to watch TV in a different way, potentially people will actually shop from their television. Maybe you know, scan a QR code on the TV and get taken directly to a product page on their on their Amazon app, or even through inaudible tones. You know, your your television will be sending messages that you can't really hear, but your mic can pick up on it and take you to that
page in your shopping app. So I think if they're really going to differentiate, they got to get people engaging with the television.
The story on Bloomberg is titled Amazon's video ad push aims to turn TVs into shopping carts. It has those charts that we just showed you. Check it out Bloomberg. Spencer sofa with the reporting. Let's keep a conversation going with Melissa Verdict, president of the ad campaign managing platform Packview. And you just heard Spencer's reporting. Melissa, we showed you the data in the charts. What do you see Amazon doing in this kind of conversion of eyeballs through the screen to.
Ads to shopping baskets.
Yeah, just to add to what Spencer said, Amazon has a huge advantage with all their rich retail media data, so not just being able to have shoppable ads, but the ability to retarget people. They know what you bought, they can show you the best ad. If you're in market for baby bottles in formula, you're a new mom, can they can share and show you the most relevant ads and that has better performance. And right now advertisers
are really cracking down on performance. They want to make sure that their advertising dollars are as effective as they can be. So Amazon has such a great advantage with the ability to have rich retail media data, real time sales information, and show you the most relevant ads.
You've got what thirteen billion in ads spending to oversee it? Digital marketing company, patfew, how many of your clients? How much of this sort of money is going to be put to Workconomason do you think?
I mean, this is a very new product, so just keep that in mind all of our we have a lot of clients that are starting to use this new product. And right now it's kind of the big brands that are starting to use this. But Amazon's ambition is to bring this to the SMB, to the smaller brands, mid market brand kind of democratize the ability to get this through self service, so you don't just have to go
through a through a party or an agency. They're bringing this to the masses and so that's kind of also compelling, and that not just big brands will be using this, but ultimately everyone can can get into this space.
Showpabowl TV is something that age is taken to with fools. Just's still a bit uncomfortable about the whole situation. Is this something that will just organically spread? And give it five years and I'll forget that I ever thought that this was a weird thing.
Today right now it is weird.
I mean, you see QR code are going to whip out your phone and you know, take a picture of it and go shop when you're watching movies, so that that experience.
One, we're gonna have to get used to it.
Two, Amazon will continue to innovate in a space and then three during temple events like Prime Day and Black Friday Football. I don't know if you watch Black Friday Football this year, but there are QR codes all over the place, and when you're sitting on the couch, you're you're thinking about shopping a QR code that's that's more relevant to you, So you're gonna You're gonna go ahead
and do that. But when we're sitting there watching a movie and in the middle of that you see QR QR code, Are you really gonna you know, have that desire? And that is going to drive innovation and change one is changing the mindset of consumers so we'll.
Get more used to it.
And then two is just the formats will change. It'll continue to so you know, Amazon has this day one mentality. They're going to continue to think about how can we bring this to consumer that they're going to want to use it.
Melissa Verdic love having on the show. Thank you for President of pat Few always interesting stuff. Meanwhile, coming up, we're going to be talking about how, oh, there's a sort of a depleting number of public companies out there at the moment. How is that impacting VC strategists and strategy more generally, the Hippo is going to be joining us Managing partner Eric Heppo stick with up for us as a Bloomberg Technology.
The world's largest private equity firm, Blackstone is setting its eyes on AI data centers and it's on a quest to become the country's most sought after landlord, too big tech and the world's biggest by power capacity. I want to bring in Bloomberg's Carawetz, or want to buy editors here in San Francisco.
So this is interesting.
We're talking about Blackstone becoming an AI player, and we know all about the compute capacity needed and cloud capacity for training and inference on the other of m side. But what we're really talking about, I think, is Blackstone investing in and controlling the real estate essentially exactly.
So Blackstone is a huge real estate player. It's the biggest part of its whole firm and the biggest business. And it's actually known for you know, kind of going into these industries and identifying where there's a shortage of space relative to demand. And so it's done this with warehouses when it saw the e commerce boom has created
a big warehouse empire. It did the same with single family homes for housing, and now, you know, a few years ago it started to see all the demand needed for data centers and the coming you know, electricity needs that are coming. So it bought QTS Reality Trust in twenty twenty and kind of got really lucky by sort of the rise of generative AI that really just made
demand explode. So now it's going all in on this bed, giving QTS a lot of money to rapidly expand and become, you know, the biggest data center provider in the US.
Yeah, ten million dollar takeover all the way back in twenty twenty one. Coming home to Roostcar, I'm interested in where where this route to state footprint ends up being, Oh, we're losing some technology behind you, But tell us a little bit about where which states where looks appetizing to build out.
Well, one of the biggest areas is in Phoenix, and they have a really giant data center there. They're building five buildings that have a giant complex that's gonna be sort of the crown jewel. We have a reported that Microsoft is gonna be one of the tenants there. There's another part of Phoenix that's four hundred acres they're trying to develop Northern Virginia, which has of course long been a data center hub because it's where interconnector intercontinental fibers connect,
so it's a high speed area. So they're growing there. There is a big project underway called the Digital Gateway with Blackstone and Wakefield trying to build a new data sen corridor in Manassas, Virginia that has been the subject of some pushback from residents and backlash and sort of in process now. But those are some of the main growth theorists, but really kind of different spots across the country.
Well, maybe everyone wins a little bit from this AI focused Caro. We so we thank you so much for that really well read story currently on the Blomberg terminal and on dot com.
Meanwhile, and let's.
Talk about AI opportunities more broadly and what it's doing for the VC segments.
We've got VC Spotlight and I'm.
Going to look at that, oh with Narra Hippo Managing partner Eric Hipoe. It is great to have some time with you tech Day, Eric. And before we go into the landscape of public versus private, I want to ask you about, well, where you're putting your money to work At the moment, you're doing deals, much of that in AI.
Here in New York, we're not doing pure jen A ideals at the moment because they're too expensive and there's too much of a frenzy and it's hard to tell exactly to pick your winners at the moment, what's going to end up on the maid LM platforms, the big tech companies, and what's going to be a stand abone company. Having said that, the great majority of the companies that we we invest in these days are really data driven companies and so they employe AI in many, many different fashions.
So we're doing a lot of that. We're doing a lot of animation, We're starting to do quite a bit of climate and clean technology, asset light, mostly in the electrifications phase. And we continue to do a lot of healthcare, both on the consumer and on the enterprise level.
At the enterprise level, and we're.
Making some new deals that I've seen on your website. Also got a lot of things in Steff. I'm interesting in your own expertise and what we all know Eric Hippo for is, well, how much experience you have in the world of media, and with the fact that you're in new offerings like now this news, but the fact that you really built up your experience having been at the likes of well, I think at the Huffington Post. How much is AI going to play in to the future of media?
How much is it decimating it?
We haven't really done a new media investment now in a number of years, maybe two or three or four years. And one of the reasons is that media is in shambles at the moment, as you can tell from all the layoffs that have been happening to tell from the switch and the big platforms in the video, from broadcast and cable to streaming, and so all of this kind needs to settle down.
And to your question, AI is going to have a big.
Role, good or bad in the media space, and that's still to be determined. What is an AI driven story? What is true, what is not true? What needs to be copyrighted, what shouldn't be copyrighted. All of these questions loom really large in the media industry, and it's going to take a few years to sort this out.
Eric, good morning from San Francisco. We were just showing some of your portfolio companies and I was interested in what you were saying about electrification and asset light model. But one of those names is Zipline, and I'm always curious about Zipline. I'll always bump into Kellernaldo, the CEO at some valley. Is it lining an IPO candidate.
As if I will be an IPO candidate given its size and its scale and it's growth, it's growth trajectory. You just saw that they announced a really big deal with Walmart to serve the Dallas area with their drones. That's that's it's it's a you know, we're beyond the pilots stage.
We're beyond the trial stage. We're now at the stage where you can actually.
Implement these kinds of deliveries and you could do it on scale.
So we we've been talking a lot on the program today about Reddit. You know, we understand it's it's talking to the bankers and talking to its investors and saying, if we IPO, where should we do it from a valuation perspective, And it's looking like five billion dollars is about right down from the ten billion where they last raise or.
Valued last time.
But we're trying to understand if it's a starting gun for the twenty twenty for i PO window. So give me the Eric Kippo thesis and outlook for that this year.
Yeah, Well, you know, there's there's there's nothing like the truth about then then going public. Uh, and you know their reported revenues are about the billion dollars, So five billion dollar valuation of five x on that seems reasonable to me.
Obviously, with there's a lot we don't know.
We don't know the growth rate, we don't know the bottom line that well, so it could be it could be a little bit more than five billion dollars if the growth rate is higher, and if if the.
Company is profitable.
But but five at the moment, given what we know, seems like a reasonable evaluation.
What's so interesting is we get this breaking news across the IPO sphere. At the moment, Eric and I'm looking at how Reno, European company. They built a sort of spin off umpire, which is an only They called it the only European evy and software pure play. That intention was I PO this unit. We now learn that they are not going to be seeking an initial public offering in the near term because the current equity market conditions, basically, the evaluation isn't going to be right and there's too
much volatility. How much is that going to be the theme of twenty twenty four More broadly, how much do you worry that that this window isn't going to open?
Well?
This has been this is this has been the problem with the IPO market for for a number of years now, with the exception of two years ago when we had the SPACs and all the SPACs and and and kind of the failure of.
The SPAC structure, and we're back.
To kind of like the dol drooms when it comes to to being able to go public, and and and and that's that's really dangerous. It's it's obviously dangerous in my business because we expect, you know, an exit, whether it's M and A or an IPO.
But I think it's dangerous on a broader sense.
We we now have less than half of the public companies that we had the mid nineties and mid nineties there was a little bit more than eight thousand public companies, and I'm talking about the US, and today there's less than four thousand, and that number keeps shrinking. So what does it mean to be in the world where we have fewer and fewer public companies and it's very hard to go public. I don't think. I don't think that's favorable to the economy.
Eric, this is VC spotlight, and the story of twenty twenty three was a drop in activity, right volume or dollar perspective for venture back deals. But there seems to be some kind of like stabilization. At the start of the year, AI had such all of the very little oxygen out of the room. Are you back to kind of writing checks across a broader range of sectors?
Now we are, and we've been back, i would say since mid last year. And for us, it's not a question of lack of opportunities, because we see thousands of new companies every year and we make you know, we typically make fifteen to twenty new investments every year. In good part it was because the valuations we're still too high. And remember we're seed investors first, so we are very early investors and getting started with the right footing, on the right footing, with the right valuation.
It's critical to what we do.
And what we're seeing now is that there's much more you know, realism in the world in that world, and people are being more you know reasonable as.
Far as valuations are concerned.
So we're back on track in terms of making the you know, our regular number of investments. Where the market is still kind of like shot is on the late stage. So if you take if you take serious c's and beyond, it's it's very hard to get a company financed at that level. Whether that opens up again in twenty twenty four, it's it's too early to.
Tell, all right, Larry Hippo, managing partner Eric Hippo, a lot of experience and a broad conversation.
We really appreciate it. Thank you.
A little bit of.
Breaking news when it comes to the shares owned by Delivery Hero of Delivery, which is a UK rival in food delivery. Delivery Hero will be selling up to sixty eight million Delivery Class A shares we understand. So there's gonna be some supply pressure on delivery shares in the market after the market close. Of course, that occurred about twenty minutes ago, So some European action when it comes
to food delivery. Meanwhile, let's talk about social media at the moment and what's happening right here in the US and more broadly worldwide. Because the site X it's currently blocking some searchers to Taylor Swift. That's after pornographic deep fake images of the singer, well, they've been circulating online.
This is as consumer protection is front and center at social media giants, with X CEO Lindi Yacarino and the CEOs of a number of other technology companies actually scheduled to appear before the Senate on Wednesday to testify about protecting children online, in particular, joining US now from Washington is ruly bad social media report, Alex Birinka.
And you've really already been incredibly.
Busy with twenty twenty four and deep fakes, whether it's a voice of Biden or whether it's fake pornography involving Taylor Swift, and there's just no regulation for it.
Certainly, January was the month of deep fake AI videos on social media, on the heels of the Taylor Swift explicit images going viral on X last week. We really got to see kind of the slow nature of chasing and taking down some of these images and videos on social now that these tools, these AI tools are really cheap and easy to get their hands on. That Taylor Swift debacle on Wednesday was just days after robocalls of
Biden went out to New Hampshire voters. They were obviously fake, and they were urging voters to hold their votes and not go to the polls, which is not how the election works here in the States. So we are starting to see kind of the real implications those of US
in the tech industry. We've been seeing this happen across the Internet, but this past month it seems like the public is really getting to see some high profile examples of what happens when AI hits social media with bad actors trying to put out either fake or damaging information.
Alex Azo go ahead to Wednesday. What is the aim of this committee hearing? What DC want to get out of it?
Well, the CEOs of Meta, x, Discord, TikTok, and Snap will be at the Senate Judiciary Committee on a hearing focusing on child safety. Now, just before this hearing last week, Snap was the first tech company to actually come out in support of the Kids Online Safety Act, which would put in regulations to protect kids online. But this is not my first hearing, and I can tell you, guys, I bet there will be questions that are outside of
just kids safety as well. TikTok and its Chinese parent owner always is a hot button issue, so we might see some questions directed to the CEO of TikTok's way around China and data protection. And also, guys, after this deep fake debacle on X, I would expect X CEO Linda Yakarino to get some very pointed questions, particularly around why some of these posts got forty seven million views and took almost a day to take down.
Aksperanca, we thank you so much for the latest on the reporting across all of that.
Meanwhile, that does it for this edition of My Technology.
And yeah, don't forget to recap on the podcast wherever you get your podcasts, Apple, Spotify, iHeart and all the Bloomberg platforms. This is Bloomberg Technology.