THE BEAR NECESSITIES

CALLING A TOP IN TECH HAS BECOME A RITE OF PASSAGE

I heard someone, somewhere, recently say, “This reminds me of the dotcom bubble.”

Probably more than one person.

Calling a top in tech has become a rite of passage in the market, maybe even more so as tech’s role in the U.S. market has grown (the top five tech companies now represent about one-quarter of the S&P 500). And lately, the bears were looking smart.

The Nasdaq suffered heavy losses after the “Black Friday” Nov. 26 first omicron headlines, and at its low, was down more than 6% before this week’s rebound. Everything from Tesla to hot software-as-a-service names and Covid stay-at-home favorites took it on the chin in recent selling. Disruptive fund management all-star Cathie Wood’s Ark Innovation Fund is down more than 15% year to date, and peak to trough, down more than 40% after Black Friday. And all but one of more than 50 tech IPOs this year was in the red after the omicron flash crash, according to CNBC data. 

Whether it’s Tesla or bitcoin or software names with price-to-earnings ratios near triple digits, bubble fears aren’t going away. But this week, tech staunched some of the bleeding. The Nasdaq rebounded, Apple is nearing a $3 trillion valuation, and at the other end of the public market, two more Disruptors completed IPOs: digital media company BuzzFeed and Warren Buffett-backed Latin American fintech Nubank.

Nubank, valued at over $40 billion in its IPO, got off to the better start of the two, but its CEO David Velez is thinking more about the years ahead than its first trading day. "We don't think the banking branch will survive the way it is," Velez told CNBC on Thursday. “A lot of that physical infrastructure will probably disappear ... most of the providers of financial services 5-10 years from now will be digital companies.”

If the short game in tech can be tough, the long game still looks good to another highly valued start-up, and it is now putting its money where its mouth is when it comes to making bets on the disruptive future. On Thursday, Databricks announced it’s getting into the venture capital business. The data analytics start-up, valued by investors including Amazon, Google and Salesforce at over $38 billion, is using some of the $2.6 billion it raised this year alone to build a tech ecosystem in new database and AI frontiers far away from the $3 trillion market leader in Cupertino. 

“We will see more and more of this happen in the future,” Databricks CEO Ali Ghodsi told CNBC on Thursday. Every major software company will “replatform” around super-intelligence and will need to invest in AI start-ups, he said. 

“There is so much money flowing into start-ups in the data and AI ecosystem,” he said. “Start-up founders kept coming to us and knocking on our door.” 

Ghodsi said some of Databricks investors, a group which includes BlackRock, Andreessen Horowitz, Tiger Global Management, T. Rowe Price Associates and Fidelity Investments, not only supported the strategy but were also sending start-up pitches its way.

Even as high-growth tech start-ups now in the public market experience volatility, Ghodsi said the private market is still bullish on the tech-led future, and is not consumed by fears of what inflation and a rise in Fed interest rates will do to high beta stocks.

Teladoc and Zoom may be down nearly 50% this year, but Ghodsi said the world has changed for good whether it’s virtual meetings for work or medicine and “AI will be everywhere and eat software.”

In the long run, there are still “heavy tailwinds” for tech and in the private markets, he says, the kinds of crunches occurring in public stocks aren’t happening. “There is still lots of money flowing into private investments … that could be the Salesforce … the Saas of the future,” Ghodsi said. The tech chart for Databricks still includes its own IPO, and if not a short game, it won’t be a long one from here either, according to Ghodsi.

“We are going to go public. I get the question every day. We will be public in the not-too -distant future,” he said.

If the markets get a scare after its IPO, he isn’t worried. “We are basically more or less doubling [our] business every year. If everything crunches and compresses 50%, we’ll grow through that,” Ghodsi said.

BECOMING A "REAL COMPANY"

IN CONVERSATION WITH CLUBHOUSE'S PAUL DAVISON

In just a year, Clubhouse's explosive growth forced industry incumbents like Facebook, Twitter, and Spotify to introduce similar audio products, or in some cases, make strategic acquisitions within the space. Amazon is working on its own Clubhouse competitor, according to The Verge.

But the hype around social audio began to tail off around April, which is ironically when the company announced a series C funding round. The round reportedly valued Clubhouse at $4 billion, but it's unclear what the start-up is worth today.

Early on, exclusivity helped Clubhouse, which ranked No. 33 on this year's Disruptor 50 list. The number of people who could join was capped, and new users needed an invite from a member and the company only expanded from iOS to Android devices this May after a year of iPhone exclusivity. In July, as part of an effort to reach more people, Clubhouse ditched the invite-only rule and opened the app up to everyone.

For co-founder and CEO Paul Davison, a former Google intern, it was a necessary shift toward scaling the technical infrastructure and increasing the size of his team as opposed to launching new features and refining the app. But Davison has since been able to focus on the latter: just last month, Clubhouse launched two new features in a bid to separate itself from the competition and continue its early momentum.

CNBC recently spoke with Davison, who maintains that user retention is strong and argues that our re-emergence into society will prove to be just as big of a boon for the company as pandemic-induced lockdowns were in its early days.

DISRUPTION IN ACTION

THE REST OF THIS WEEK'S HEADLINES

Databricks secures $38 billion valuation and launches 'Lakehouse' venture fund

RANKED NO. 37 ON THIS YEAR'S LIST

Databricks co-founder and CEO Ali Ghodsi joined CNBC's ‘TechCheck’ earlier today to discuss the company’s new venture fund, which will invest in startups and technologies across data and A.I. alongside leading, institutional venture capital firms. Ghodsi discussed the influx of investments into private data, A.I. and software companies. Databricks' cloud-native approach has been compared to Snowflake, which was the biggest software IPO in history.

Rent the Runway CEO says it is changing how it buys apparel from brands to boost its profits

FIVE-TIME DISRUPTOR 50 COMPANY

Rent the Runway is still losing money, and it’s sending investors fleeing. But Chief Executive Officer Jenn Hyman hopes to sell investors on her strategy to win over women’s wardrobes while turning a profit — eventually. “One of the major components of our path to profitability is capital-light acquisition models for our rental product — our inventory,” Hyman said earlier this morning on CNBC’s “Squawk Box.” In its fiscal third quarter, Rent the Runway reported a wider net loss compared with a year earlier and an active subscriber count that has yet to return to pre-Covid levels.

Jeff Bezos climate fund gives millions to energy efficiency start-up BlocPower

RANKED NO. 47 ON THIS YEAR'S LIST

The Bezos Earth Fund announced new donations of $443 million to a wide range of climate and environmental groups this week, including a $5.5 million grant to BlocPower, an energy efficiency technology start-up focused on building construction and retrofits in urban areas. The company plans to use the Bezos grant to add 125 million buildings and additional cities to its BlocMaps software database, which identifies buildings in need of energy efficiency upgrades and helps building owners learn how to electrify and decarbonize properties. 

Elon Musk says SpaceX has started building a Starship launchpad on Florida’s Space Coast

SIX-TIME DISRUPTOR 50 COMPANY

SpaceX has begun building a launchpad for its Starship rockets in Florida, as the company looks to add another location to launch the mammoth rocket that is in development. “Construction of Starship orbital launch pad at the Cape has begun,” CEO Elon Musk said in a tweet. Starship is the massive, next-generation rocket SpaceX is developing to launch cargo and people on missions to the moon and Mars.

CONGRATULATIONS!

THE LATEST DISRUPTOR 50 COMPANIES TO MAKE A PUBLIC DEBUT