All right. Welcome, everyone. So it's good to have everyone here, and with us, we have Greg Becker, CEO of SVB Financial. Greg, it's nice to have you here. Yeah, great to be here. So since we had you here last year, we've seen a lot of changes in the macro environment: high and persistent inflation, unprecedented pace of rate hikes, the equity markets down significantly, particularly in tech. When you look at the innovation economy over the next year or two, how do you think about valuations and the general outlook of the sector? Sure. So good to see everyone. Great to be here. I'd probably answer the question, Colin, a couple of ways. One is looking at just venture capital. So I think just venture capital overall and where that's been and where we think it's going to go. And then the second part is, to your point on valuations, so we can talk about valuations, public and private. Obviously, there's a lot of great companies here, and that's part of the conference, is talking all about that. But taking you guys back a little bit, thinking about venture capital, if you go all the way back to 2018, 2019, and I'm just using U.S. venture capital, you're kind of in that $150-$160 billion range. And then you pop into 2020, you're in the 200s. And then it peaks out in 2021 at $350 billion, drops down to $250. But you have to look at what the fourth quarter is, which is kind of a big decline down to an annualized level of $144. And so then what we are forecasting for that is $130 billion. This is in the U.S., roughly $130 billion of venture capital flow in the U.S. So big change. And then start to tick back up in 2024 once you start to see a level of kind of certainty. So let's look at the valuation question. And I always talk about valuations. So you're going to start with public company valuations, and I'll just give you, again, some data points. When I think of probably the most common technology, software, so think about public company comps and how it relates into private. So the peak multiple, kind of multiple on an average basis for software. SaaS is a little bit higher, but if you look at software overall on a forward basis revenue, you're kind of in that 10 times forward revenue back in 2021. It bottomed out not that long ago to about 5 times. When you think about where the balance is, at least the analysts that we have at SVB, and obviously, you guys have an incredible amount of experience in this, says that the range will end up being at about 6 to 8 times on a forward basis. For 6 times right now, and the range is kind of 6 to 8, there's a little bit more room. Now, there's going to be a lot of volatility between here and there. Then you go talk about the private. What does that relate to the private? Privates, it obviously depends upon growth rate. It depends upon the business model. It depends upon a lot of different things, and so private companies can clearly have higher multiples than what I just described based on the fact that they're growing at a faster pace, right, so smaller base, faster growth, you can have a higher multiple, so that's what's going to happen, I believe, so this year, you're just going to see it bounce around in the public markets. In the private market, it's really about how much cash they have left and when they need to raise money, and that's the big question because they raised all that money a couple of years ago, and now they can have a longer runway until they decide what that valuation will be. I know it's a long answer to the question, but I thought just the context was helpful. That's really helpful. And I think that's a pretty good segue into when you look and watch companies within the innovation economy that now have less access to capital with the compounded issue of grappling with really high inflation rates, what has been the biggest shift in how they operate and manage themselves today? Yeah, and maybe I think talking about the bifurcation again, even of the venture capital market, when you look at that seed in Series A, we're actually seeing a lot of activity, a lot of healthy activity. And so when you hear the narrative about how slow it's gotten, it's like, wow, it must be across the whole stack, and it's actually not true. We certainly believe now is a great time to start a company. You can find talent coming out of the larger companies. You can see there is capital that's out there. It's really when you get to the later stage that the harder decisions are having to be made, and I would say our client base, and we have about 130 clients that are here at this conference, just to kind of give you a perspective, and it is such a wide variety. I was down visiting a pre-public company down in LA that is, I mean, they literally could go public easily later this year, even in a really tough market, and this company is growing at a fast pace. If you talked about impact of inflation and slowing down, they're almost having no impact, so really, the story is so company-specific about kind of what they're doing, but it is hard. It's about cost of employees are going up. I mean, costs overall are going up, and managing this in this environment is really the biggest challenge, and it's not easy. So as we think about companies managing themselves now and then how they've historically fundraised through multiple private rounds, they've accessed the public markets, as you've said, via IPOs, even SPACs for a little while. Just a little while. Just a little while. But all that activity has basically come to an end. So besides the case for private for longer, when companies are looking for an exit, do you anticipate an uptick in M&A activity, strategic partnerships, or any other avenues? It's kind of easy to forecast an uptick when there's nothing. So that's a good place to be. But I'm certainly confident that it's going to come back. I mean, we're in a window right now that it's been a very long period of time without IPOs. And again, as I said, when I look at our client base, there are so many companies that are in the portfolio that are private that could access the public markets. And so that's going to happen. It's really a matter of time. And we had a debate. We had an advisory board with a group of 10 venture capitalists a few weeks back. And we were having a conversation about almost a poll of when do they believe the IPO market will open back up and look at the second half of the year. It was, how many public companies' venture-backed IPOs do you think there will be in 2023? So 10 venture capitalists asked the question. The range was from 0 to 30. The median was in that kind of 15-20 range. There's a lot of high-quality companies. The IPO market's going to come back. Strategic partnerships, yes, they will pick up. You've got the largest companies. They've got a lot of cash. They still aren't the best innovators. They have to look at creating partnerships and then acquisitions. I do think all those things will pick up. If you think about acquisitions, it's still the predominant way that liquidity is created in the technology market. I'm bullish on it. As far as when it happens, that's going to be the harder part. Perfect. Perfect. So you mentioned the VC and the private equity community and how they're sitting on brand new highs, over $300 b illion in VC, perhaps $ trillions within private equity. $3 trillion in private equity. So while it may take some time to deploy all of these funds and deal counts are going to remain depressed for some small amount of time, we know that highly successful companies are formed during challenging markets, during and after these challenging market conditions. So do you have a view on which sectors or types of companies may be attractive this time around? Yeah. I'll give you my perspective, and it's a variety, and here's why, and this is what we, as an institution, so love about the innovation economy because it's not focused in one sector. You can't say, "Gosh, if it's just this sector and all the companies in that sector are going to be doing really, really well," so I think about it this way. I think about it from a horizontal perspective, and then I think you can look at almost like a vertical that cuts across, and there's certain technologies that are actually both horizontal and vertical. AI, machine learning would be in those categories, but when you go across there, you can look at robotics, and manufacturing is clearly one that I think is going to be really huge. Given all the headcount and the hard problem with trying to find good employees and all those things, it's going to be they need to automate. And so that automation is massive. There are so many robotics companies out there. And I think that's really going to be an industrial revolution across the world. That's a big, big, big market. AI, we can talk for probably hours about what the forecast is on that and how big that's going to be. That's going to be a very interesting one. But then, again, what we're optimistic about it literally is you can look at every vertical. You can look at ag tech. You can look at fintech. You can look at clean tech. You can look at med tech, personalized medicine. You literally go across the entire stack. There's exciting things in every single category. So for me, if you had to pick a couple, I would say in the next 12-24 months, no question that AI is going to get a lot of attention. So that's one. And then I would say industrial automation would be another one that I think is really important, and robotics that follows that. Great. Great. So if we shift gears just a little bit, we've seen talent reductions almost across the board from Google, Meta, Microsoft, Amazon. But for most, most of those talent numbers are still above the pre-pandemic levels, implying that the talent war still exists, but maybe cooling. What are you hearing from your clients around their own talent needs and managing that play between work from home and return to office? Yeah. So there's kind of almost two questions in there. So the work from home, and then there's the people themselves and kind of what they're doing from the standpoint of adding new headcount and things. So let's talk about headcount first, and then we'll talk about work from home. On the headcount side, I think, again, it's so company-specific. You can look at it and say companies are. It's been hard to hire, but we're hearing it's actually gotten a lot easier. And so they're able to do it. And the talent pool is much, much, much better. And so I think from that standpoint, I think it's a good thing. From work from home, you have the whole spectrum. I have two of my kids who are in New York. They're working for startups. And basically, they're sitting here, and my daughter, she's in five days a week. And my son is in four days a week. And they love being in the office together. And there's other people that are fully remote. So from that standpoint, it really does vary. Great. What's Morgan's? So Morgan Stanley's policy, at least on the investment banking side, is four days a week. And then if you want to go in on a Friday and witness the quietness of the office, then you can go and do that too. But four days basically. I'd be curious to the audience up here. How many people are fully remote? One. How many people are one to two days a week? Three to four? Then five days a week. Yeah. I mean, you guys are a great representation of what you see. It's basically all over the place. Yeah. Yeah. So if we shift gears a little bit again to the crypto space, it continues to be under, just to say the least, a lot of pressure. So what are your views on where it's been, where it is today, and where do you think it's heading? Yeah. I mean, again, if you took a poll of this group, I mean, you'd get a wide variation of what people would say, right? So you can look at it and say it was an incredibly hyped market. I think if you break it apart, we talked about this a couple of days ago. You can look at blockchain. You can look at how the technology is going to be working. But then you look at the cryptocurrency itself. And those need to be split in two. So I think if you looked at blockchain and you looked at the trend of investment and you looked at what's happening there, you'd see this great trajectory up. And then it's kind of plateaued and maybe it's gone down a little bit. Then you look at cryptocurrency, you would see a really, really rapid rise. And then you would see a rapid deceleration, right? And so I think that's just the split between the two. I'd show hands again. How many people in here have cryptocurrency? I don't know. It's 25% of the population. And so you would have heard not that long ago, it would be like, "Everybody's going to be doing cryptocurrency. This is the new thing. This is the big thing." And you got to go down and really play. And so we clearly see that slowing down. But Web3, blockchain, I think that's definitely here to stay. Yeah. Yeah. I agree with that. In the fintech space, there's been a good deal of dialogue around establishing regulations. Now, it's pretty complicated, obviously. Any thoughts on which areas may come first? This is on the heels of the crypto conversation. And do you think it's going to be around crypto or some other spaces? I think there's no question it's going to be around crypto. I think that's one area you're going to see it. I also think just broadly across fintech, I think if you think about the Fed, what they want to do is making sure they're kind of managing kind of all financial risk, right? And so much of that risk has gone outside of the banking sector. And so if you're sitting in their shoes and you see things like FTX and other things happen, you're going, "We actually need to be more aggressive. We need to be more engaged in the regulatory environment." And again, should we be surprised by that? And then what we try to talk to our clients about is that really, you got to lean into it. And so it's kind of early on. And I think there's still some of this. It's kind of like, "Yeah, yeah, we want to be regulated." But then you really, if you put on a lie detector on them, you're like, "Do you really want to be regulated?" And the answer is no. You want to be regulated so you can check the box. But you want to be able to be as flexible as you want to do the exact same thing you're doing with this good housekeeping seal of approval from a regulatory perspective, right? And that's where I think the regulators say, "That doesn't feel right. And that needs to be changed. Yep. That makes sense. So you guys are an international company. Morgan Stanley is an international company. And it's an interesting time to be navigating the geopolitical dynamics out there. What trends are you seeing in the global markets? And how do you see companies thinking about managing that risk and operating at that global scale? Yep. Well, I'll start. And I'll talk about us. Then I'm going to talk about just our clients. And then I'm going to ask you the same question, how you guys think about it. I think our clients, here's the good news. Innovation companies are global. A lot of them are global from day one. And so they know how to navigate that. They think about navigating that. And that's just one of the strengths of innovation companies. They think about building a business. And they're like, "Oh, we've got developers in Eastern Europe. We have developers in India. We have developers in China. We have developers in pick the place in the United States that's now more of a remote working location." So that whole being able to be virtual is a really, really, really big and leverageable point. So that's an advantage of being a tech company. But I do think the geopolitical discussions out there, the changes in uncertainty, I mean, companies want certainty. And the less certainty you have, the more challenging it is to think about being global. So I think that's just on the top of a lot of people's minds. But again, we have clients all over the world. And it's an exciting part. But we're definitely having that discussion on a more regular basis. For us, it's a little bit different. It's a regulated institution. It's a little bit harder to think about where you'd expand. We get questions all the time. "Why aren't you guys expanding into South America? Why aren't you guys expanding into different international markets?" And it's much more difficult. Hence the question back to you. Morgan Stanley is one of the most international firms out there. How do you guys see it? Are you guys changing your approach, your behavior based on kind of the things that are going on? Yeah. It's a good question. I think, and not to speak for our CEO, but I do think that we are following our clients to where they conduct business. And I think post the war, there have been reviews, as every other company has done, of their affiliations and ties to certain countries. And I think that it's always an evolving conversation and an evolving topic that the company examines. But I think so long as you're operating in a country or a jurisdiction that doesn't have any sort of issues, we're there to go and service our clients wherever they may be conducting their business. I do think an interesting part, and we are hearing this. When you think of some of the risk in whether it's in Asia or other markets, I think people are trying to de-risk. They're trying to sit back and go, "How do we think about if you're a hardware company and you're manufacturing in certain countries that are in a difficult spot, how are you de-risking it?" And trying to find a place. And I think for the United States, I think that is an advantage. We're hearing more companies are thinking about how do you move manufacturing back to the US or to the US. Challenge, right? The challenge gets back to your first question, which is on inflation, right? The US isn't exactly the least expensive place to operate. And so you go through that and say, "Yeah, you may be de-risking in one way, but you may be increasing costs and creating risk in your business another way." And so that risk management overall is kind of part of that equation about thinking, "How do you manage your global business? Right. Right. And so I guess the follow-on to that question is, so it sounds like companies are thinking a lot more domestically in their focus and how to think about operating within the United States. So when you look at the US, which markets are you seeing pockets of opportunity? Yeah. Across the United States, we've had offices pretty much wherever there is innovation happening, and so people ask us once in a while. It's like Silicon Valley. What's, "Geez, if Silicon Valley doesn't have the same focus as it has, isn't that a problem for you?" You're like, "Well, kind of in the US, it doesn't really matter. If it's in Silicon Valley versus New York or Atlanta or Seattle or wherever, we're there to help them out." The market that I would say that's had the biggest growth over the last several years, to me, it has to be New York. I mean, New York. There were years, many years ago, where it was like, "Innovation in New York, it's impossible," right? There's not tech companies in New York. We've seen just a massive growth in New York City. So we've added a lot of people, a lot of amazing clients. There's a lot of companies that will be ready to go public. And Morgan Stanley will be alongside them when they're ready to go. But New York is probably the one market that I would say has taken off. Miami is going to be interesting, at least from my standpoint, because if you go back into 2021, if you took a poll here, how many people were thinking five years ago and thought about Miami as a place of operation? I would speculate maybe nobody would. And all of a sudden, in 2021, it became incredibly popular and a lot of people talking about it. And so yes, we've seen a growth there. But from my standpoint, do I see that being a market that's going to outstrip some of the other markets? I'd probably say not likely. Great. Great. So you mentioned this earlier. We're talking about a lot of different technologies that are emerging within the innovation economy: blockchain, the Internet of Things, 5G, quantum computing. And you mentioned this before, but let's talk about AI. And it seems to be the next big thing, disruptor across industries: healthcare, manufacturing, finance. Any thoughts on what you think we might get wrong or maybe misinterpret about its impact? It's a long list. I would maybe, again, put the question out to the group. How many people have used ChatGPT? Think about how many hands were just raised. That has only been released how many months ago? And I mean, it's amazing. How many people, again, raise your hands again if you've used it, felt that ChatGPT surprised you how good it was? Raise your hand if you were surprised by how good it was. Yeah. So to me, and that's just phase one. A friend of mine is a senior partner with Bain. And we had dinner a couple of weeks ago. And we were talking about, again, ChatGPT and AI and everything else. And he tends to be a very skeptical person. And so we were talking about this. And his response was, he goes, "For me, there's not many things I look back at. I go, "Actually, it actually may be close to the hype." He said that wasn't it. Yes, it was related to ChatGPT, but it was also really just AI in general. And we've had AI companies in our client base for a long period of time. But I really do believe that it is going to be pretty amazing. But you asked the question, "What are they going to get wrong?" And I think the biggest challenge with it is going to be in enterprise: the choice is the following. And it kind of doesn't feed into the OpenAI and other companies, which is for OpenAI and other companies to get smarter and smarter and smarter, they want access to your data. They want your data to look at your queries, to look at how you're looking at things. And that makes it smarter. So if you go to any enterprise CISO and you say, "Hey, we're going to give our data to ChatGPT or OpenAI. How do you feel about letting our data be there so it can be smarter?" "Oh, no, good news. You'll get access to your data too." But I think few of them are going to say, "That sounds really like a good idea." So the question's going to be, are these AI companies able to set up closed networks so that you can use the technology and keep all the data in-house? And it will take the base data, and it will learn from it. And what will that look like? I'm fascinated. I think it's actually going to be really, really cool. But it's like, let's just go back to crypto. And I'm not comparing the two. And I spoke at a conference a week ago, and somebody asked me a question about when a market gets overdone, whose fault it is. It was almost like, "Who should we find to blame?" And my response was, I said, "I actually don't think there's anybody to blame." And I think what it is, is if you're really pushing innovation, you're actually going to see more aggressive investment. You're going to see bolder ideas. And if you don't actually have failures, you're probably not pushing the innovation as much as it should be. So it is going to happen. It is going to be overdone. I think it's going to be too reliant on certain things. I think people will make assumptions that it's better than it actually is. Mistakes will be made. And that's going to be a problem in a lot of different ways. But it is going to be exciting. It is going to be a lot of hype around it. A lot of companies are going to use it. It is going to be a good thing, but there will be mistakes. Very helpful. So I think we ask you this question every year. So if you were to give advice to entrepreneurs, young or old, starting a company today, what advice would you give them to set them up for success in this environment? Yeah. So we have tons of clients in early stage and middle stage. And so we get a lot of exposure. But I do have my son, who's 25. So my data point of one where I can have a microscopic view into what he's doing. He's got a startup in New York, about 30 employees, and had it for five or six years. And just watching what he has done, and it doesn't matter what they do, but the one piece of advice, just seeing that, and we know it's true, and you guys talk about it, it is all about the people. And I know it's such an obvious answer, but it is about the people. It is about how they connect together, how they push each other, how they challenge each other. And then if it doesn't work, you got to be willing to make changes quickly. So they had it. And again, it's not about this company. It's about the challenges that they had and the decisions that were made. So there were three, actually four guys that founded the company. And they came to a point where one of the individuals, it wasn't a fit. And so they sat there and really struggled with, quite honestly, too long about how do you let that fourth person go. And they finally did. And they were so relieved about it. And they were able to then build on that and have incredible hires that they had. So my point is, it's about the people. It's about fast decisions. One of our executives at the bank had everybody read this book one time. And I think this is really interesting. It's called Beautiful Constraints. And it's about how do you manage a business with constraints? And how can you go from a mindset of, "Woe is me. I don't have as many resources as I want," versus, "Look at what I can do with the resources that I have." And I think that mindset of people first and Beautiful Constraints are just, quite honestly, a really positive way for startups to think about it or even tech companies in general. And so those would be two of the many pieces of advice that I would have. That's really great. I guess this last question is more on the personal side. When you're not working, what do you do to de-stress? Cycling is my vice for sure. Living in Northern California and being on the Peninsula, I think it's the best bike riding, cycling in the world, period. It's great to be going out with so many colleagues, employees, and teams, and venture capitalists, etc. That's one thing. Then the second part would be, there's no doubt my family. We have a blended family. We've got five kids, 25 all the way down to 21. Being with them, being with my wife, is definitely the best part. Between those two things, it's definitely my happy place by a wide margin, so. Oh, that's great. That's great. Okay. Well, I think that makes. Yeah, I think it's a compliment. Yeah. I think we've run out of time here. So. Great. Thanks for coming. Appreciate the time. Yeah. It's great. Thanks, everybody.