Public. Deciding that the scrutiny directed toward him had become too much of a distraction. The resiliency of facebook, despite the backlash over big tech. I get that. Im not the ideal messenger for this right now. We have work to do to build trust. What does the future hold as we head into 2020 . A special edition of Halftime Report in San Francisco, begins right now. And we welcome you to 1 market we have a great lineup today were going to be joined exclusively in a little while by snowflake chairman and ceo Frank Slootman as he prepares to take the Company Public in the year ahead. Frederick kerrest, the cofounder of okta, that stock up more than 90 this year were joined by Brad Gerstner who helped us take stock of whats happening in the valley throughout the year. Deirdre bosa is with us, covered the ipo and Venture Capital markets closely as anybody its great to have both of you here so brad, interesting year to say the least. Uber, lyft, they go public wework blows up. What do you make of the whole thing . I think last time we were together you heard bill gerly and i said risk premiums in the late stage Venture Capital market were too low. So since we were here a lot has changed. Wework was pulled, radical change in its valuation, weve seen the Public Markets pull back in how theyre treating money losing businesses and demand they perform before the value correct. So i think weve had a healthy reset of that latestage market, but its left the mid stage and early stage largely uneffected in Silicon Valley. You have a front row seat. Yeah. I started out the year by sitting down with adam neumann and him telling me they were ready for an ipo at any time now were at the end of this year that definition of what it takes to be ready for an ipo has drastically changed. You saw postmate ready. They were going to go and now they decided to delay the plans. I spoke to the grab ceo and cofounder who want to be profitable before they go public you cant imagine one of the gig economy platforms saying they want to be profitable before they tap Public Markets but thats what youre hearing now really that drive to show profitability and perhaps not strict profitability, its always ebitda, or ebit profitability, but that is one of the biggest differences ive seen throughout the years. Sounds like youre saying the party is not necessarily over out here, its just maybe the party is in a different place, the size of the party is a little different. I know. We always look for the headline as though Silicon Valley is a light switch on and off. Think of it as a continuum the late stage market has corrected. Theres no room for moneylosing businesses with no prospects of positive economic chix to get public. Growth at any price is over. Its been reset theres stuff being done theres structure on latestage deals getting done i dont think its corrected as much as i suspected it might have. Why do you think . Rates are still low tremendous amount of capital on the sidelines. Nontraditional players still investing in late stage from foreign sovereign funds to Family Offices and the nasdaq is at an alltime high remember the nasdaq is still at or near that alltime high which is attracting those late stage wework was a shock to the system. Was it as big a shock to the system as it should have been . I mean the muscle memory here can be quite short, right. I wasnt too long ago that Travis Kalanick was pushed out of uber and look at what happened to them in the Public MarketSilicon Valley never took real ownership for wework because its a new yorkbased company and there wasnt a lot of Venture Capital relative to other companies. Brad, do you think that the less than has really been learned youre seeing more money go into Bigger Companies with more distinct paths to profitability, but do you think this all happened a few years ago part of the health of the ecosystem to be an investor in technology you have to suspend disbelief sometimes and you have to believe that, you know, that Creative Destruction will take out those businesses i mean it was just a few years ago, groupon was the hottest late stage deal that got done. Now where is it in the Public Market zinga and now where is it . Those late stage markets we refer to as quasi Public Markets over a billion in valuation, have attracted a tremendous amount of capital from the Mutual Fund Industry and sovereign wealth industry thats different. I would say earlier stage venture is as healthy as ive ever seen it. Are there other companies you look at and say theyre in the danger zone in maybe not as a drastic as a wework but ones spending a ton of money that need to maybe tighten their belts . Right were seeing belt tightening deirdre referenced postmates there was an article last week about them laying off employees, resetting the timing on their valuation. I suspect that all of those companies that compete with uber or lyft in the food delivery business, watching what has happened to grub in the Public Markets, grub hub going from 150 a share to 30 a share f youre door dash or swiggy or postmates youre tightening your belts and realizing the markets will be more demanding. What are you doing if youre an airbnb and we will talk to Frank Slootman, its postmate, casper, made well, palentear others in the pipeline to go public, how are they impacted . Im glad you mentioned airbnb this is a different kind of unify korn theyve come out and said theyve been ebitda profitable over the last couple years their challenge is probably regulation as they come to market thats their problem as you see cities around the world crack down on what theyre doing, similar to what uber and lyft are now having problems. Certainly the most anticipated ipo of next year and i cannot wait until they open their books and you can see exactly how theyve managed to be this asset light model, but be able to be profitable and the amount of money theyve raised 3. 5 billion they have that in cash this is not a money burning business others, you mentioned snowflake, that should an interesting one too. Its this different model, postmates is delays but airbnb and snowflake is moving forward. While were having this conversation literally, tiger global im told from the folks at headquarters cutting their juul valuation to half of what it was just a year ago. I mean, it shouldnt be a surprise that private valuations change because we watched the Public Markets and the val ways change every day a good what i suggest to limited partners, universities and endow ment, what they should do is create a public basket to their private companies and they should mark the changes in their private portfolio every day. Wework didnt go from 47 billion to on the verbal of bankruptcy overnight even though thats what it appeared to to be door dash or postmates ought to look at the retracement of the valuation of uber and understand the last mark they got in the private markets is unlikely their true value today. Theres no transparency youre looking at these illiquid private markets when airbnb is one of the rare ones that stopped financials but many others you have no idea. In the Public Markets we look at comp sets for airbnb, the comp set is expedia and booking. Com. And as the risk premiums around those assets change, you need to assume if youre on the board of airbnb, that the same type of change is happening in your business same for door dash, postmates, go down the list so youre right, airbnb is a business that is much healthier from a Unit Economics perspective, but theyre going to be compared to booking. Com, their growth rate is going to be compared to booking. Com and their profitability per room night will be compared to booking. Com when they go public next year. The behavior of investors, looking at today mutual funds, and these funds and firms that are piling all this money into either late stage or ipos, and now, are licking their wounds. I wonder what the change is going to be as a result of what youre seeing. Brad can probably speak to that too, as to whether theyre pulling back a little bit. What youve seen over the last decade really is as these Companies Stay private for much longer, mutual funds want to weigh in to force some of that upside before they become Public Companies. You look at, for example, fidelity and t. Rowe, american mutual, sorry, john hancock, hartford, they have been in some of the most anticipated flashiest unicorns like juul and wework that have seen major valuation haircuts and had to mark down their holdings jackson national, 75 is how much they marked down their wework holding theyre still in companies we could see go public next year like airbnb, 23 and me, it will be interesting it see if they pull back a little after getting a little burned this year by some of the biggest names. What would the impact be if you had some of that money dry up its already pulling back if youre a Mutual Fund Investor seeing these markdowns, theyre seeing them in their holdings, but its only natural youre going to pull back your Risk Appetite a bit i dont think its going to have that much effect like i said the late stage Growth Market is pulling back a little bit, but if the nasdaq stays at an alltime high you can rest assured there will be Mutual Fund Investors and others chasing those late stage deals to try to get that ipo pop remember as well, that in a world thats flirting with direct listings, which bill and i talked about on this set a couple months ago, it is more and more difficult to get those preipo allocations and pop so the mutual funds perhaps have an incentive to want to come into those private rounds where they can get their allocations on the books veep though they may be pushing the price a bit. They are coming in earlier. We were talking about, the series c was led by t. Rowe with involvement by fidelity. Were talking about some of the names the valuation haircuts but there are some Success Stories we should mention fidelity told us that 2019 has been successful as far more valuations have increased their decreased. They were in crowd strike and data dog, two successful ipos this year. Thank you so much for joining us and having this conversation again, as somebody who covers this day to day. Talk about a couple of your holdings before we take a break and bring in Frank Slootman. Facebook, you your biggest winner of the year the stock is up more than 50 and you havent wavered as you said time and time again, whether its on this set or on the phone or via satellite when back at headquarters youre a huge believer this opportunity. Volatility creates opportunity. The fact of the matter is facebook from our vantage is the leading Global Internet technology platform. We have the founders still the leader of the business, who is allocating capital in ways that instagram, whatsapp, in ar and vr we think is industry leading, we think they have massive opportunity to still scale their monetization on a global basis in whatsapp and instagram. They started to talk about commerce and instagram which we think will be massive. If you listen to the ceos of ralph lauren and other public apparel companies, instagram is their number one source of growth and lead generation obviously its controversial around political ads obviously you know, the Company Might have done a better job in terms of how mark performed in washington, d. C. , but the truth is, we so see a Management Team and a business with opportunity. At 30 Earnings Growth it is still only trading at ten times next years ebitda one of the cheapest names in our universe for one of the best technology companies. What do you make, i dont know if you want to call ate battle, twitter banning political ads, facebook not going to the furthest lengths of that should they . Im happy facebook has not reflexively followed twitter into the political ad band i think theyre eville waiting the situation. The truth of the matter is depending on which side of the aisle youre on you may have a different perspective. The president of the United States can reach 100 million twitter followers and if you want to be in opposition to that voice you cant buy a political ad to tweet a response so to me thats sort of unilateral disarmament seems to be a Nuclear Option to a problem we all know exists so i hope that facebook continues to take thoughtful action on this certainly a review of the factual truth of some of these ads is something thats important. They have independent Fact Checkers doing that today and i would just say stay tuned as to what theyre going to do. The Stock Performance this year would suggest that all of this talk around regulation and big tech under fire is noise the market doesnt care about it at all if a stock could be up 50 and this is the posterchild of regulation and big ten run amuck. Thats what makes a market and creates opportunity. Remember the stock was over 200 last year, ended near 125, so it took a drubbing in the Public Markets last year. Thats when we built our large position in q4 because we didnt think it was a fair reflection of the actual Business Today weve round tripped back to 200 makes for a great gain this year the question is what the next two or thee years look like for facebook and we think the political ads question, regulatory question will be settled, but most importantly they are executing fundamentally in such a profound way with a great Management Team that we think is underestimated. Good stuff. A quick break. Up next one of the most anticipated ipos of 2020 the ceo of snowflake joins us next hes considered one of the top leaders in the software space. Frank slootman, that man right there, sits down with us next. As a principal i can tell you this. When one student gets left behind, we all get left behind. This is a problem that affects each and every one of us. Together with ibm, we created a whole new kind of School Called ptech. Within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. You know whats going up today . My poster. Today, there are more than a hundred thousand ptech students around the world. Its a game changer. Welcome back to one market here in San Francisco. Cloud Software Company snowflake expected to be one of 2020s most highly anticipated ipos, in part because of the man who will take that Company Public, Frank Slootman considered one of the kings of software in Silicon Valley having taken data domain and Service Public now in the past now snow flakes chairman and ceo with us in a cnbc exclusive interview. Thank you for being here. Good to be here. Good to have one of the kings of software here 25 years of experience, there are people who im sure know of your past, they may not know exactly what snowflake does. Youre not a sass company. What do you do yeah. Actually its one of the first companies, significant companies, to come to market that is using a utilization model based on consumption were not licensing use rights to the software. You essentially buy credits and you consume those. It really follows the public cloud model and completely analogous to that. It will be a wakeup call in terms of Financial Markets like this is a new animal, theyre already starting to move into utilization models slowly, but we believe the whole market will get there over time. What i find so interesting is that your customer of amazon and microsoft and others, but youre also competitors how does that work it works better on some days than others. Theres tension of course theres all kinds of friction. But youre right, were spending hundreds of millions of dollars with them so were a good customer we partner because we drive legacy on premise work to the cloud, but at the same time they have their own products and it can get pretty testy out there its a huge market and because of that, you know, we figure out how to sort of control the impulses a little bit and make sure that we perform for the customer. This is so interesting, brad, as an investor, when frank describes sort of this new frontier that the market is going to have to get its arms around, im thinking of how investors like you Value Companies like this, how youre thinking about the kind of business that franks snowflake is in. At the end of the day its not completely novel aws in the business of consumption, one of the Largest Software Companies weve been following nearly a decade. At the end of the day, the question how much value do you deliver to your customers and how are the customers consuming. It in a consumption model we see a leading indicator every day of the health of the business, how those customers are using it, what benefits theyre getting from it. A subscription model, sass, weve talked about in some ways is backward lookin