King Gets Crushed in IPO: Bloomberg West (03/26)

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March 26 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Virgin Group's Sir Richard Branson, Spark Capital's Santo Politi, Former ISS Commander Chris Hadfield, Asana's Justin Rosenstein and Eventbrite's Julia Hartz. (Source: Bloomberg)

Live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world.

I'm emily chang.

Our focus is on innovation, technology, and the future of business.

Current alibaba these -- leaves and investment in a tangle.

Also, the paypal founder will be joining us later on.

He is weighing in on carl icahn's leaders proposal.

Symantec has fired its president and ceo after two years on the job.

The world's biggest maker of security software has posted declining revenue.

Stocks are down this year.

Board member met -- michael brown will be an interim director.

A former microsoft employee has been charged with healing trade secrets from the company, including code.

According to federal officials, the russian national admitted that he provided the information to a freshwater.

-- french blooger.

Google has enhanced gmail security features.

100% of gmail course on in school that -- now be sent via unencrypted inaction.

No one can read your messages.

Documents leaked by edward snowden elected -- allege that the nsa was intercepting google transmissions.

Cory johnson is with me now.

Air b&b is set to raise $450 million.

Those are amazing numbers.

Raising $450 million is an incredible thing.

The notion that they would have a company valued at $10 million before the ipo is unheard of.

Air b&b is always on the list of tech ipos.

Instead they are raising money.

I wonder what that says about the company's readiness.

The fact that texas civic is involved with this deal, this might be the last funding round before the ipo.

Given the frosting is of the markets right now and the receptiveness -- class you think they would want to take advantage of this.

Paul kedrosky is joining us now from san diego.

What is your take on this fundraising?

I think you will see both.

I am with cory.

This is a pre-ipo rounds.

A bunch of folks want to be on board before air b&b goes public.

I have no doubt that that is the plan.

People are putting a bunch of capital in and they are planning to take it out again in six months.

That is a good trade for them.

We have seen some interesting investment over the last few years.

Things like t. rowe price and fidelity.

Now texas pacific.

This is not really their style.

What do you make of it?

It is not.

It is oddly reminiscent of the stuff we saw in the last bubble.

You had a lot of people who have lots of cash that they want to put to work.

They thought it was a guaranteed return if they put it in pre--ipo.

That idea that we are seeing the same kind of hot money show up, it is worrisome.

I am not troubled by the evaluation.

There is a company -- here is a company that will be larger worldwide.

It is stunning, the growth that they have had in terms of the total revenue worldwide.

It is remarkable numbers that they are posting.

They are absolutely trashing their competitors.

You have a too-for going on here.

Let's talk about home away.

Air b&b is value that more than some of these major hotel chains.

We have not seen any of the financials.

How do we know for sure that it is really worth $10 billion?

You don't. we have been offered an opportunity to invest.

We do not have to make that call.

With respect to the size, and the total number of transactions they're doing, those numbers are the kind of numbers you would you from a global chain on par with hilton.

The nice thing about air b&b at home away is that they democratize home rentals.

You rent whenever you get on the way.

I get to earn a little yield on my condo in san francisco or wherever.

That opens up the market.

That's not to be a skeptic, but his idea of evaluation compared with hotel when the hotel has hard assets, is an interesting one.

You can flip it around and say that one of the great attributes of air b&b is that they do not have to deal with the same sort of things.

Glad they will never have to repaint the rooms.

You will never have people say, i want to stay on the floor that was just renovated.

That never exist.

It changes their senses.

I know we talk about a bubble . $19 billion.

They do not make any money.

Literally.

Do you see any trends that are worrisome when you talk about the amount of capital that is out there chasing these cap companies -- technology companies?

For sure.

I see it in other sectors where it is less obvious to me how they will earn a return.

I do not seen the same problems at air b&b that i wouldn't many other companies.

I am more troubled by the stuff i see happening with the internet of things.

We see people funding deals at very expensive valuations.

They are ignoring the fundamental problem that they are just moving atoms around.

There is a lot more fraud on that side -- froth on that side.

You are tying -- trying to earn a return on this kind of business.

What about the regulatory issues?

Air b&b has had major legal challenges.

Huber has challenges all over the world.

What happened in seattle where they are limiting the number of drivers on the road.

Had we known that regulators are ultimately going to give us your -- did?

I do not think we know that.

We know that a politician will gravitate toward that first.

Over time, and whether it is three months or three years, marketing is inevitably opening up.

Whether it is the market of car rentals, or the availability of air b&b housing rentals.

There is a force at this point.

There'll be too much pressure from people to make it happen.

I also wonder about the business.

It is taking away a very profitable area with minimal revenues.

I wonder air b&b have a similar deal.

It is not that they are competing with the hotel business, but they are even reading it.

-- eviscerating it.

One of my favorite pages from start up is somebody who can take an existing tenant and our business -- $10 billion business and turn into a $100 billion one.

The competitor cannot compete.

Paul kedrosky, thank you.

We will continue to fall air b&b of course.

Coming up is our special guest house, max lesson.

? i am here in the studio with cory johnson.

We have a special show today.

We have a special guest host, max levchin.

He has an incredibly impressive bio.

He is the cofounder of paypal and the chairman of yellow.

-- yellow -- yelp.

He is also the founder and president of hvf.

Is a struggle to keep up.

How do you keep track of it all?

It is primarily adhd.

[laughter] how involved are you in all of these things?

It really varies.

I am a firm believer in a narrow focus.

I realize that are different kinds of focus that i enjoy and need to have in my life to enjoy.

Glow is pure joy.

It is a good for humanity project.

Being part of that makes me wake up and saying.

It is my regular job.

Hvf is where i go to brainstorm.

I can think about mining asteroids for gold or whatever.

Intellectual oasis.

We will talk about that later in the show.

Do you think you work on something in been you take a role where you need to get operational details?

You approach it from different sides?

It is the latter.

Being able to scratch the operational itch makes me pretty good board member.

My job is not to say how to do.

It is to find a good management team.

I can tell people to tell me what they have.

I will not tell them how to do it.

I want to get your thoughts on the alibaba story.

Obviously there's been a flurry in the messaging space.

What is your take on that.

? there are different layers to that.

The most obvious layer is everyone who does not have a mobile social graph says they need one.

Facebook said, here is the price, and needed huge.

That is obvious.

The more interesting question to me is with facebook alibaba and enormous companies that are very successful, are they capitulating?

Are they admitting that it is not easy for them to build a social graph during this transition to mobile?

The fact that they have to require one.

-- acquire one.

Is these defensive?

It is both.

It is very valuable.

It is also very valuable to them as they firm up their grip on the rest of the world.

It is very international.

I think it is genius.

The calculation that mark zuckerberg made was around how much the market cap would be.

The price is probably just paying it forward.

Will they have a profitable business and messaging might move that way anyway?

It might deal with the margins of the phone carriers?

This communication would happen at a facebook platform as it moves away from carriers?

Facebook has aspired to be a communication utility.

Any successful network becomes a communication utility.

That is a threat.

Instagram, whatsapp, all the different free sms platform.

Can you envision a future in which these book is not the dominant social network -- facebook is not the dominant social network?

I suspect that they are getting towards being the dominant social network.

The fact that they are so diligent suggests that they are intending to be the dominant.

There are other types of things that might become social networks like and grandma whatsapp.

It makes you wonder if something else might come along like based.

-- these book.

-- facebook.

Anytime the giants are not as strong as they seem to be, there is an opportunity for runners.

Coming up, we will talk about carl icahn changing his tune.

We will discuss the paypal mafia, next.

? i'm emily chang.

This is "bloomberg was." -- west." we are talking about paypal is cory johnson and max levchin.

Carl icahn has a new proposal for paypal.

He is calling for an ipo.

Ebay says that the company should stay together.

It is great to have you both here.

I'm curious to hear your thoughts.

Max, would you think about this new idea?

As i mentioned, i learned this from you in the break.

I am making up my mind as i go.

But that is why we love you.

I thought, this is not a bad idea at all.

You have the commercial part that is instrumental to paypal success.

The separation between paypal and ebay commercially is a terrible idea will not best idea.

Splitting a portion out and giving them a trackable motivation to innovate seems pretty good.

I would say that carl icahn pulls a good one out.

Some people think they should separate.

What do you think?

It is plausible that they will work separately in the short term.

The strategic product planning takes years to go to fruition.

It is probably worth more in the long term combined.

It will come down to if they are still able to execute the long-term product planning.

I would air on the side of that.

The flywheels would be preserved.

When i look at this deal, i understand why ebay wants paypal.

I do not understand why paypal would want ebay.

A decade ago, it was pretty clear.

It is different now.

There's still a tremendous -- in the manufacturing of american businesses, this is where they hatched and grew.

They figured out the details.

They sold their products.

For every truism about how ebay has been completely dominated by paypal, there are new sellers that are coming in.

Paypal is there at the door as they are hatching.

That is very valuable for paypal's growth.

Could this forge everywhere?

This is not just a case of paypal being part of ebay.

I do not think it is great for paypal.

I do not think it is bad for paypal.

Paypal needs to separate from ebay to cash in on opportunities outside of ebay.

What about the innovation case?

Many people have made a case that paypal has not innovated when it comes to rot.

What do you think?

There are lots of different skills.

When you shake things up, you are likely to get some innovation.

Whether it will result in more innovation over the next few years is hard to say.

There is a lot of synergy between paypal and ebay.

There are a lot of things that ebay does overseas that could be beneficial to paypal.

There is a lot of deep product stop that we do not know about.

That innovation could be disruptive.

Max, you are spending the majority of your time on a pavement have any.

-- payment company.

What is paypal missing?

I do not think paypal is missing that much.

It is an excellent payment system.

I am working on a company that has a payment products.

We are trying to be a blender and build a modern 21st century credit-issuing bank.

They would offer markets and processes a payment system.

We are different.

We do not say that we are paypal 2.0. we could be a provider to merchants that she is paypal.

If you look at paypal.

It looks like it was written in c++ 15 years ago by a bunch of university students.

As it goes on, there is now hope for a lot of that to be blown up rewritten -- blown up, rewritten, and rebuilt.

I wonder if it is about keeping at the hands of amazon for someone who looks at the ebay empire and wants a piece of that?

Do you look at the corporate machinations and see that happening?

I do not think so.

I do not think about who owes -- owns pieces of it.

It comes down to innovation and what is the best way to move things forward.

There are other companies in the space.

There is room for ebay and amazon to innovate.

I doubt that the decisions are being made to prevent ebay from interacting with paypal.

We will talk about wearables next.

We will talk about the future of wearable technology next.

? welcome back.

I'm emily chang.

Fit it -- fitbit is facing a lawsuit after users say that it caused listers.

-- blister.s they say that fitbit sold a dangerous and effective products that injured customers.

The company unveiled the product in october.

We reached out for comment, but did not hear back.

Google just unveiled android where.

-- wear.

It is a new version of entry designed for wearable technology.

Cory johnson joins maine.

We also paypal founder max levchin.

You guys have apps for wearable devices.

I trimmed it down to just the job own.

-- jawbone.

I was rocking be fitbit and the jawbone for a year because i could not decide which one i liked better.

We had the chief financial officer from carmen on last week.

They are doing a lot of business in wearables.

Why do you think this business is blowing up?

There are a million great reasons.

The battery life is extending.

There is low-energy transmission.

Let's reflect on the lawsuit.

I think this whole thing is bonkers.

The class action lawsuit is coming out against fitbit for a subtle reason.

The people who are buying it are still buying the old devices.

These are the health conscious 1 presenters -- 1%. most of the general populace is unaware of these devices.

There are 99% more people who would benefit from these devices.

They could get thinner and healthier.

84 -- any form of class action lawsuit is ridiculous.

These people are early adopters.

It might burn your hand sometimes, but you chose to try it.

I wish i exercised as much as you said.

I were these today for you.

I am not compelled to wear them on a daily basis.

Can this go mainstream?

Some people say that these will become part of our close and everything we where.

You have been working with wearables for two decades.

It will shock your readers to know that i do not exercise all the time.

The mainstream potential for wearables is bigger.

The potential is huge.

The potential for making yourself stronger.

-- smarter.

You have information right when you need it.

It is the year were two away from becoming mainstream.

It is intriguing to me how much is in the following.

-- telephone.

We see a lot of endurance apps.

These sensors in the smartphone are changing quite a bit.

You work in this arena, what is the phone lack?

What would show up in a wristband?

The major change -- people have easily time.

A split-second of having to take it out of your pocket and look away makes a huge difference.

If you look at the continuum of when software was written on desktop computers, you only use it for a couple hours a day.

Then you have laptops and you are using it to-three times a day.

Then you into phones and you into using software 20-30 times a day.

Now we are going to watches.

You will be using products hundreds of thousands of times a day.

That changes everything.

It seems like google with android has a head start.

We are still waiting.

The android announcement is massive.

There is an enormous infusion of interest.

People are committed to entering -- android.

Now they can go for anything that runs on the largest mobile operating system.

It is an enormously intelligent decision.

Max levchin is with us for the hour.

The ceo of ever know.

We will say goodbye to him now.

Coming up, we will talk about health care technology.

What if you never read oh or skipping the gym cause -- cost you money?

That is asked -- next.

? you are watching "bloomberg west." i'm emily chang.

From wearable technology to health care technology, many new acts are helping people improve their health.

You may get a financial incentive to exercise and eat healthy.

Our guest host for the hour, max levchin, was an early investor.

He is with us in the studio.

Tell us about cap.

-- pact.

Tactic -- pact is an app that helps people live healthier with talkative and negative incentives.

At the end of each week, if you do not meet your goals, you pay into the pool.

That is your reward for everyone else who does meet their goal.

Ok.

why?

It is brilliant.

I think the future of health care, the affordable care act not with dancing, is about changing the -- notwithstanding, is about changing the cost structure.

People have to become healthier.

Adding a bite to a cost of eating badly, that is a great idea.

I think a mobile app that tracks your performance with a financial component is everything i love.

When you look at these kinds of investments, do you think, i want a health care investment?

But it has to be different.

The way we ran across pact was that we were brainstorming ways of creating financial and ended -- incentives to exercise.

You do not have the motivation to wear these things all the time.

If you hit your wallet, more people will do that.

There is a company that does this.

We got in touch and the rest is history false how much do you make if you fail?

I am not sure i would want to bet on myself.

I would bet on cory.

You would be surprised how powerful the incentives are.

We are more likely to be motivated by loss, then gain.

By having five dollars on the line, people meet their goals within a year.

We hate losing.

It is especially true people in silicon valley.

It is a loss.

I have noticed that the purchasing of something, a lululemon purchase, or this jawbone device, it gives me going further for another few weeks or another few miles.

That makes all the difference.

I would like to point out you are thinking about this from a bigger picture perspective.

There are things like low.

-- glow.

You are trying to lower health care costs.

This has the ability to do that.

All of these products in their later stage versions look like new products.

They look like toys.

We also really underwrite a portion of the cost of treating fertility, which is a fundamental issue to address, and pact is about wellness and fitness.

All of these things ultimately lower the cost of being healthy.

That is the role of an insurance company.

The spread the risk.

We're trying to lower the risk and spread it.

From a per folio perspective, does pact become a thing?

And you have bundled together.

That is taking it too far.

We became very passionate about this notion of infertility and the fact it is not covered by traditional insurance.

We want to balance the space of health insurance and look for other companies.

How do you gauge the size of the market for this business?

We started out in the consumer market.

The real opportunity to see is tied to health care.

We have looked at the before and after data.

We see that there is a 40% increase over six months.

That leads to an extra five miles every week.

That is the kind of health care change that we strongly believe in.

If we can change people' ears, we can change the facet behaviors, we can change the cost associated with those behaviors.

-- when is it going to become more than just ask?

-- apps?

With below -- glow, it is a product that solves financial problems.

At the platforms themselves, they will step in and say that this is a unified way of using the products.

Jeff flake apple enabled several kinds of financial transactions.

-- just like apple enabled several kinds of financial transition.

Thank you max, cofounder of many things.

Thank you so much for joining us.

As we had to break, here is a look at what is coming up tomorrow on "bloomberg west." a former facebook executive will join us to talk about the social network and what he is working on now.

His new product is microsoft for mobile.

From the crisis to -- in ukraine to a missing jumbo jet, the biggest world problems.

? welcome back to "bloomberg west." i'm emily chang here with cory johnson and max levchin.

We are talking about big world issues, the ukraine crisis and the search for the missing jetliner.

It is an amazing story.

The nsa.

So many problems in so many problems to solve.

What are the biggest and how can technology help?

At hvf, you are tackling all kinds of things.

You spend a lot of time thinking about problems and how you might be able to solve them.

Walk me through that.

Hvf has a very specific color to it in the sense that it is focused around the notion of data as the raw material to be used for solving problems.

The process works around a hypothesis.

We sit around the table and brainstorm.

What i would like to think that we do is that we asked questions.

What sort of data can we mind?

What do we not know?

What is just about to happen and what does that tell us?

Mix of that, we have a question that i love acting, -- asking, what does this fill in the blank when it is all -- salt -- soolv ed?

I'm an optimist.

20 years from now, i think that we will be good and striving.

We are building important things.

30 years from now, this problem is solved.

What happens between now and then?

What took place?

We rolled backwards and we say, this happened, and this was short, and this was invented.

Can we be doing this?

We look for invested -- investment opportunities.

It is an uplifting process.

Here are a few things that will happen.

Take me through it.

How does that look on your daily calendar?

What is the agenda for that?

You have a work process that not many people go through.

Thanks i wish i had more time to do it.

When it comes together -- recently i found that we are more productive if we are not in our offices.

Sometimes it makes sense to be in the office and cover a whiteboard.

We have a lot of interesting toys in the office.

Sometimes we play around with the 3-d printer which takes too long to do anything productive.

Most recently, we go to strange and interesting races that are not -- places that are not at our office.

The most recent conversation we had -- it was late at night.

It was well past midnight.

We talked about what happens to video.

Video on mobile is an interesting thing.

Here are the 10 questions we are going to deal with.

It begins at 10:00 p.m. if you're seven stop -- pier 7. it shakes itself as we start the conversation.

Somebody says something and nothing will happen.

And talk about some of the big things that are going on in the world.

Ukraine, you are originally from the ukraine.

There are protesters.

Camtek balaji help the situation?

Are there limits to what technology can do is to mark technology is very central if you look at the organization of the independence square protesters andy cyberattacks on both right.

It is clear that conventional violence in my hometown of kiev -- there's a fair amount of violence, but it could have been worse.

I grew up there.

I have been on that square many times.

I have family in crimea.

As is very raw.

Fortunately there's not as much bloodshed as i expected.

It does not look like technology makes much of a difference.

We are spending our time looking at ukraine and a look back at us.

It looks like boots on the ground are decisive in that conversation.

There was a cyberattacks stop -- cyberattacks.

It coincided with the russian troops moving in.

Armed conflict will include a cyber conflict.

What about this?

How is it that two weeks after a gigantic 777 disappears, we have no idea what happened to it?

I am more preoccupied with the ukrainian situation.

Disappearing planes take a long time to find.

Two weeks later and we're still looking.

I hope just really is find it.

There are bigger issues in the world.

What about flight data?

That is what i was about to say.

The reason we have not found it is because of a lack of technology.

It is lack of technology in the cockpit.

Permission to use and i had -- ipad by a pilot.

That thing should be wrapped in sensors.

Claims should not be allowed to disappear from radar.

-- airplanes should not be allowed to disappear from radar.

Why do i not have very high speed internet connection to a huge number of satellites that are sitting closer to the plane?

The fact that we do not have connectivity on these flying fortresses is a problem.

I have you solved that problem?

Start examining the regulations that were put in place in the 1960's. that is stupid.

Let's allow for communications.

These things could all be struck down and should be allowed.

I want to thank max levchin.

Our special guest host for the hour.

Thank you for watching this edition of "bloomberg west." we will see you tomorrow.

This text has been automatically generated. It may not be 100% accurate.

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