Twitter's Whistle-Blower Subpoenaed and Y Combinator's New CEO

court's opinion? Will discuss. Plus, the tech industry's most prestigious business incubator, y Combinator, has named its first American Asian American CEO. I'll chat with Gary Tan about what to expect under his leadership, and Bitcoin falls below twenty thou as investor respond to the fed's hawkish dance. So how

are the world's largest crypto performed during a recession? We'll try to answer that question, But first let's check in on the meme trade, because that's really been sort of one of the narratives that's emerged over the last few weeks, seemingly out of nowhere. It continued today. You saw some of the speculative corners of the crypto market, the miners

up there posting some gains. Then once again you had bed Bath and Beyond just crushing it up almost twenty five percent, and some of the originals to you had game Stop notching gains of about two percent on a down day in the broader markets. But speaking of memes, let's listen to how some of the Bloomberg television guests

are reacting to this moment. Memes come and go quickly, same thing goes with these prices of alatility down, stock market up a perfect precondition for some more meme stock action towards the very very big pictu where there's a price discovery and market efficiency and all sorts of things that do adhere to fundamentals a little bit more. Game Stop has been daddy uh, and so the interest there from the retail world has has maintained better than some

of the other stocks you bad, Bathroom Beyond. I think there's probably a lot of factors that play here. Gator Stop is still not sustainable at the price that it's at. If you use fundamental analysis for leadership to be you know, maintained in those areas, we wouldn't think that's sustainable moving forward.

So we've seen a turn both in terms of the general market environment and in terms of people interested in once again playing equities, getting involved in capital markets, and the two of those things together, I think I explain why we're seeing a little bit of a meme stock resurgence. Let's get more from Bloomberg's Bailey Lipshal. He joins us on the phone, and Bailey actually the Market's live blog over at Bloomberg News just ran a survey on this topic.

Will the mean mania fizzle out? Almost two thirds said no. So let's start simple why, Katie. I think it's a combination of factors. Like some of the guests for Bloomberg TV mentioned, is just that you have de free trading applications like robin Hood. You have the ability now for retail traders to buy far out of the money call options. You also just have the sense of camaraderie and really community that platforms like Reddit and stock twits have founded.

So you when you look at it kind of the confluence of those uh kind of factors, you see it continue to pop up here and there, and that's something that we saw most recently last week with bed, Bath and Beyond a particular but that really does date back to even the hurt stage of late nineteen when this trend of retail traders kind of taking up in picking up the ability to trade kind of came into Vote

and Billy. If I think about the last two years of living through and reporting on this sort of meme craze that still is continuing in markets, these stocks used to sort of trade as a block. If one was up, you could bet the other was up. You can sort of see a little bit of a break apart here now though, Are we starting to see any sort of fundamental stories returned to some of these names. I wouldn't say it's fundamental. The more investors I talked to and

strategists that each has their own story. And that's really what we saw play out in the summer of last year when you look at a game Stop obviously kind of lifted all boats. Was the titlisted all boats back in January one, But then AMC really caught fire in the early June late in May area when CEO Adam

Aaron embrace retail trading. When then you saw that kind of play out with bed Bath and Beyond with its own way, with Ryan Cohen's Steak which he is subsequently dumped, So really you're looking at it where there's not really fundamental reasons for these rallies. But Bed Bath and Beyond is set to a strategic update on Wednesday, so that's another event for speculative investors to play, which is something we saw play out today in particular with call options

on bed baton kind of by itself. Well, let's dig into bed Bath and Beyond because actually one of the questions in this survey was which stocks of these will go bankrupt within a year? You had game stop bed Bath and Beyond n a m C expect Bed Bath and Beyond to go bankrupt within the next year. What are we expecting to hear on Wednesday? The big focus was laid out by Morgan Stanley and what they're looking

for comments on cash burn. This was a company that's been continuing to burn cash in the last few years, dwindling, dwindling cash position down from over a billion at point one point a year ago can now closer to a hundred million. So looking for cash burn, comments around vendor support because we have seen that Bloomberg report from about two weeks ago that maybe they weren't getting uh good

supplied because they were running back on payment. And another thing is just looking at current trend going into the holiday season. This is really according to Wall Street analysts, they make or break stretch, board, bed, bath, and beyond going into the fourth quarter. And what that could mean for a company that really, when you look at it from a fundamental basis, who was kind of nearing uh the end of at least according to some what could

be a potential light make or brick stretch. Definitely watching with bated breath. But Bailey, I know you also cover SPACs in addition to memes, and when I think about SPACs and memes and crypto, it's sort of all boils down to that same speculative urge driving these bets. At least in my view, Is that fair though? Is it fair to lump SPACs in with some of these mean names? Uh?

It really depends, obviously when you look at the SPAC trade that played out when you go back to Virgin Galactic in tween turning into Draft Kings in early one, which really set the stage for the craze where pretty much any celebrity or investing kind of tighten hat us back in some way, shape or form. It just kind of caught the enthusiasm and energy of a market that seemingly was a bull market that could not run out

of gas. And that really is why I think when I talk to some of my sources, SPACs got caught up with meme stocks again with some of these alternative cryptocurrencies, because there was so much froth in the market that it is able to have some of these speculative corners. The market really kind of go mainstream and be adopted by professional traders as well as retail investors. Bailey Lips,

Bloomberg News, thank you so much. I really appreciate your time coming up how startups can change their strategy to raise capital in the current environment. This is Bloomberg. Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy. The Federal Open Market Committee's overarching focus right now is to bring inflation back down to our two gold.

Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone in particular. Without price stability. We will not achieve a sustained period of strong labor market conditions that benefit all. The burdens of high inflation fall heaviest on those who are least able to bear them. We are taking forceful and rapid steps to moderate demand so that it comes into better alignment

with supply and to keep inflation expectations anchored. We will keep at it until we're confident the job is done. And that hawkishness from FED chaired room pal just crushing the risk on mood that we've seen from markets in recent weeks. And of course that shifting sentiment does not bode well for fund ups seeking starting seeking funding. Rather, I'm here to discuss this Christina Ras. She is CEO

of the financial software startup Cube. Christina, you recently raised thirty million dollars for your Series B funding round earlier this summer. Obviously, that's a much different environment than your Series A round from just a couple of years ago. Compare and contrast the difficulty. So our Series day was about eighteen months prior, so at the end of twenty twenty, beginning of one, and that was really the beginning of the party. So this was the time when unicorns were

being crowned nearly every other day. It was the world of endless capital without guardrails. And we've now moved into a world where certainly the sentiment has changed, but we're going back to good old fashioned business fundamentals. So for us in particular, we are a planning company and we did plan for this, and our business model is really

lends itself well to both good times and bad. So when times they're good, we're a sword in the sense that companies need to allocate capital in the most effective way possible. Uh, that's actually harder to do the net loooks if you think about all of the companies out there that have blown billions of dollars and then when times are challenging, it's really bad extending runway. So we like to say, while cash is king, runways queen um and we help companies to do just that. Runway is queen.

I'm going to write that down and use that. But this thirty million dollars that you raised in your Series B, what are you spending the proceeds on right now? And is that different than what you might have planned to spend it on. Had this sort of risk off vibe rippled its way through ASSA classes, we would have definitely

been more aggressive in our go forward growth targets. So there was almost a joke going around this startup ecosystem last year of six to eight X is the new three X, meaning companies are going to grow seven year over year, which is what vcs are expecting. UM three X. Of course we're sort of the gold standard for growth.

What we're now hearing in terms of um of sentiment is three years is the new three X. So going back to how we're sending this capital, we're looking at extending runway for a longer period of time, whether rather than growing aggressively to the point of maybe putting ourselves in a position uh that that that growth is difficult to achieve or maintain. UM So I would say that that is definitely something different than the world of one.

But we are in a really great position to get to either a path to profitability or extend or runway as long as possible. I'd love to expand on that a little bit. How do you expand your runway in

a market environment such as this one. So going back to core business fundamentals, every company, especially a tech company, has to think about how much they're willing and ready to invest in R and D, and for us, in our investors and for our customers, this is an area that's really important and we don't want to pull back. We could certainly get to profitability faster if we pull back on R and D because that doesn't generate immediate revenue,

but it's more of an investment in the future. Where it comes down to us is really solid execution around our go to market. So that means we're looking at a lot of predictive measures around how well our go

to market is UM is performing. So we look at things like magic number, which is how much we're sending each quarter versus how much revenue it's generating in the following quarter, and a good or best business practices for that magic number to be somewhere between point seven five and one UM and that's something we're doing to extend

runway so that we're very efficient with the capital we use. UM. And one of my favorite UM sort of business uh I guess coaching lines actually came from the Netflix show Cheer, which when the coach was saying, it's you know, it's not about what the other teams are doing it's what we do here on the mat and for us in our company internally, it's about how we execute internally um and how efficient and effective we are at leveraging the

capital that we already have. That show made me feel so inferior, but I'm glad that you pulled something away from it. Christina, someone who recently went through fundraising, who recently worked with vcs, I'd love to hear your perspective on what's top of mind for those vcs right now, what are they looking for in potential investments. First of all, it's good old fashioned business fundamentals, and I'm a former CFO, so I love to hear it. I love going back

to basics. The numbers that are really top of mind for most investors today are your growth, sin net dollar retention. So great, you get customers, but how well are you retaining them and growing them? That's the most effective use

of capital. How quickly and effectively are you growing? Some of those terms like magic numbers, so a lot of things around go to market fundamentals, and more importantly, of course, I haven't mentioned cash yet, but your burn rate and your burn ratio, so how well are you using the cash that you already have to generate either additional growth

or moving towards profitability. So a very one of my favorite metrics is the rule of forty, which looks at how much um profit you have versus how much growth and trying to get to or above the number forty. And So, if you were to give an advice advice to a startup who is trying to attract funding right now, who is trying to capture the attention of some of those vcs, what advice would you give them to sort

of tailor their strategy in this environment. So right now, what I'm hearing is most sterns are not advised to raise right this second. If you can extend runway, that's not just going to be you know, through business fundamentals,

but also looking at other external sources like debt. So if you can't raise equity, look for a line of credit or another way to extend runaway, maybe reducing burn whether it's reducing your growth rate or reducing the amount of R and D depending on the type of business you're in, are just ways to extend capital until we get out of I would say, do we know a little bit more of when we hit the bottom of the market, or at least when investors are confident enough

to start really investing heavily. Again, that is cheaper than equity. I've heard that one before. Q CEO Christina Ross great to spend some time with. You really appreciate it well. The U S and China are nearing a deal to avoid Massy listings over audit supervision disagreement let's American auditors go to Hong Kong to check the records of Chinese

companies listed New York. But if the agreement falls through, more than two hundred US listed Chinese companies face delistings from American stock exchanges starting in early Here discuss the strategy risks founder and CEO Isaac Stonefish, Isaac, great, to have you with us. In your view, how likely is it that this agreement actually goes through. I think it's

very likely that the agreement will go through. What I'm more uncertain about is whether it will solve what the U. S. Government wants it to solve, namely equal treatment for Chinese companies and US companies and other globile companies, and whether or not it will actually stem the tide of worsening US China relations, which seem increasingly likely to lead to all out conflict or war. And do you think such big,

big hurdles such as that could ever be solved? Is there any agreement that could go through that would satisfy all of those requirements out? No? Okay, Well, let's talk about the ramifications here. If this doesn't of the course, this agreement, like you're saying, doesn't go far enough in your view, But if it doesn't go through at all, what are the ramifications of that? What is actually at stake here? It seems what the Chinese side is doing

is buying time. There still are roughly eighteen months or so until the companies would have to delist. I think probably the idea is we'll sign this, the U S side will try to implement it, They'll find a lot of stonewalling on the Chinese side, and by two and twenty four things will be different enough that will be able to keep moving the goalposts and keep pushing the can down the road and figure something out. Then it

doesn't feel like this is a very big concession. It feels like this is a very good stalling technique so that companies on both sides and investors on both sides don't see Beijing communicating that they're not really open for this. So if that's the future we're looking forward to, that the goal post just continue to move forward, just a series of stalling techniques. Do you think that we'll ever actually see these d listings go through? It's a great question.

I think the question of whether or not these companies will be list will depend so much more on the macro environment at the time. So we saw significant deal listings earlier in the month from several large s o e s, presumably because they didn't want any US linked auditors anywhere near their books. I think it's possible that if US China relations worse in certain companies will be lists, maybe not even because of this, but because of other considerations.

And I think certainly a lot of promising Chinese companies are finding it less appealing to list on US markets and are looking closer to home for their capital raises. So why is that? Why is listing on US exchanges Maybe not the holy grail or the big goal that

it might have once been. A lot of it is Aijing and the Chinese Communist Party is increasing paranoia about data and data security, and a lot of folks believe this has to do with Beijing really fearing that the US is going to go to war with China against Taiwan if Beijing worre to sees the island, and national

security is really coming into the forefront. There's an expression in China and China politics dominance, and I think we're seeing that not only with domestic politics, but really with foreign policy and national security as a major major force driving Beijing's decisions, Isaac, who has more to lose here? If we make it sort of a binary conversation, I mean, is it more important for a Chinese company to list on a US exchange? Is it more important for that

US exchange to have those Chinese companies? That's a great question. I think it's pretty even. I think from a broader perspective, it's investors who lose because of less choice, less efficient markets. And really what we're seeing on both sides is the U S and China prioritizing national security. And that's what governments do, and that's what investors often don't like governments to do. But that's really the new reality, the new

base case for US China relations. So investors thinking about various equities should really have a national security strategy in mind as they make decisions, and ISAAC going with your expectation that really we just continue to stall and stall. What do you think could happen along the way in terms of the Chinese tech crackdown? For example, do do we do we expect to see delistings even if not

forced to? For example? I think that's really impossible. And I think one thing investors have to keep an eye out is both Beijing and the US is worried about US companies in China and Chinese companies in America. So if, for example, this seems to move forward and then there's some corruption allegations against a Chinese company on the US exchange,

Beijing could retaliate against an American company in China. It's also possible that investors start to feel like the markets in the other country are a lot less appealing, and the government's respond accordingly. I do feel like there's a lot of people with large positions in China who want you to believe that this is business as normal, and it's really not, and Beijing has been very explicit about that. So this to me is not the key signal. This is part of the noise alright, Isaac, we have to

leave it there. Really appreciate your time, though, That is strategy Risks founder and CEO Isaac stone Fish. Well, let's move on to the Musk Twitter drama now with the Twitter whistleblower now subpoena by Elon Musk's lawyer, that whistle blower, Peter Zatko, claims Twitter officials didn't know or care to find out how many of its accounts or spam and

bought accounts. Let's bring in Bloomberg's Kurt Wagner for more on that and current The argument that has been made is that zach Coe's claims could help Elon Musk actually walk away from this deal over those spam accounts. Does that theory hold water? You know, I think it's a little more complicated than that, right, I Mean, what the whistle blowers basically said was that Twitter has not done a good job with security and also not a good job with identifying how many bots are on the service.

And when he says that, he's really meaning in total, right, how many of all the accounts that are on there, how many our bots? He claims that Twitter has no idea now where it gets a little bit more complicated is that Twitter's argument has long been that, hey, it's fewer than five percent of the accounts that we you know, count his monthly active users and share with Wall Street, Right, So the kind of talking about two different things here.

What I do think matters here is that this whistleblower is a top senior executive at the company, reported directly to the CEO, who basically is painting a picture of a company who's you know, mismanaged and and not taking these issues seriously. Right, So, whether or not the data he has is going to help Elon Musk, I think he's painting a picture of a company that hasn't taken the body issue nearly as seriously as Twitter wants you to believe it has, and theoretically za CO would know.

But is there any world in which this subpoena could actually backfire on Elon Musk? I mean sure if if he goes and starts answering a bunch of questions that basically confirmed that even though maybe Twitter doesn't know how many bots are total on the service, they're making their best guess right there, They're doing the best that they can to uh create this number that they share with investors.

That's really all Twitter has to do and has been saying that they've been doing for years, right as they are doing their best to calculate this stuff. So if for some reason he comes out and and you know, some of these answers start to show that Twitter did put some thought into this and did handle this in the best way possible for investors, you know, certainly that seems to, in my opinion, defend Twitter's argument a little bit here. Well, let's talk a little bit more about

the Twitter side. How would you expect Twitter to respond to the subpoena. Well, they declined to comment on this venus specifically. I imagine that you know, they too are very interested to hear what Zacho is about to say. They have somepe did a bunch of people, um and and I'm sure that they would love to, you know, ask some questions of of him themselves. But they have since come out and said, you know that everything that

he said in this whistleblower complaint is false. They said it was uh, you know, mischaracterized all the things that you would expect a company to say to someone like this. Um And so, you know, again, no comments specifically on his subpoena today, but they're clearly, you know, unhappy with what he shared thus far, and you know, claim that it is not accurate. And Kurt, I know that you are living and breathing this case. But for the rest

of us, what should we keep an eye on next? Yeah, well, there is going to be a shareholder vote in a few weeks, and it feels a bit like a formality, but I think it's an important one, right because this feels sort of like the last hurdle that Twitter has to really clear to show that they have done everything in their power to make this deal happen. And so that's going to happen. I believe it's on September, so

in just a few weeks. And again, if shareholders come and approve of this deal, then it's kind of Twitter can say, hey, look, we've done everything we said we were going to do. We'll see you in court. So I think that that's a big moment um that's coming up just after the holiday. Alright, plenty to keep an eye on. Bloomberg's Kurt Wagner, thank you so much, Really appreciate it coming up. As crypto follows the sharp adjustment in US stocks, where is it headed and what does

it mean for institutional interests in the space. We'll discuss next. This is Bloomberg time now for our crypto report and bitcoins still hovering around twenty thousand dollars. This is risk appetite wavering following FED chair j Rome Pals speech on Friday stressing that interest rates may have to stay elevated to stamp out inflation. Let's bring in Blockchain Capital partner Kim jall Shop for her read on this kindel great

to have you with us at this point. How much is bitcoin and the crypto space space broadly just a macro trade? Thanks for having me, you know. I think bitcoin and the crypto markets more broadly have certainly expanded into broader attack over this last cycle, and I think we're starting to see that get reflected when it comes to UM macro comments coming from Germ Powell and sort of the general market sentiment tending to sort of edge

away from risk UM. I don't know if that's going to continue for you know, the long term, but it certainly is I think a result of how the markets have behaved in the past twenty four months. We also have crypto contributortionally basic on set with us Sinale. It definitely feels like uh fed chair Jerale pal spoke and Crypto listens. Crypto did listen, even though it's trading lower than where it was a week ago. Katie, you do have that lift back up just a little bit today

in the last twenty four hours. Kindle that if you look at what's happening here. Of course, the macro is driving so much of the story, but there's also some single name events. When you look at a lot of the tokens that are trading Ethereum being one of them. When you see what happens to Avalanche on the downside, some news over the weekend driving the price a lot lower.

How much do the fundamentals matter here? You know, I think there are going to be short term narrative driven you know, moments, as there are with any sort of equity or asset class. More broadly, however, the fundamentals I think continue to matter. I think that the long term investor is still paying attention to the fundamentals and that's really going to be driving a lot of investment. As far as investment goes, then, how much are you thinking

about valuation? There's a lot of question about whether ethereum just has a lot more room to run given that run up with bigcoin we've seen over the last several years. Is that something that you believe or do you believe that the merge can create some more complications ahead, you know, I think the merge is a really big milestone for

the Ethereum ecosystem UM. You know, this this transition, I think is going to have a lot of ramifications UM, whether that's related to institutions being able to allocate to ethereum more um heavily than they have in the past, as well as UM certain fundamentals around the issue issuance of ethereum itself. I think this is going to be a really big milestone. It's it's unclear if that's UM you know, being sort of reflected in the price of

ethereum today. That's something I certainly don't UM don't have the ability to sort of see into, but certainly think it's going to be a part of big part of

the discussion in the next six months. Canential I want to talk up more about institutions in the crypto space because a narrative that I've picked up on over the past few months is that this big volatility, this really dramatic draw down that we've seen across the crypto landscape is going to scare off some more of those traditional players, those big institutional players. Has that been your sense as well?

My sense is that a lot of institutions and enterprises more broadly have been getting really smart on crypto assets more broadly and are using this time as a way to implement strategies and sort of figure out exactly what they what role they want to play in these markets. You know, even today we heard an announcement from Meta announcing the ability to post your un f t s

across Instagram. I think that's a big sort of strategic move that's been in play for a number of months, and I think we'll see similar reflection on the institutional side, as they've been putting sort of the pieces in place into what that looks like. Well, Ken Jaws, speaking of Meta, I think back to this time last year or even six months ago, I was hearing a lot about the metaverse, I was hearing a lot about Web three. It feels like those conversations have sort of petered off as we've

seen this big market volatility. When are we going to start to see a rejuvenation in that space. Is that ultimately tied back to what the Federal Reserve is going to do? Yeah, you know, it's it's difficult to know exactly when sort of markets will will come back to life. However, I will say that founders and teams continue to build in the web three space as well as the metaverse.

There are a lot of really interesting projects that have been funded over the past twelve months that we're going to start to see execute and ship on their roadmaps, and I think we'll start to see some great um engagement and use cases really come to light over the next uh, you know, year, year and a half. Well, there's also just a lot of dry powder on the sidelines when you look at how much money has been

raised in the venture capital industry. Is there an opportunity now that valuations seem to be stabilizing a little more, they've come down quite a bit. Where are you placing your bets? Yeah, we continue to think up watching capital that this is one of the most opportune periods to engage with right founders that are really focused on the

long term. You know, we're doubling down on infrastructure. I think as a really key theme for us, whether that relates to scaling existing blockchains, privacy more broadly, powering consumer use cases. I think infrastructure is a really interesting space span right now and something that we're spending a lot of time on. I'm curious about some of the existing companies that you've placed your bets on. Over time, We're seeing some really interesting changes here in in what some

of them are doing. Think about coin Base, for example, and how it says that more customers will be using its staking services. I'm curious as to how consumers are going to be interacting with some of these companies differently as we look to what crypto looks like coming out of this most recent winter. Yeah. I think companies like coin base are really trying to put their users in

the best position given the market changes. So as staking becomes more of a mainstream use case, enabling their millions of users to be able to get access to those products, I think is a really big value prop for folks like coin Base or other exchanges that have that ability

in their in their um you know, product suite. On the other hand, we're seeing entry points for retail users really proliferate across the open protocol ecosystem, whether that's using defied protocols or more consumer oriented and f T communities. I think, um, everyone's entry point into into Web three looks a little bit different right now, and so really trying to ensure that there's a place and a use

case for for everyone. And when it comes to Web three, I mean, I'm just fascinated by the idea of the Internet on the blockchain. And I've heard it both ways that you could see, uh, some of these trad five players come in, some of these more traditional companies that aren't necessarily crypto native come in and build Web three. I've also heard the case that you know, it has to be someone who's native to the crypto industry. Where

do you fall on that debate? And when you think about the own bets, your own bets that you're placing, I mean, are you more likely to invest in a crypto native company or maybe someone with a little bit more experience coming from the realms of traditional finance, you know, I think every company is its own sort of use

case to think through. However, I will say there is a certain something special that comes from being crypto native and really solving for pain points that you're seeing within this ecosystem crypto and webrary more broadly is very focused around grassroots organization and community really giving ownership back to the users of the products that we see, and so I think being crypto native is really important to the ethos of how, um, how you can build a product

in crypto, and how that really can scale over time. That's not to say that financial institutions and sort of web two companies won't be able to build some really great products and ideas in the crypto space, but I will say that being digital and crypto crypto native is certainly I think a unique advantage. And I'll put another

question to you along those lines. You know, when you're invested in everything from unit sap swap and sushi swap to coin base and crack and centralized or decentralized, which is the way of the future, you know, it really is a spectrum. It's it's certainly not a black or white question in terms of, you know, whether the world

is going to look completely centralized or decentralized. And I think that's something that's really become clearer and clearer over the past few years at watching capital and and UM. You know, more broadly, thinking about the market, we really want to back founders and products that are solving for customer pain points and for real problems that they're facing in the market. And I think that's going to continue to exist on this factrum. Blockchain Capital partner kin jall

Shaw and Bloomberg's own Shinali Basset. Great discussion. Thank you both so much. Gary Tan, one of the founders of y Combinator and currently the managing partner at Initialized Capital, will come back to y Combinator as its president and CEO early next year. He will also be the firm's first Asian American chief. Gary Tan, I'm pleased to say joins us now for more on this news. And Gary, in many ways, this is a homecoming. What brought you

back to y Combinator. You know, for me why combinator is truly sort of the beacon for opportunity and you know, for me growing up, you know that gave me everything in my life. You know, I started my life actually as child of Chinese immigrants, and you know something times food and secure we were sometimes, you know, we're in one bedroom too, betterom apartments. I got my first job, uh, making web pages, and that helped me pay for the

down payment for their home. And I just remember going to White Combinator, dot com, slash apply and putting down what my idea was, and they met me, they gave me an interview, they funded me, they put me in this community, and that community changed my life. And so at the end of the day, I just know that that is what we can keep doing for thousands more people, you know, possibly way more than that, And that's really

the goal. That's why, you know why ce gave me so much, and you know, I want to give back. So you start early next year as president and CEO. What's top of your priority list if you had to pick, you know, one of the things that has been incredible for me that you know, I want people to know out there why c A is a place where the alumni help each other in such a fundamental way. And I'll tell you a story of when I was in

y C in uh summer of two thousand and eight. Um, there's a company that most tech people know called Hiroku that um you know, they were on their way. They did, of course go on to get acquired by Salesforce, and it was great. One of the biggest exits of the time for y Combinator. But I remember those founders coming and telling me, hey, this is how you raise your seed round, this is how you actually do it. And

they gave us their secrets. They said what they said in those conversations, and they gave us the words to do it. Six months later, Uh, you know, we were running one of the biggest rails websites on the planet, called Posterous, and they wanted our source code because they said, well, we need we're a hosting service for rails and we need to be able to handle you know, the biggest website. And you know, normally in technology, nobody would ever do that,

Like the source code is your crown jewels. But we said, you know what, here it is and we helped them. And you know, that's the kind of thing that happens every single day. Like these aren't stories or you know, access to information that you can get at a conference or you know, sitting next to someone you know, even you know at the top business schools, Like this is real, really advice and resources from people who are the best

in the game. Uh. And you can just apply online and anyone has access to it, so that you know that is still super unique and so powerful in the world. And Gary, of course you are y combinators first, Asian American CEO, and when you're seeking to fund VC founders,

how important will diversity be for you? You know, at the end of the day, you know, at INITIALIZED, I'm super excited about gen Wolfe and Brett Gibson sort of stepping into the rules of managing partner at INITIALIZED, and I really have to just recognize gen Wolfe as a true leader in sort of bringing diversity to you know,

even actually the fund itself. You know, Initialized is actually the second most diverse fund in the world according to the information And you know, at the end of the day, what is investing about if not trying to build the world that we want to live in? And well, Gary, talking about the world that we currently live in. The markets have seen just incredible volatility over the past few months. We heard from Jerome pal on Friday sparking even more volatility.

If you think about this period of higher interest rates that we're heading into, how is that affected sort of the startup world and some of the investments you could be funding. You know, I think one of the very lucky things about just early stage investing period is if you look at these times of great crisis, really great

work is done. So you know, when people thought the web was deader than dead, that's when Facebook was created, when people thought and actually I was in the least successful Why Combinator batch of summer two thousand eight because

Lehman died, which was crazy. And you know friends of mine now Brian Chesky and Joe Gibia and Nathan bar Chick actually like they went through air they went through White combinatd with Airbnb the year after, and that was the batch where Paul Graham said, you know what, there might not be a demo day because there might not be any investors. So the blessing is, you know, whether it's a good economy or a bad economy, if you

pick a problem space that's real. If you can use technology to attack really big markets, those are actually the times when some of the biggest opportunities present themselves. And so you know rain or shine, you know, I think y C and early stage it's you know, things have adjusted a little bit, they flowed down a little bit. But this is good, this is healthy, and it's good for the ecosystem. Well, let's move beyond some of the

early stage investments. I would love to get your thoughts on the I p O market because it's really really dried up over the summer. When could we start to see some of those companies coming public. Well, you know, it's like Warren Buffett says, right, these things are in the short term popularity contests and in the long term their weighing machines. And when you're talking about I p O s well, the weighing machine is uh not willing

to give multiples that a lot of people want. Um. You know, it's hard for me to predict, to be frank, um, when this will happen, because it's sort of separate from sort of the day to day of these startups, which I know really well. Um, I really hope that you know a lot of the macro sort of situation resolves itself and that you know, I think there are a lot of indicators out there that say that inflation is over. But you know, I'm not exactly the right person to

pay attention to their like. You know, what we can do is tell our early stage and growth stage founders be thoughtful about your cash, build something of true value, and you know, don't build something for just that next round or to be able to sort of impress that next VC. It's really about impressing your customer, your user, high retention, high gross margin, and you know, great customer

acquisition cost versus LTV. That's you know, the fundamentals, and that's what we try and teach every day in and day out. Early Early, Gary, it is great to get some time with you. That, of course is Gary Tan. He is initialized Capital founder and partner and soon to be y Combinator president and CEO. Thank you so much. That does it. For this edition of Bloomberg Technology Tuesday, we're going to speak to Cours, Sarah's CEO, to discuss

growth in education technology. And don't forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify, and I Heart This is Bloomberg