Welcome to Stocks and Translation, Yahoo Finance's video podcast that cuts through the market mayhem, the noisy numbers, and hyperbole to give you the information you need to make the right trade for your portfolio. I'm Jared Blicker, your host, and with me is the People's Voice, Sidney Freed, who's here to ask the people's questions and to keep us fromGetting too wonky. Today we're gonna be talking about venture capital or VC, that realm of money raising that companies tap before they IPO. In our word of the day, valuation, what something is worth sounds simple enough, but it can mean all the difference to a startup, how unicorns are minted.And this episode is brought to you by the number 64%. That is the share of all US venture capital money that's been invested in the first half of this year that is going to artificial intelligence, how AI keeps gobbling up more and more of the startup investment pie.And today we are welcoming back Brianna Samuels. She is a Wall Street trained venture capital investor and entrepreneur who began her career in investment banking before pivoting to VC and launching Good Report New York, a sustainable label for women's workwear. Now she straddles finance and fashion, evaluating multi-billion dollar tech deals and building an ethical apparel community.You keep busy, Brianna. And the last time we were here, we were talking about, this was in the wake of the 22 bear market, we're talking about not a lot of money going into VC. Have things improved?

I would say that we're hopeful. Things are slightly the same, but hopeful.

OK. What is, what does an improvement look like? Like, is there a specific dollar amount that would mark a significant improvement?

I would say that there's not necessarily a specific dollar amount, but it's kind of what is the activity like? What is the activity in terms of the capital flowing to various stages of venture capital, whether that's early stage, seed, Series A and late stage Series D and beyond, but then also what's happening in the IPO market, M&A as well.

All right, we want to get to our word of the day because it ties into the VC cut discussion that we're having here and it is valuation. This is the dollar worth investors assigned to a company or asset today based on expected future profits or risk and supply and demand for its shares. So valuation is critical across the life cycle of a company and tell us how it plays out in the early stages and in the VC stage.

Yeah, so everything when you think of valuation is connected, and this is like one of the things that is giving us some hope and optimism overall in the private capital markets. When you look at the first half of this year so far, we are seeing an increase in the US in pre-money valuations, especially on the earlyYour stage side of venture capital, but the only exception of the category of Series D startups, maybe not seeing that big of an increase so far.

What is a pre-money valuation.

So happy to start with before we talk about valuation and what pre-money really means.Series is really just a way to break down the different stages and you can even think of it as like a VC backed company life cycle. You start with preceed, you move on to seed, Series A, then you can go down way into the alphabet. When you get to early stage, it's usually preceed to seed.Then you move to Series A, Series B is that middle category, late stage, and then what a lot of investors coin as growth equity is like your Series C and so forth, and growth equity is really right before a company, well, IPO. When you think about valuation, which was the second point of your question, a whole host of things come into how do you set a valuation for a company.What types of analysis are you doing? And, and this is one of the things that I love to talk about is this is also how public markets and private markets are connected because oftentimes what's happening in the public markets can set benchmarks and precedents for what you will use and the numbers that you will use to determine the startup valuations. Are these models

that you're talking about? Do you have different models that you apply and whatDetermines which model you're going to use for one particular company, and then do they ever get out of date and you're like, oh, I got to tear that up and start all over again. Like, how does that cycle?

Yeah, it's it's a whole host of different analyses. One of the main things as an investor that you're going to do is you're going to build a financial forecast for the company. You're gonna expect what it's going to earn and spend for, say, a few years.Down the line, whether that's 5 to 7 or even 10 years out, and then you're going to use those projections to build what you think is the current value of that company, and a lot of investors, even in investment banking do this too, which is called your discounted cash flow analysis. So that's exactly it. It's your profit and loss statement with a few other adjustments to understand what are the cash flows each year, andThen you bring it back to the present value. That's one analysis that you'll do. It's a whole triangulation exercise, kind of coming back to my previous response as well. You'll look at precedents of what happened in the past. So what are comparable companies that are public? What did their growth story look like? Where are they currently trading and what do their revenue multiples look like? You'll also do the same thing and look at M&A.What were similar companies acquired for? What were their evaluation metrics to kind of hone in those prices

actually paid by the company. So I got to imagine those are real because when you talk about models, that's um, I mean, there, there, there's a lot of wiggle room in the models and I assume too, like after a big financial crisis like the global financial crisis, things have changed, maybe you got to rip up some old models, but also the pandemic, I have to imagine that things are a little bit different or maybe a lot bit different after the pandemic.So what's, what are the trends that we've seen in recent years?

Yeah, that's correct. And I would say that we're we're seeing a reset period, especially coming off of the pandemic and one of the reasons for this reset period is because of how easy and howEfficient and how much capital was flowing around right as the pandemic was happening and rightfully so, you wanted to stimulate the economy. You wanted to make sure that businesses were being able to push through this period of uncertainty. We also

got, I went into the wrong places arguably.

Exactly. And and that's the bet though, right, especially in venture capital, you're playing a role of numbers and power law. When venture capitalists think of theirFund strategy. They know that they're going to make maybe 20 investments and they only need a handful of those, 1 to 4, to make it big, hit that unicorn status to return the entire portfolio of the fund. So they know there's going to be several investments that get written to zero. So

talk about the challenges right now in the VC world to raise money. Talk about policy, whatever it is that's challenging folks.

There's still quite a few challenges and a lot.of what we discussed about a year ago when we sat down here as well. A lot of, although we're optimistic, optimistic because we're starting to see more robust IPOs, M&A activity as well. As you said, Jared, a lot of that capital is flowing to AI and AI infrastructure. And the reason for that is because investors, especially in this time period, are favoring business.models that are asset light can scale efficiently, which does mean that when you look at other categories, whether it's consumer or other verticals, they're not getting as much funding and those businesses are finding it really tough to raise the money. The last category here too is that the venture capitalists have to get funded to then deploy capital into these startups.

So venture capitalists need to be fun.as well. Tell us about because you touched on this before, the direct link between valuations and exits and the exit being, OK, I'm in a private company right now, the exit could be the IPO day. That's when they can cash out potentially if they want to, but how are the private and public marks linked? And by the way, Yahoo Finance has data on private companies as well as the public ones now. So sometimes I take a peek at these companies pre-IPO, but uh what are the mechanics behind it?

Yeah, so they're closely intertwined, and I would even say that policy regulation is also linked to this. You start with policy, you start with regulation. That really dictates how the cash is moving in all of these markets. When you think about the public markets, if they're robust, it means that there's a lot of activity, a lot of valuation.Getting set also increases in valuations, which then can trigger and signal and create benchmarks for the private capital markets. You'll see then upticks, more funding rounds, more money going to startups, and then these startups ultimately wanting to achieve liquidity and return capital back to their investors. Either they're going to do that through an.or an M&A transaction.

Is there like anumber you need? I'm obsessed with pegging things to numbers to exit a threshold to IPO. Like I'm assuming it's that's an individual thing based on your models, based on the money you're making, but like is there some sort of threshold?

Yeah, I'm not going to give you the answer you want, but itI can understand where that question is coming from. It's going to be so hypers specific to each company and even each industry. The the endgame with a lot of private companies that want to then go public and have an exit, is that they want to have an increase in valuation, so an increase from the last round of capital that they raised in the valuation that was set, and they want to be able to return capital.their investors. So if you don't think that you can achieve those two things, you might stay in the private capital markets a little bit longer until you have more certainty around those two factors.

All right, we're going to see if we can come back to that, but we need to take a short break right now. Coming up, we're going to dig into how much of the fundraising pie that AI startups are gobbling up in a runway showdown featuring fashion. This might actually be a first for who wore better. Stay tuned.This episode is brought to you by the number 64%. That is how much US venture capital money went into artificial intelligence startups in the first half of this year, according to Pitch Book. That number is only 53% globally, but only is still more than half. And so Brianna, we just touched on this before, is this overall, this is putting a damper on some people who would like a bigger piece of the pie or just a piece of the pie for themselves, how big is the issue?

I would say that it's one to monitor closely. I would say if we keep seeing this being a consecutive trend for several quarters and even an extended period of years, that's when we need to rethink how do you get more capital flowing to these other businesses. But I always like to think about the markets as a pendulum. There will be certain moments and certain periods of time where certain industries are in favor, and then it'll start coming back in other ways as as models.Investing styles and strategies and other factors start to change and maybe realign to better suit other other verticals.

I was going tosay, is this any different really than just the new tech thing getting most of the attention? Are

we in a bubble bubble.

That's a really good question. I read so much research on this as well because I do have that question. You see so much capital flowing.Towards AI startups and that space changing really quickly. The real question we have to ask ourselves is, are we seeing that productivity uplift coming out of these AI startups? And are we really seeing that return on investment? And I think there is still an outstanding question, which we need that factor of time to really determine. There are going to be winners in this space. So there are going to be a whole categories of companies that will win.It's going to be a race to see who can get there first and what that will look like.

I'm,I'm on pins and needles here waiting for that response or waiting for that answer. I'm sure Microsoft would like the answer to that as well. I want to ask you about your job because your job as head of a fund of funds is to deploy some of this capital. How are you doing

it? Yeah, it's an amazing role and I absolutely love this. As we were talking a little bit earlier in the conversation, part of the dynamic.Here is how are venture capital fund managers raising money? What does that environment look like? Unfortunately, it's really tough for venture capital fund managers to raise capital. This so far this year, or in this last quarter, they've raised about $27 billion across 238 different funds, but a lot of that capital is going to established managers and a lot of these mega funds. So if you're an emerging manager,which to help put that into better terms, you're raising your first fund, second fund, 3rd fund, you're finding it really challenging to get your platform off the ground, and it's taking you a lot longer. Fundraising timelines used to be around 12 months a year. They've now extended to about 15months.

That sounds like a big lengthening. All right, it's Fed day, so I got to ask you, would you like to see a bunch of interest rate cuts here because that would add some more liquidity to the system.Um, how big a deal is the Fed and what it does in terms of your job?

You know, it's all connected, so what they decide to do will have impact and we'll see how it trickles down. I think for my personal prediction, they'll likely keep things steady with just how many different factors and things are moving around in markets currently.

Uh, just like on you deploying cash, like, do you individually have to raise it? Do you have a team? Like how does this work?

So that's a great question on the startup side or the fun side.

On theside,side.

So when it comes to theOne side, usually when you think of like a venture capital team, you'll have your general partner. They sit at the top, and that general partner is responsible to go out, have meetings, whether that's domestically, internationally, and then you're probably thinking, who are they raising money from?They're going to raise money from institutions. It can be large asset managers. They can go to endowments, pension funds. They can also, which is a growing asset class, start tapping into family offices, which can be a whole spectrum, and then that last category is high net worth individuals.

So then how do you, how are you making the calculus?With what money does come in where you're putting the cash.

Yeah, so where they put the cash is they're going to think about their network and how they want to run their fundraising process. Some managers have really strong high net worth and individual relationships, so that's where a lot of their capital is going to come from. They call that deep pockets, exactly.I like deep pockets. And as these managers start to mature, they'll start to institutionalize. So when you think about a fund 3, that's when you'll start to see them raising a lot of capital to from asset managers, endowments, pension funds. But I think the next part of your question too is now once they raise that capital, how are they deploying it? It's really based on their fund strategy.You can pick as a fund manager really any strategy that you want. You can have a thesis that focuses solely on B2B enterprise software. It can be a fully consumer fund, a consumer tech fund, or you can be generalist where you're deploying capital into various different things. You'll also break that down and focus in by stage. So a lot of managers only focus early stage or they only focus late stage, and then lastly, they'll only focus on like growth equity.

We led this discussion in the second half with AI and how it's gobbling up some of these funds. What are some of the other trends you've seen? What other hot areas are there and who's getting left behind right now? Yeah,

I would say that the other area which is really closely tied to AI is probably going to be energy and infrastructure. You need to power a lot of these AI companies, and that is where a lot of capital is flowing. Yes, it's slightly contradictory becausethese verticals are a little bit more acid intense, but you kind of see the full circle that's being built here. I would say that there's probably two other categories that we're seeing move pretty healthily right now, especially based on some of the IPOs or speculation of IPOs. It's banking, financial services, and then lastly, government, government tech, aerospace and defense.

this year, even when we had the liberation Day panic in the market, uh, that was one sector that just didn't get sold off a bit. All right, we got to pivot now to today's runway showdown, which is a fashion forward event for a change. We are pitting the slow fashion steward on the left catwalk against the ultra-fast trend chaser on the right. For the left, think Earth tone capsule suits, recycled fabrics, and a pre-order model that keeps inventory.tight and margins fat. On the right, a neon blur of algorithm-driven microdros, hundreds of new looks every day, priced under $20 and gone before your coffee cools. And Brianna, I know you've got skin in one of these games, but consider the framing of the following question. With capital costs rising and tariff headlines swirling, which strategy fits 2025 better? Is it patient profits or volume fueled virality?

That's a great question.It's going to be a tough one for me to answer, knowing that I play in slow fashion with my clothing brand, but at the end of the day, you're in business and you have to think about financial sustainability and your financial profile. And with certain factors, I would say that it might be best to think about what can earn you the best margin in this environment, which might not be taking the full slow path.

Ah, so the margins might actually be better in the path.

I want to talk about your company Good Report, the sustainable women's workwear company. I went on the website, things are sold out. I tried to make a little purchase. So what's going on there?

It's doing really well and it's been so much fun. It's something that's so personal to me. I'm in the office so many days of the week and I really wanted to provide a sustainable option to women.To wear every single day as everyone's returning or a majority of people are returning to office. We started with two skews of amazing wool suits in 4 different colors, as you mentioned, we're almost sold out and we're about to sell out of our remaining stock, and I'm constantly thinking about what I had mentioned before on financial sustainability. You know, I'm really re-strategizing right now.I want to keep growing the brand and keep providing products that consumers love. And I had a software integration in my website that allowed me to cross sell products from other brands. And one of the things that was selling really well were these leather tote bags that women wanted or anyone really to take to the office to school. So I'm starting to think about that, especially with thein demand and doing it in-house.

How are youthinking about AI for your ownbusiness?

Oh yeah, this is, I love this question. I actually hosted an event last fall on how as a small business owner, you could think about using AI in your business, whether it's helping you create some product images that you can use on your social feeds. I think there's always that balance of question, and I think a lot of the AI use case eitherThere is an inefficiency of like your day to day work tasks or marketing right now, but consumers still want to see humans and humans in the loop, especially when it comes to marketing. So it's a mix, especially for me, of using the live models as well as creating unique images that can also help build our brand universe.

Um, just a 15 2nd answer here, please. Any last words for the viewers.

That's a great question. I would say keep watching the private capital markets, keep thinking about how they're all interconnected with public markets and monitoring the IPOs, and think about consumer. Consumer is an interesting space within private capitalmarkets.

All right, cool. And just to recap really quickly, I learned a lot about the pipeline and also taking into consideration.The connectedness between the private markets, which you can also explore at Yahoo Finance, as well as the public ones and how they're linked together, um, and also the slowdown that we're talking about the last time. It's nice to hear that things are cautiously optimistic now, but it doesn't look like we're quite in the clear. So we have reached the limit on our time and we will see you next time on stocks in Translation.