Technology and Investing In Ukraine

sides of this fight from Ukraine and Russia. We'll talk to two tech employees on the ground and the role of crypto and the Russian invasion and how crypto exchanges are navigating the crisis and sanctions. Will get the view from Crack and CEO Jesse Powell. As we continue to cover the situation in Ukraine, we are talking to tech

leaders and employees where it's hitting closest to home. Today we bring you the stories of Matthias Clink, CTO and co founder of past Base, who is working around the clock to help employee stuck in Ukraine, as well as Russian employees who have fled the country. Also joining us in Samir, a product designer at Salondo who's also a Russian citizen. And relocated to Germany back in August, but

still has family and friends in Russia. Mattias and Essa, thank you both so much for joining us and as I want to start with you, you decided to leave Russia months ago because you felt this tension escalating. Your parents are still there, your friends are still there. How are you doing and how are they doing? Um? Well, thank you for asking. It's it has been complicated, of course, so I hope for the best. That's what I can say. President Putin, we're hearing could soon declare marks a law.

He is already cracking down on the media. This means that, you know, the borders could be closed. Um, it could be more difficult to protest illegal Uh to protest. I know one of your friends I believe, was arrested for protesting. What do you think, What do you think about all this? Well? What can I think? Well, it's it's it's awful. It's just awful. So I cannot fully believe this situation is happening. So, um, we all in the country I think just missed this point.

When this the things get so bad and so wrong. Mattis, you have both Ukrainian and Russian employees You've got Ukrainian employees I believe who are still in the country and Russian employees who have left. How are you navigating all of this and the challenges that both of these employees are facing. Yeah, it's, um, of course, like a very tough situation. UM. I think what we do in the first place is really try to support our team members

with like support and safety. Basically, some of these team members, UM, since they're like currency got like incredibly devalued. Basically all their life savings is like are basically gone. So we're like working with them of course in ensuring that they still can get their like salary even though some of their like financial institutions now are on the sanctional list. So this is like one one part of course what we do for our Russian team members and in helping

them and providing them safety. And at the same time, of course we're working both with the Ukrainians and Russians and helping them to relocate if they want that. Um, some of them can't, so, especially like the ones who are in Ukraine, UM, they're basically sent back at the border and almost called to arms and told that they have to fight. And it's of course like a very

test situation for them as well. So that's in that sense what we're trying to do is um how helped them at least um to stay and find a location where they can work from you like see that they can have access to internet, um and and just like trying to somehow manage the situation with them together. You're a young startup, I mean, are you saying that these employees they're still working, they're still shipping code, doing their jobs in the middle of a war. Yeah, this is

pretty much insane. It's about like thirty of our of our engineering team as either Russian or Ukrainian, and you can imagine probably that the productivity is far more than like even more impacted by that. And it doesn't even stop there, you know, like we have team members also in Buphrenia and some countries close by or human Germany, um and pretty much everyone here in Europe is like

heavily heavily impacted by this situation. And on the one side tries to support our team members who are like literally in the midst of this, but also we as like a leadership team of course provide um um the space that they can show Basically um, their support for them. And and also um, we canceled meetings that they can go on protests for example here in Berlin. So this is at least the minimum what we as a company can do is creating the space for them to to

so social engagement here. And as your friends who are still in Russia, your parents who are still in Russia, are they trying to leave? Do they want to leave? Do some of them support this war? I know many many people do not. Yeah, that's true, many people do not support the war. And none of their friends and my family, none of the people if my clothes circle

is support. But I hear the stories also from some of my friends that they do not speak with their parents anymore because the parents see it tends to see the situation differently. So um, and yeah, the majority of people is trying to escaped Russia right now, I would say that almost how of my closest circle managed to escape in Armenia and Georgia and closest countries. Of course, it's not that easy with my parents because they had already they retired. Um, so I don't really know how

to support them in this situation. So um, But yeah, these sanctions are getting tougher every day sanctions coming in from them around the world. How is this impacting everyday Russians? Obviously the target is wealthier Russians, but how is this impacting the people that you know who maybe had nothing to do with this? Yeah, that's that's true. It impacts people in every way. So basically, my parents lost almost all of the savings just basically overnight or in the

in the course of livel last week. The same I can say with some of my friends also, a lot of them was receiving their salaries in Russian troubles. So also with all this situation, with the companies starting to prove stopping to provide their services in the country, Uh, we can already see a lot of change, and I think it's going to be only more of them unfortunately, Mattias, is there any way that you can describe ideologically how this is impacting your company, given how much of your

team is Ukrainian or Russian and how emotionally difficult this is. Yeah, and so absolutely. Um. I mean what we also offered is of course mental health support to all our team members were affected by that, and um it's it's just like a really tough time, and um, I think we just need to help key members really to go through this this tough time and help them and not only them but also like their relatives, um to come to Germany if it's possible, and relocate them if they want that.

But it's it's just like such a such a such a sad thing, what's happening right now, And it's it's at the same time, you also feel like a feeling of like powerlessness, um because you only have like very limited impact on that here from from from from Germany. Basically, how concerned should we be about the tech industry given the deep bench of tech talent in this country, in both of these countries, and the fact that they these people are working for companies global companies around the world.

Are are you worried for? Uh? You know the supply, You know that the great talent that all of these developers and engineers and product designers UM possess and have to give back to the world. M So, so what I think what is going to happen likely in the next coming of weeks is of course that more team members will try to either leave Russia and Ukraine to more western European countries and I think this is also what in as I just touched upon that some of

her friends already tried to to leave. So I think in the short term this is of course there's like a high impact, especially for teams like us who have um a lot of team members in one of those countries. Um. Long term, I think, and this is already what we saw from the European Union, which I strongly welcomed, is that we are like very very like friendly towards giving

visas towards those people impacted by the situation. And um, I think this is absolutely the right move to to like protect civilians and allowed them basically to escape from this tragedy and and bad situation in those countries. And as you have leafter country, your parents are still there, your friends are still there. How do you see your near future? How do you imagine this ending? That's a tough question. Um. Of course I will try to help my friends to escape. I helped them to get the

job in Germany. Um, with the parents, it's much difficult because as I sat there in the or quite an old age right now, my only hope right that when this situation would started to decrease, I mean the heat of it. Um that maybe some countries would will still open their borders. We'll still have the old borders opened with Russia, and I can at least, um like, invite my my parents there and we can meet during a short vacation. That's all I can hope or right now

probably no more. Do you think you'll ever go back to Russia? Um, that's also a tough hian. I don't think so. Like so, I wouldn't say like never, but unless this regime is um is in power, I would rather not too. I would go there only if I definitely have to do it, like I have some family

business to do. But personally I'm afraid of my safety if I would go there, I would I cannot be sure that I can get back to Germany and as a mere product designer at Salando, Russian citizen Matias clank Cyto and co founder of past Pace, thank you both for joining us for sharing our story. We hope that you both stay safe. Much more coming up Bumbloomer Technology. Stay with us. This is Bloomberg. Welcome back to Bloomber Technology. I'm emily changing in San Francisco. How our investors hedging

ge political risk in Ukraine are crety. Gupta has been digging into that crety. What you've seeing, Yeah, I mean it's a pretty straightforward trade here, Emily. You are seeing the surging oil price surgeon commandity prices, so naturally you do get that exposure in the stock market, but you

will also get it through defense names. It breaks pretty set a lot of sense as you start to see a lot of these European nations really ramp up their defense seeing some of those lessons from Ukraine, Naturally they go to the number one maker or export i should say, of defense kind of companies now, of course, as the

United States. So check out this e T F the three major e T s. You can see the flows have just skyrocketed, going back all the way two years, moves that you haven't even seen during the trade war between the Nine States and China. But this isn't the only kind of defense they're looking at. Emily. We are on day nine of the Russia and Ukraine war, and you can see very clearly people are betting on cyber security as a really key piece of that defense strategy.

And of course we do know that Russia does have an upper hand. They are very strategic in using cybersecurity measures. That has been one of their criticism in the past. So if you actually look at the stocks coming we're saying the past two weeks, for example, you can really see that these uh names, names like Paula Alto, crowd Strike, that really kind of specialized in cybersecurity, they're the ones

that are getting the bid. Basically an assumption that a lot of corporate America is going to start looking to cybersecurity names to ramp up their own defense systems. Emily, Okay, pretty, thank you for that round up. Meantime, the tech world has wasted little time announcing plans to cut business ties with Russia over this unprovoked invasion of Ukraine. Just this week we saw Apple, Oracle, Disney, met At, Spotify, Microsoft, just to name a few. But not everyone is following suit.

Earlier this week, the CEO of we Work had this to say on Bloomberg. We have just four locations in Moscow. We're doing incredibly well. We are as a right now over nine de percent occupied. It's a small part of our business. Uh. You know, the revenue is about top line revenues about ten million dollars on our base of several billion dollars, so it's a very small part of our business, so you know, not much of a financial

low business. In back to our business. Since that comment, we Work announced it's partnering with the UN to help the more than one million refugees who fled Ukraine, adding it's also offering flex space across Eastern Europe to displaced Ukrainian businesses. However, we work still operating in Russia. I want to talk more about all of this with Alfred Trong, general partner at Race Capital. Alfred, I want to start

a big picture we are witnessing. You are no stranger to witnessing global conflict and the impact on global and local economies. Just how chilling do you think the impact of this invasion of Ukraine will be on the global economy and on the tech industry. Emily, thank you for having me back for good to steal um. Well, this this is a very personal metaphor me because I when

I will see you a b a system. Uh. In September eleven, we lost the employees one of the Towel, one of flight and free so um, I like a part of me have ever died when those kind of things happened, And I have to be the one to call it a family. It was very very tough time and you know what these are chilling experience and memory. So for me, UM, I think this impact is going

to be a very long term and very big. UM. I've been wanting our own companies and also that will have offices and employees in the Ukraine for quite sometimes since early January, to take measure and set a backup plans for having backup offices in neighboring countries. I think, goodness, at this point, I have we have everyone accounted for and they have now since safely have been in moved to safe places and they continue have been able to

resume working. But it's an extremely scary time. Money has been pouring into startups over the last couple of years. Do you think that's going to slow down? UM? I think UM likely not because of justice invasion. UM, without any doubts. UM. We are going to be seeing, um, some of the softening and the ipeo market. You know, some people believe the ipeo market is temporary close so when you have liquidity kind of all sudden drying up.

We will be seeing some late stage deals softening up on valuations or maybe even having some early signs of you know, difficulty and fundraising, but it's going to take a long time before it trigger down to the early stage deals. In particular, I think most of the venture investor have raised a lot of money for at this time, so we have a lot of dry power to continue

to invest in companies. Um the view of investment those company obviously over time will change, you know, because think about this like our own company and that web that buys them like take to take everything about the sanction very seriously. So if they are selling two Russias, they will have to be very careful and we have to assume some of those customers will have to say goodbye to so that will have impact. The European market has been extremely hard for early stage slide of for the

last fel of months. There's no doubt that will be impacted in this coming year, you know, the rest of twenties two, So those impact we're going to be feeling pretty well. So full startups, I all advise them to be careful with their cash and to have you know, ample run ray and be careful if they want to be going out to fundraise, to do it early and do it diligently. Now. We just went through the list

of businesses cutting ties to Russia. I spoke with Brian Chesky, the CEO of Airbnb, just a couple of days ago, and asked whether or not Airbnb would cut off service to Russia. Take a listen to what he had to say, just a couple of days ago. Are you willing to consider uh, you know, tougher self shanctioning in Russia, even though you know, you know it sounds like hosts are limited right now based on what they can do, But would Airbnb consider going so far as to cut off

the service. I think all things are on the table right now, so we're really focused right now. I've been working around the clock with the team to try to figure out how can we have a hundred thousand refugees from Ukraine. But we have another team working with local governments and really trying to answer these questions. And if

we have an update, we'll certainly let you know. Brian Tansky tweeting last night that Airbaby is indeed now cutting off service to Russia and Belarus, is this something that you think all companies should be doing? Well, that's that's definitely the advice I've been giving to your own startup CEO. So we actually most of our company have come to

me over the loss Um weekend. In particular, we're seeing open source companies seeing huge amount of package download from Russia and some of the see what was calling me and said what should I do? So I've been advising them as at this point in time, you must block because we honestly don't know how to sanction you know, where does it lie and what our responsibility of. But you know, we also have to play our part right,

so what is right has to be right. I mean, this is a time where we all have to step up, you know, to have more engages to know what's the right thing to do. And one of the thing I would like to add though, the Russian people are innocence right, so most of them they have nothing to do with this wall. So we we we've got to be very careful we don't ended up discriminating. Many of our friends that are good friends are doing the right thing that Russians,

so we've got to have that distinction, very very careful. Right, there's a line between you know, a fine line between who is this affecting and clearly these sanctions are impacting a lot of everyday Russian citizens. To that point, how much money is in the venture capital ecosystem, how much Russian money is in the venture capital ecosystem, and should founders be questioning whether to take that money, should they

return that money? Yeah? So for us obviously for us, we have never taken any of the Russian money um for our fun for the people to invest in our fun. I'm sure that through this time they are people that directly and directly have invested into venture capital, directly in

the direct us in the companies over this time. But I think those are the things where we need our government to guide us to know what's going to be that lining and money that they have taken to actually ingrained in the spending of the company, What do we do with them? Those obviously are not for me to judge. Those are actually we need um guidance from the State Department and you know exactly what to do. I mean,

we we've seen this movie before. We have you know, the serverest, you know when we have shut down, you know, funding from China and then I think overall very smoothly industry and also you know the tech companies were able to direct very quickly and we'll be able to tuck right in line and be able to comply to all the all the needs. At this point in time, I think we're still too early. It's very chaotic. I think the most important thing to do is to worry about

the people. If we have employees, when we have companies, we have founders who have to make sure that them and their families are safe. That's job one. What about venture capitalists? Venture capitalists are very powerful, They've got a lot of money. They're typically more quiet. Should they be taking action cutting ties? Uh, you know, pulling people out of funs, you know, cutting off partnerships. Um, Actually, I think some of them must not as far as you think.

I know that I have good friends. You know, they've went very large funds, They've been very active, They've created email. It is, there's a lot of actions have been taken to help the Ukrainian people, you know, during the situation. Now, I'm sure that I think in the days and the weeks to come, we're gonna see actions from venture funds of taking actions. You know, also in terms of sunctioning what the Russian money coming in. We all have to do our part. It can be just you know, at

a very very macro level. You know, I think at a fine green level, we all have to do our part. I'm sure this is coming. Alfred Trunk, Race Capital General partner, thank you for sharing your prospective here with us. Coming up, we're gonna be doing my crack and CEO Jesse Pale a deep dive on the role of crypto in the Russian invasion and the Ukrainian resistance and how is crypto exchange is navigating the crisis and calls to cut Russia off.

This is Bloomberg. The crypto industry has gotten a lot of attention after Russia's invasion of Ukraine, some government officials wondering whether Russia or the country's tycoons might be able to skirt sanctions using crypto, and Ukraine actively seeking donations via digital assets. But finance, coin based cracking and more have come out against blanket bands on Russian users. I want to bring in cracking CEO Jesse Powell for more on this. Look. Jess, you've been very clear that cracking

won't freeze the accounts of general Russian users. Given the events of the last twenty four hours, Putin's escalation of this war. Does your position on that still stand? They still stand? You know, It's it's really hard to know as a private business, you know, which doesn't have a major global geopolitical analyst function inside of trying to evaluate

these these situations play by play. Um. You know, we look at our role as being able to follow executive orders from the White House, being able to follow O fak and and sanctions coming from the government. We're very happy to comply with those. We've got a long history of working with governments and law enforcement. Um, but to ourselves just decide to impose account freezes on individual Russians who probably don't support this invasion. I think it's a

bit a step too far. And you know, it's freezing someone's finances is more than just sort of stopping selling them shoes or uh, photo filters. You know, it's it's a pretty extreme measure, and uh, we won't do it until, um we're forced to do it by the government. We know the Department of Justice is going after luxury assets of Russian tycoons, including crypto assets. Have you been contacted by enforcement officials? Are you cooperating and what do you

think the role is of exchanges in that respect. Yeah, I mean Cracking dealt with law enforcement requests last year. UM, so we're in regular contact with with law enforcement and regulators and governments around the world pretty much at all times. You know, we get more than ten requests per business day, so we're actively in communication. We've got a seven compliance team of over six hundred people who is monitoring the situation and ready to respond to sanctions or any kind

of executive order coming from the government. UM. As a US based company, we're obviously following the rules of the United States, and so when we hear from the government that there's something to do, we will comply and and we'll do that. Do you see the legal risk though as escalating? And are you consulting with officials actively to assess that and figure out what Cracking should be doing. It's it's an ordinary course of business for us. Is

not really anything special to do here. We're monitoring the situation. UM. You know, we're sort of passive here and that the government can contact us at any time. We have regular contact with the government, UM and many governments around the world, and so UM there's not sort of an active dialogue going on about what we're going to do outside of

any kind of formal regulatory requirement. Now ch Analysis is reporting data that shows Russians residents and sanctions hit Russia, they're not in a hurry to trade on crypto exchanges. Is that what you're seeing? What color can you give

us on volume and liquidity? Well, you know, cracking doesn't have a ruble market, and so if Russians did historically want to get money into Cracking, they would have to be going through the Euro or the dollar, you know, generally through the Swift wire system to get money in. And now that banks are shut off from Swift in Russia, it's going to be very hard for people in Russia to get money out of the country and into the global crypto ex changes. So I think they're gonna have

a tough time there. Um, we haven't seen much activity coming out of Russia. You know, people might have already had their money in cracking. They're still free to trade it, they're free to withdraw their cryptocurrency out of cracking, but um, there hasn't been a lot of activity, and I think that's largely due to to the sanctions that are in place now on the banking system. People just can't get their money in and out of the country now. And

what about crypto going in and out of Ukraine. Obviously we know that uh Ukraine has raised millions of dollars worth of digital assets. What kind of volume in liquidity

are you seeing there? Yeah, huge ticket activity around the Ukraine. Obviously, tens of millions of dollars have been donated directly with cryptocurrency, and I think that's an amazing story to follow that the government has directly raised money from all over the world to to finance the defense and people are able to through through crypto crowdfunding, able to to support people

directly without any sort of intermediary um. And you know, we saw something similar in Canada as well, when when the government of Canada sanctioned its own citizens and turned off protesters from the banking system. Cryptocurrency was there too to continue to support people and be that financial rail of last resort, you know, where the government had provoked those permissions. Ukraine is calling for more crypto donations, not just in the form of bitcoin, but does and tether.

We've seen some mixed results here. Do you see the scope of digital assets as a force for good or is it more complicated than that. Definitely a force for good. I think currency choice generally is a force for good. I think the um the sort of d weaponization of the financial system is a good thing. And you know, we look at sanctions against Russia as generally a good thing, a good way to to non violently, non physically respond to uh, you know policy that we don't like. Um, well,

those those same weapons that we impost on Russia. The sanctions can also be imposed against your own citizens, and we've seen this happen in many countries around the world, obviously Canada most recently, but um. You know, often regimes turn inward against their own people. And when that happens, Um, once funds are frozen, it's very hard to leave that situation. And so cryptocurrency is something that sort of exists as

sort of cash under the mattress. UM. You know that you can take with you if you want to get out of a bad situation. If your bank account has been frozen without due process. You know, when your funds are frozen without due process, that means it's on you to go back and fight to get that back, and without any money to do that, you know, you're worried about feeding your family. You don't have money to pay a lawyer to try to go get your money back

that's been frozen in your bank account. So I think a lot of people are looking at crypto now as as a sort of backup plan, you know, as an insurance policy against their government turning against them. What's your take on the macro risks right now, though, What are you most concerned about, especially as it pertains to cryptocurrency. I know you and I have had a lot of conversations about price and bitcoin going to the moon, in your words, and we've certainly seen bitcoin rallying but then

also pull back. Are you concerned about the risks to crypto given what we're seeing in global equities? No, you know, I think I think you just look at the long term tenure chart of bitcoin, and you know, it's outperforming everything else in the world, So I'm not worried about it.

And these kinds of geopolitical problems you know we're seeing with Canada and Russia are great examples of where bitcoin really shines, you know, outside of being a speculative asse at it's really solving real problems for people on the ground. And I think the more people are going to see that, and it's going to become an even bigger thing as people look to bitcoin as a safe haven. Crack and CEO Jesse Powell, Jesse, always good to have you here.

Thanks for sharing your perspective with us, appreciate it. In early March, Apple plans to unveil an iPhone SC with five G, but the big announcement should really be a significant price cut to the current SC. The model currently costs four, but if Apple really wanted to, it can lower the current model to two and turn it into a full featured, low price phone for areas like South America, parts of Asia and Africa that are currently Android strongholds.

Two phone would make the current SC an extremely hot seller to those who don't need the functionality of five G or a thousand dollar plus iPhone thirteen. By expanding its user base with a two indre dollar device, Apple could create more long term services revenue and add way

more people to its ecosystem fairly quickly. Dropping the price of the an SC two bucks would also give Apple an easy answer to its iPod touch conundrum that would allow the company to quite frankly discontinue the three year old iPod at the same price. Such a device could also greatly assist Apple in India. That's a market that Apple once talked up as it's next China, but one that's really been a bit of a roller coaster for

the company in recent years. Recent data points the sub five percent market share for Apple in India, but the average phone price in the country is now about two meaning that Apple could potentially have a winner on its hands there with a nice price cut. Still, it's unclear if Apple actually ever do this, but there may be no better time than this March, when Apple plans to release a new high end five G I phone sc

I'm Mark Erman. This is power On. Don't forget. You can subscribe to Mark's weekly power On newsletter at Bloomberg dot com and we'll be following that Apple event next week. Apple updating its return to office policy meantime, the company setting April eleven as the deadline for operate employees to return to in person work at least one day a week, marking a key test of whether the tech giant can

re establish office life in a post pandemic era. This coming a few days after Google sets its own return to office for April four, and Meta is actively looking at halting all advertising in Russia. A Corey, a vice president for Global Business Nicola Mendelssohn. She spoke to my colleague Caroline Hyde earlier. Take a listen to what she had to say about Meta's actions when it comes to

advertising in Russia. To listen. We are taking extensive steps across all of our apps to ensure the safety of our community and also to support the people who are using our services, both in the Ukraine and all over the world as well. We've established a special operations center. It's working around the clock. It's responding to activity that we're seeing on our platforms in real time, and we're really closely, you know, monitoring the situation. We'll be monitoring that,

of course. I'm Emily Chang. This is Bloomberg