You told me things were very frothy a lots happened since then. The wework had just come out. We know what happened with the wework blowup theres been this sense that you saw with the wag news. Theres been these companies have raised an extraordinary amount of money and pitching themselves as Tech Companies that really went Tech Companies. Wework was not a Technology Company. Swag not really a Technology Company, and the combination of trying to get the technology valuations on companies that shouldnt be trading that way and companies that are just raising too much money and have no financial discipline. Hopefully some of that is coming to an end but i still think valuations are going to be crazy for a while. I think, if anything, this signals the beginning of the end of these shoot the moon sort of Business Plans what i mean by that is we just they dont work for two reasons. One, companies are raising a tremendous amount of money and they do that primarily to try and have some sort of competitive advantage versus their competitor but all that does is actually just drives more money, more funding to the competitors it makes it easier for the number two to raise money, not harder and i think on the second issue, really, is that once you are running one of these companies, you realize that running a company is all about managing habits if you have a habit of managing a company at a really high burn rate, its very hard to then make a righthand turn into fiscal responsibility. And so if you have raised the money, the capital is sitting in the bank, youll end up spending it and thats part of the problem. You heighten the risk that you are not going to make the metrics for the next round the Public Markets are beginning to, obviously, figure this out you can look back at this year, go look at zoom as a great example of a company that went public, had great metrics, growing over 100 year on year, great net dollar retention but also Free Cash Flow positive and from a performance standpoint, that stock today trades at 40 times sales and 400 times forward earnings and the reason why investors give it that leverage or that latitude is primarily because its working on the economics just to jump on that, i think the retail investor, Public Market investors have gotten more savvy about the difference between growth with great Unit Economics. So amazon, hey, if amazon is not profitable for a couple of quarters we know and weve learned the lesson amazon knows the day it wants to be profitable it can cut back on r d and drive tremendous profits. Growth with great Unit Economics like an amazon or zoom will pay for that growth at all costs with poor Unit Economics while youre seeing a bunch of these Companies Trading below their listing price. Thats over now, though, right . Growth at any price . Can we say thats done Growth Without Unit Economics that work, people are are on to that. And i think thats going to be over at least for a while its no wonder you guys talk about zoom if you look at the best performing ipos of the year, zooms right at their second best the stock is up 81 . If i had told you at the beginning of the year that uber and lyft were going to do so poorly and that beyond meat was going to be up 200 or thereabouts and zoom and crowdstrike would do so well, you would have told me what at that time . Zoom and data dog have two unique specific attributes about the companies. And they are companies with great recurring revenue streams. Have high net dollar retention which means if the business stopped today, it would keep growing from a revenue perspective just from its Current Customer base. And they both were Free Cash Flow positive. So both of those things show that those are, you know, a good place. I think the issue with uber and lyft ultimately is a bit of this you are trading on someone elses capital for a bit. Uber and lyft essentially have massive stipends and bonuses that they pay drivers and drive the incentive wheel in that way. If they take that away, ultimately both of those companies will be highly profitable its just a question now of, who moves first . You think there are a lot of pretenders out here . Generally speaking, yes jon fortt just asked the mongo ceo, and we had this conversation yesterday with fra frank of snowflake everybody is a Software Company when in reality thats not actually the case. People are pretending to be something they arent as you alluded to with everybody calling themselves a Technology Company whether they are or not. The multiples on the Software Companies and the multiples on these profitable sas companies are so tremendous Everyone Wants to paint themselves that way the reality is exactly as you mentioned. A lot of them are. Wag, in hindsight, these things seem sort of obvious wag should have never raised 300 million it was a Good Business, a decent business could have been a nice profitablebusiness of a certai size poured too much money into these companies and it ruins them. Its a softbank effect as we talked about before. And thats sort of where and why we are where we are in some respects is that true well, look. I think one of the things thats now driving it is the employees are recognizing whats actually happening. And when these Companies Raise a tremendous amount of money at a very high valuation, it used to be the case that that was celebrated i think employees now realize that that comes with risk. And its the employees that ultimately are left holding the bag. Heres what i mean by that when investors go pour a bunch of capital into a business, they ultimately have preferred shares and liquidation preferences. The employees are sitting on the bottom of the stack. And so i think people are now starting to realize that more capital, especially raising more capital to do uneconomic things to drive market share just dont work you guys have a new fund. Are you being more selective in the companies you look at and the amounts of money youre willing to throw around . I think from the beginning, we were. We had a perspective that Unit Economics and existing Product Market fit were going to be important to us. We tried to avoid we try to avoid companies that are, hey, growth looks great now and then this miracle is going to happen when we do this thing that we arent really sure about yet and that will cause the Unit Economics to fall into play and then well be profitable we stay away from those things you see these in some of the companies where the Unit Economics dont work now that are public the pitch is, well, this and this and this are going to happen and the Unit Economics will be great. We tend to stay away from those things weve done a bunch of Enterprise Software so far this year just havent seen anything we like massively well in consumer. Usually from a trend perspective, that means things are greater. These things tend to go in cycles its been a dry spell in consumer for a little while on the private side that will change we touched on the softbank issues and you mentioned wag diedre bosa has been tracking down these stories in her reporting. As if the drop in uber and wework wasnt enough, more for softbank today wag just the latest we were talking about this just before we came on tv, but its the perfect example of vcs pointing to softbank and saying, what are they doing . This is evidence they dont know what theyre doing and its a good example of taking perhaps more money than you need wag initially was looking for 75 million. Softbank offered 300 million. They didnt do what they are supposed to with that money or couldnt get those Unit Economics to work. So theyve laid off im told 80 of their workforce from the beginning of the year. Softbank is selling its stake back to the company. Of course, its not the only one, right theres worries bubbling about some other vision Fund Portfolios you see you are talking about looking for more Profitable Companies or with paths to profitability. You see losses accelerating. The chinese startup that has money from softbank, the korean ecommerce site. Theres going to be another softbank ipo this week at a much lower evaluation than softbank invested when you hear vision fund 2 is full steam ahead, does that make you worry do you roll your eyes and say, do we need another vision fund it does make me worry and roll my eyes those are two Different Things i think vision fund 2 if you are an investor, a good question you should be asking is why. Just i dont see it you dont see the need for were seeing whats happening. You get you generate you bring in 100 billion. You have to put the money to work because youre drawing fees your lps want you to put the money to work. So you end up trying to find places to put an extraordinary amount of money to work and those companies are taking too much money and collapse under their own under the weight of that cash. As adam mentioned earlier, it creates all sorts of bad habits when you have too much money and those habits are hard to change. Do you share dicks view on that totally mine is even now, after going through the process of raising our own fund, i look at 100 billion and the things that you can do with 100 billion you can literally change the face of technology and humanity with 100 billion. Yet you chose to invest in a dogwalking service. I love dogs. We all love our dogs ill show you a picture of my dog at the end of this making sure he doesnt get yelled at on twitter at the end of this. With that kind of firepower, i question why youd go invest in things that wouldnt further humanity than just further your dogs ill play devils advocate. I know especially being here in the valley, a lot of vcs its easy to rag on assad especially now, kick him when hes down. But this is the guy who made a bet on alibaba thats made him one of therichest men in the world. If you look at the returns from the vision fund he says we dont get a full view into it but theyre double the average vc returns. And you also take a look at where they are winning and losing transportation, real estate. Theyre losing big there but theyre actually doing well on consumer which makes up 20 of the vision fund. Health tech enterprise as well so its not all its not so black and white. Its not actually on the vision fund though i think they werent being smart around allocation of that capital my fault, if you ask who is to blame its the ceos who took the money. They decide to ultimately take the money. They take the capital and they take it at a very high valuation. It ultimately then has a high risk reward game theyre playing. And oftentimes what were seeing its just not working out. Isnt this what this is all about here, though you are trying to grow your business the point adam makes, you see ceos, firsttime ceos optimize for valuation over everythin else repeatedly, and its like this classic mistake of, well, the way everything is measured out here is by valuation if i raise this much as valuation, then im better at this other thing you create all sorts of you are out way over your skis that causes all these Unit Economics problems or spending habits that are hard to correct later. I think adam is 100 right and not taking anything away, yahoo japan and going back to that and before, the guys made bold and courageous decision after bold and courageous decision vision fund 2, were seeing some of tresults of vision fund 1 and id question whether thats a good place to put so much money. If you see all thats happened, there was a needed reset out here and if its in the process of happening in some respects, vision 2, delays the process of a reset. It just means that free and excess capital is readily available that will need to find a home and will find a home. The party is about to end lets come in with trucks of champagne. Here we go again part of the issue, too, is its not just coming at the very end of companies financing history which is where the vision fund traditionally played but also out here, tremendous amount of capital at the early stages so it really looks more like a bar d barbell. So it really means this middle part of the companys history, i think, is where the company will win or lose. And so that management part in the middle is really the key again, to jump on something adam just said, we see because these companies tend to be close to public or just newly public, the results of the vision fund investments, theres a lot of, you know, excess investment and valuation in the early stages. A Company Raises a seed round and then raises an a and go and raise a b, the series b are happening now at hundreds of millions of dollars in valuation before the first customer is live thats just as crazy theres a recent series a for 200 million but they say, better path to profitability but i have a question for you guys would you be comfortable taking the other end of the softbank bet. Investing in a company where you know its competitor is going to get 100 million, 200 million from softbank. If the Unit Economics i dont think that the short answer is, yes, because theres capital available to Management Teams that execute well. And you dont have to worry about thats the only vision fund is the only place you can go raise money so if you are competing against them, youre out of luck thats simply not the case if you are a Great Management Team and disciplined Management Team and growing ebitda and growth with great Unit Economics and a path to profitability, youll not have any problem raising money. I want to pivot and thank you for joining us again lets talk about twitter if we could. The latest news is jack dorsey says hes moving to africa he is still running square and twitter. You were c. O. O. There. Yeah, you answer this question well get to you in a second. Would you havelet that fly . If you want me to try and defend it, heres what i would say. 75 of twitters audience is outside the u. S. About half of its revenue is outside the u. S. Most of the user growth, their Revenue Growth has been coming outside of the u. S like it or not, while this is a u. S. Hqd company, most of the action for this company, i think, is happening outside the u. S. Tough for us sitting here or tough for some of us sitting here in San Francisco to think that its not the center of the universe but the fact is its not. Couple that with the fact that jack, i think, is looking at africa as a huge growth factor for the company, both ultimately in or square i think if you ask him, his perspective will ultmaltly be around users and revenue and then lastly, i think hes got a view that he has to figure out some way to decrease the hiring pressure here in San Francisco and so by creating a more Remote Workforce and he may lead by example. Ultimately the question may be for some investors, not that hes deciding to go live overseas, and study culture there, but actually the market that he picked and it may be the case that some investors in twitter may ask that he spend another three months over in japan why japan . Twitter is bigger than facebook in japan or any other market or any other competitor globally. If you can figure out or in japan. If you can figure out whats happening right in japan and export it across the rest of the world, that would be time well spent. I didnt want you to defend it or in fact, that was the genesis of the 280 characters expansion. Understanding the way it was being used in japan and the character set in japan, how tweets were being engaged with and the tweets at a larger character set were being driving higher engagement. End upped being the driver of the 280 being rolled out to the rest of the world. They call the decision, quote, reckless, says its irresponsible and negligent of the board to allow it. I think the board im sure the board and jack will have a conversation about that tweet. You know, i think that ill say this i mean that seriously. Im sure the board and jack will have a conversation about that i havent read you the galloway stuff im sure i can guess what that says. Ill say ill take a little bit of a different angle to what adam said just to try to be dramatic jack likes to test out ideas publicly if you remember, he wrote a blog post or maybe sarah friar published it when she left square the ceo of square left to become ceo of next door here are the things that jack said to sarah upon leaving one thing jack said was you have to be willing to fail in public. And jack likes jack will try out ideas and things hes thinking to himself publicly, you know, first before discussing them privately with other people and thats just who he is. Was this a jump the gun decision heres what professor Scott Galloway tweeted he wrote an oped as well. Jack dorsey is a parttime ceo 80 of his wealth comes from his afternoon job sknair its difficult to ask people to work evenings and weekends when the ceo works mornings and then moves to another continent jack must be replaced. As i said, im sure jack and the executive team and the board are going to have a conversation about where the appropriate place to live is and how long you should spend there do you think he should go or not . Im not going to i think jack has done a terrific job with the team and the company. The team there loves him the people who work there, you know, you can see it on twitter. They all appreciate working for him, the way he has their back, the way he thinks about the company. The way he articulates jack speaks with the fluency of the inventor of the product and, you know, thats a powerful thing in a company to have the ininventor of the product standing up and talking to you about how he thinks about it and how that contrasts with how he originally thought about it. Thats, you know, theres no one who has more authority than that in the company does your answer to the question mean that if he leans over to you in the cubicle next door and says, adam, im thinking about going to africa you said, great, can i drive you to the airport youre cool with that . Look, i think, you know, im not there, obviously, at the company so im not cued in to whats actually the conversations are like i will say jacks got an incredibly deep bench, and he often goes in fact, he spent a bunch of this year trying to travel around the world meeting with twitter partners, twitter advertisers and twitter employees as well to get a more global view. I understand the critique for sure, and im just giving you the other point of view. Let me ask you this as we move away from that but onto twitter itself. Year to date the stock is up 5 . Nasdaq set a record high everybody is feeling good about tech the president of the United States is prolific on twitter. He tweets his points of view he tweets policy on twitter. And the stock is a dramatic underperformer why . What does that tell you about the monetization capabilities of twitter or lack thereof . Whats the issue in that 5 . Well, interestingly, on the last earnings call, user growth was up based on their new metric, Monetizable Dau which admitted he i dont fully understand the definition of, although i could guess at what it is. User growth was up tremendously, according to that metric, and apparently revenue according to the team on the call, revenue was down due to an issue they had with their direct response ads, application installs that seemed to have something to do with how they were attributing or how they were assigning value to people who had clicked on an ad so i am not sure whats going on there. I would expect that youll get a lot more clarity around that coming out of this next quarter. And if user Growth Continues to be as christmas as it was last quarter, you can see a dramatic swing there. So i think that part of the result youre seeing is due to whatever the and was sort of described abstractly so im not quite sure what was going on there, but there seemed to be for the first time a real split between Revenue Growth and user growth. Those two things diverge for what i think was probably the first time and hopefully well figure out what was going on there in the next earnings call. Is twitter monetizable . How do you answer that question . Absolutely. In fact, its got one of the highest monetizable rates per active minute, exterior example, of usage and a variety of different stats. Theyve built a 3 1 2 or so, depending on what you believe q4 is going to be 3. 5 billion brand business for something that in the grand scheme of things right now on the user side is still fairly small as compared to instagram or facebook or Even Companies like snap here in the u. S. So the real question around monetization is how do they make the leap into direct response, as dick was mentioning this is an active set of work thats necessary to be done at the company. It needs to be coupled with sustained user growth. Not just quarter, one quarter user growth, then it goes back down you need a sustained movement in terms of user growth over a set of years to actually drive the dr business. I would say that if you if i can make one ask of the company and again, people there who are watching this are probably rolling their eyes and here we go it would be in the next quarter, it would be helpful to understand just what exactly is going on in that discrepancy that occurred in some detail between the user growth and the monetization rates and when can we expect that to sort of reconverge theoretically you still have some contacts around that place. You are doing it on television i cant get the free tshirts anymore but i have a few email addresses. Do you still own shares yes, i do are you an unhappy shareholder . No. Have you sold any recently . Since between when i left and now . Yes. Recently, no im not a shareholder right now and i feel mostly because private investing is a potential for up side than anything i see in the Public Market i have to take a break but do you support the decision to ban political ads . Yes, but its a longer conversation all right well get to it before the end of this hour i promise you that up next, the state of investing in Silicon Valley. Well be joined coming up by sequoia capitals botha. Youre watching Halftime Report from one market in San Francisco. Were back right after this. [grunting] [maniacal laughter] gold. Gold right, uh. Thank you, for that, bob. But i think its time we go with gbtc. Its bitcoin exposure through a traditional investment account. Nice rock. Its time to drop gold. Go digital. Go grayscale. Welcome back to the Halftime Report. Im dom chu. Shares of peloton are sinking after a negative note which set a 5 price target for 2020 the firm says peloton has obvious comparisons to gopro and fitbit and that the company depends too heavily on Fitness Trends and fads. The firms management has been overly promotional saying it is, quote, disconnected from all reality in the postwework economy. Now we have reached out to peloton for a comment on this citron report. But those shares are on the move of the short seller report from citron back to you, scott, in San Francisco. Dom chu, we appreciate that our next guest runs sequoia capitals business instagram and youtube. Also currently on the boards of square and mongodb hes with us exclusively today thank you for having me happy day for mongo just had the ceo i guess it comes down to a path to profitability, a smaller than expected loss. Thats what the market seems to be cheering today. That speaks to the overall environment were now finding ourselves in absolutely. People are focusing on Unit Economics. Its important for people to have a clear path to profitability and growth at all costs, those days are numbered youre a shareholder of mongo. I am. Threw union square investment. Do we call it a turn . Is it a recent turn where the market seems to be more focused on, as all of you have used these terms, Unit Economics more than anything else it is a recent term but its episodic i was the cfo at paypal many years ago part of the mafia part of the mafia we raised 100 million in march of 2000 at a time when the company had no revenue and we did silly things because we had money in our pockets. And there wasnt real focus on Unit Economics back in those days we had to get religion when the market dried up and you may see something similar where people have to focus on profitable growth you told our producer something really interesting i want to read it for our viewers and expand on it with all of you theres tension right now between the fear of missing out and the fear of looking stupid which is weighing more now on the scale . Which is winning out fear of looking stupid is starting to weigh a little more heavily in that equation yeah . As a result of wework and some of these other issues weve had . As a result of some of the other news with whats happened at wag as well its a real test to your resolve as an investor when you look at a business and other people are affording it very high valuations the business continues to raise money but you dont quite understand it and you check yourself and you have a lot of selfdoubt about your judgment so that leads to fear of missing out, and i think people become momentum investors is there too much money sloshing around. Vision 2 is down the pike. You guys are huge players here i joined sequoia in 2003 and at every limited partner meeting ive been at weve said theres too much money in Silicon Valley so its a good problem to have, but weve literally seen valuations get pushed to the stratosphere when in reality they should never have been. The key is to focus on the long run of the business we partnered very early with companies at the seed stage typically and help them as enduring Business Partners were involved with companies on average longer than a marriage lasts in america so its typically ive been on the board of square for a decade now and we continue to hold our shares so we look for the long run in all these businesses, and in the long run, devaluation will take care of itself im glad you brought up square because i hope you heard the conversation that we were having about the ceo, mr. Dorsey, moving to africa are you in favor of that should he go jack is an incredible ceo, and when he informed us at square that he was taking on the ceo job at twitter again, we had a conversation about it. And jack asked us, evaluate me on the results and jack has both phenomenal Management Teams at both businesses and has a great these companies are both thriving because of his Management Teams these companies are both worth more than 20 billion. Its incredible what hes done its a little change to see all the critique and hes also a huge champion of remote work and i didnt think you need to be present physically in the office to be an effective ceo you dont think he needs to make a decision. These businesses now are more mature than they were when he turned to you and the board and said im thinking about doing both this time is different than that im not sure thats the case. Both companies are flourishing hes able to provide incredible vision and leadership and motivation and he has fabulous Management Teams hes empowering them to run great businesses the founder culture, i think, is a natural place to go next. And it seems to be under more scrutiny than ever with what happened with adam newman at wework here we are talking about jack dorsey and maybe it comes in cycles whereas you, when the google guys needed an adult in the room you brought in eric schmidt. Then there was a return back to the founders and are we finding ourselves again in a period where we need more adults in the room episodic about Unit Economics. Its the same thing with, you know, it was when jeff and i were running i was running twitter and hes running linked in, you have this it goes in waves. You need to bring in someone who is an operator to run the company and takes over from the founder. And then it swings back to, no, no, only the founder who understands the original vision for the platform its funny it just bounces back and forth out here you hear because of some of the things weve seen with wework and others youll see more of, oh, no, we need to go back to having a professional operator in the room. Its not just about the founder. But its sort of funny to people out here who have seen it happen four or five times it bounces back and forth. Where do you come down on the issue of direct listing versus a traditional ipo . Obviously, you were at twitter did a traditional ipo. Your new Company Virgin galactic just did a direct. You have companies in the pipeline that have to make a decision one versus the other. Is the pendulum starting to swing more towards direct listings and will that be the trend of the future . Its wonderful to see innovation in the listing process. I took a Company Public as a cfo in the traditional approach. Its imperfect and i welcomed the idea that theres innovation that we can question some of the assumptions that brought us to where we are. At the end of the day what matters is the quality of the business you build the companies were involved with, whether its google or square or mongodb, more than 80 of the market accrued after the ipo. And what really matters is, are they building a Good Business . That was just a day in the life of the company the point bill gurley made about direct listings when he was on the show recently was, look, the underwriters arent really underwriters anymore. They arent putting their own money at risk. Theyre taking extraordinary fees for not putting any of their money at risk. And heres a way to stop that. So im kind of on the same page as roelof. Theres room for innovation. The road show is a ridiculous process and should be improved upon the road show before the couple weeks before going public if direct listings are one way toward that and somethings like the Longterm Stock Exchange is another vehicle, i think those things are all great and the more the merrier you let your actions speak for themselves with the deal that you did yeah, look, i think theres multiple ways to be successful and so ultimately whats happened to roelofs point is a ton of innovation in a space that had largely been stagnant for the last ten years or so i think its a super compelling, direct listings are a super compelling way to go out however, they have a draw back in that you dont raise primary capital for the company. It just goes out the door. So the company itself doesnt raise capital as part of the process. Its not for everybody most of the Time Companies go public because they want to raise, tap that Capital Access the direct listing we did is another interesting vehicle, partly because it does have some of the advantages of a direct listing and some of the advantage of traditional ipo in that Virgin Galactic raised a large amount of capital that they couldnt have done, say, through a direct you were an early investor in airbnb, correct . Correct we met the founders. Just the three of them, a thousand listings at the time. Still called air, bed and breakfast, by the way. Now 7 million listings its been awhile should we expect direct listing in 2020 . Is that where were heading . Unfortunately, i cant comment on that. Well, it certainly seems to be one of the things the company is considering in this maybe new way of going public. Well take a quick break well come back with these three gentlemen. First to diedre bosa with a market flash on Google Googles 2. 1 billion acquisition of fitbit will face scrutiny by the department of justice amid data privacy concerns this is according to a report in the new york post. This comes just days after the deal was cleared for review by the doj. Fitbit shares fell on the news but theyre rebounding a little. The doj and ftc are worried that fitbit, if owned by google will give google even more access to consumers private data, including Sensitive Health information. Remember, the doj is already also investigating google for broader anticompetitive issues. Back to you. Okay. We appreciate it thats our d. Bosa lets get to sue herera with the headlines. Heres whats happening at this hour, everyone. House democrats claiming victory in negotiating changes to u. S. mexico canada trade agreement to ensure better protection for workers it was formerly known as nafta there is no question, of course, that this trade agreement is much better than nafta. But in terms of our work here, it is infinitely better than what was initially proposed by the administration exxonmobil prevailing in a lawsuit accusing the company of downplaying the toll that Climate Change regulations could take on its business the judge saying the new York Attorney generals case did not prove the company deceived investors. Exxonmobil hailed the ruling in a trial that it said stemmed from a baseless investigation. And Finlands Parliament choosing sanna marin the new Prime Minister the worlds youngest sitting head of government shes heading a fiveparty center left coalition. The four other parties in the coalition are headed by women, three of whom are in their early 30s. Youre up to date. Thats the news update scott, back out to you thank you for that. Much more with roelof botha, dick costolo and adam bain coming up tomorrow, another big show from los angeles. Fed day with Doublelines Jeffrey Gundlach i consulted with your grandmothers doctor. We can do the screening at her house. Hi. This is the man thats going to check your eyes grandma. Cognizant ai solutions are helping Healthcare Companies advance diagnostics and prevent blindness in patients with diabetes. Everything looks good. You have beautiful eyes. Doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. Were live again today at one market in San Francisco. Dick costolo, adam bain and roelof botha continue the conversation with us lets talk about the food delivery space y is kwoi kra is ia is in door d theres been a lot of discussion about what the future of that space holds. Postmates. Are they going to go public next year grubhub hasnt done well can all of these companies survive on their own or does there need to be some consolidation in the future . I think theres room for multiple winners in this space its incredible when you think about the emergence of this category of food delivery. Its a market that didnt really exist five years ago and here we are with more companies doing really well. I didnt even mention uber eats it is a very early stage company. The founder tony is a phenomenal operator and talking about the focus on Unit Economics, part of the conversation, one of the things tony did was focus on Unit Economics. First atly delivery level, then at a city level. Even if youre profitable, it may be too expensive to run in a given zip code and the company focused on achieving great Unit Economics before they raised enough money to really accelerate growth. And so they are flourishing. They are taking market share and they are the leader in the u. S. Now. Do you really need uber eats, grub, postmates, door dash does that make sense one can imagine that five, seven years from now there are less than probably less than all of those but i do agree theres room for more than one. The question is whether more than one or more need to be on a bigger platform that can help absorb some of the financials that, you know, obviously it takes to be a big competitor in this space i think one of the stress points thats starting to emerge or actually at the restaurants themselves which arent Technology Companies yet are now being forced to figure out integration if you walk into a restaurant youll see a line of the delivery folks on the side waiting for the food and so you start to wonder if theres a better way which gives, you know, credence to the ideas around Cloud Kitchens and some of the other Technology Moving in the space to help restaura restaurants get better at managing the demand. Theres also square is helping solve part of that problem because they have integrations that make a single sales system that enables a single point of integration for the restaurant making their life easier let me leave you with this final question if you can look ahead to the year ahead, the biggest story in Venture Capital or the biggest story to emerge out of Silicon Valley in 2020 when it comes to trying to make money is going to be what, do you think . This continued reset are we still going to be talking a year from now about froth or are we going to come back to earth, do you think . I think were going to come back down to earth you guys agree . It seems headed that way. The market will be more sane in 2020 we shall see. Well visit with you again in one of our visits out here roelof botha with sequoia capital. Up next, were joined by trae vassalo of defy partners. lfi owel ndut whats on her mind today when we come back to San Francisco on the Halftime Report yes im stuck in the middle with you, no one likes to feel stuck, boxed in, or held back. Especially by Something Like your cloud. Its a problem. But the ibm cloud is different. Its open and flexible enough to manage all your apps and data securely, anywhere, across all your clouds. So it can help take on anything from rebooking flights on the fly, to restocking shelves on demand, without getting in your way. Doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Welcome back our next guest was an early investor in nest and continues to look for early stage opportunities as managing director of defy trae vassalo back with you nice to see you again. What is exciting to you these days in the tech landscape yeah, well, theres a lot to be excited about one thing we do as an Early Stage Venture Fund is to try to not chase the shiny object so were really looking for places within the industry where technology hasnt quite created innovation yet so, for example, logistics is one of these areas where were seeing some incredible Companies Like flexport, but theres a lot more opportunities for us to bring a little bit of data, a little bit of ai, connect a lot of great disparate sources together and make real change. One of our best performing companies is airspace thats doing just that and well have more coming. So leave the shiny objects to everybody else these guys and their new fund. Commerce, infrastructure, security, ai, marketplaces those are the hottest places to be in the years ahead . Its certainly the places where were investing. And i think theres a lot of different strategies and they are big billiondollar funds that can throw a lot of money at companies that are using the capitalism strategy to try to get out ahead. What were trying to find are places where data and Software Actually truly unlock a lot of value, it has been several months as you take stock in the year that was, what do you make of all of it, everything that weve seen i think there is a lot of conversation around when is the party going to end and i think that weve actually started to see some of the coming back down to earth as you mentioned earlier around, you know, it shouldnt be growth at all cost. And not every company should be painted as a tech company. As an early stage investor, we are typically investing on companies 3 to 10 million, and va valuations usually sub 50. But it can could huhurts if we e early i think investors getting squeezed and so i think everybody appreciates more more ration alleal growth. I think that you have to realize that lot of the ceos and first time found hers and ceos today havent been threw a market downturn. So they are like of course im going to go raises as much money as i can because what could possibly go wrong. That is setting it up for doubling again 18 months for now. So for those of us who have been one or two of those, when it hit wills you, it hits you hard comes at you fast. And the ased adam said, you can just change overnight, you have to work it out of the system and so for people who havent been through it, they will continue to make these mistakes until they get hit in the face are you skrcrutinizing, you must be, because you are such at an early stage, you must be scrutinizing things more heavily. The business itself, the Unit Economics, but maybe more than anything because you are being sold on a story and it is the story that you need more than ever and we need to believe that there is an incredible amount of up side and when were investing, there is some data, but not a lot. And you get early false positives. There are things that might show in the d dhe data that dont pat we say they have hints of product fit but you have to dial it in so we tend to work closely with the founders about really understanding how are they finding their customers, how do we drive better Unit Economics and it is figuring out how do we create more economic growth, how do we create a better sales opportunity, how do we create better retention so that is what i really love about our opportunity to work with companies in this stage because those things all have to be relatively figured out by the time were raising that next round. A lot of early stage venture is spotting what is the line, spotting the good ideas that look like bad ideas. That is almost laughable. So the person comes in and they pitch it to you, look, i famously or maybe not so famously but it will be after this went for a trail run with travis and he asked me to put money into the seed round of what was uber cab at the time. And i told him it was a horrible idea and passed. So bring the way, we didnt tell that story to lps. But how do you think about it sounds horrible but from the other angle, the world will change and it will be great . That is the hard thing about investing. You were talking about fear of looking stupid and in this industry, oftentimes taking a risk on a company this early stage, you really do to have to confro confront, gosh, i could look like an a idiot because sometimes the most innovative Large Companies are really kind of crazy when you think about it in the early days. And it is not obvious until later. And enterprise versus consumer space, there is a great divergence in some of the performances of ipos over the course of the yeert. How do you think about would on versus the other if you want to refer to it as a sector . I love this question because i actually think it is an Old School Way to think about the market you know, what company is purely a consumer company, even facebook has Enterprise Sales on the back end and so weve actually taken a fairly differentiated approach in that we look very broadly and it is a spectrum and in fact many of our companies, you know, Enterprise Companies that sell to the end user, that is a consumer like sale so i think that the key is when you look at consumer versus enterpri enterprise, they can be up canner and enterprise. Thank you for being here. Mi u fsee you again soon congp,inal thoughts next emergin . At pgim, we see alpha in the trends driving specific sectors of outperformance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Every day, our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Servicenow put our this changes everything. Youre right sir. Everything. No not everything, i mean youre still blatantly sucking up to me gary. Brilliantly observed, sir. Always three steps ahead. Six steps ahead. Sixteen. So many steps. You done . A million steps ahead. Servicenow. Works for you. It is fed decision day tomorrow well talk about the markets and what is exhibited in 2020. Lets wrap up our final thoughts you were telling me about consumer versus enterprise. And weve been talking about the fact that there is not a lot going on in consumer or at least youre not seeing it in the private markets. I think one thing people should realize is six, seven years as go, you were a kicouple e consuh ceo, you better be ready to testify in front of congress and that is not a world that most people who are technologists are ready to live in or want to live in i think that maybe dido i want be called in front of congress and someone once asked me because i spent time when i was running twitter in washington and they were asking me look im about to get called in front of congress, do you have any tips and i said you you have two choices, you can look stupid or complicit and go with stupid because it is kind of a show that they are putting on and i think its probably causing some people to say ill go down this path of building this company that i can build in the background and do just as well if you are larry page like i built this thing and i built it a long time ago and here is how i thought about it and i hired all these people and now Elizabeth Warren is telling me that she will hold me i have to answer her questions. I dont think a lot of these people want to live that life. And you are having dinner tonight with jack dorsey well, i was, but after i said that he is probably having a conversation with the board, we might just be going out to the taco truck. Guys, its been fun thanks so much the exchange begins now. Welcome, everybody im Tyler Mathison here is what is ahead. A fed meeting, a trade deal, impeachment articles, a tariff deadline, a lot of headlines out of washington this hour. It has the market searching for direction. Well tell how to play the volatility and there is something out there that may actually save the malls. Well look at what it is or are maybe who it is and the names that could benefit plus an exclusive and rare loo
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