Transcripts For BLOOMBERG Bloomberg West 20160924

Germany a day before the terror attacks that killed 133 people. German prosecutors alleged the man knew what the weapons were used for. He denies that claim. The Un Security Council has adopted a Nuclear Test Ban resolution. Nearly three dozen gop senators earlier wrote to president obama expect expressing concern that he go to the u. N. Day,l news, 24 hours a howard by journalists and analysts in more than 120 countries. I amn a melendez, Nina Melendez. This is bloomberg. Bloomberg west is next. Emily im emily chang and this is bloomberg west. Its official, twitter is exploring a sale. Why salesforce and alphabet might be interested in whether the Ceo Jack Dorsey really wants to sell. Facebook admits it has been inflating video metrics for advertisers. We will discuss the impact of this error and what facebook is doing to fix it. , the company suffers the biggest hack attack of all time, the timeline of what the company knew and when coming into question. But first, it is official, twitter is exploring a sale. The struggling social network is working with Goldman Sachs on a possible deal. Sources say salesforce is interested. Other reports suggest google is considering a deal. But talks at this stage are still informal. That did not stop investors from sending twitter shares surging up more than 21 in friday trading. Twitter has made up almost all of its 2016 decline in a single day. Joining us are Bloomberg News reporters, and my guest host for the hour. Sarah, you been working this story all day. In fact you have been working this story for weeks, its been a big existential question out there. Tell us the latest today. After the many months of rumors you and i have heard, this is the first time we have heard from sources definitively that Goldman Sachs is working with twitter to deal with incoming interests and have some these informal conversations the could turn into something more formal. Emily salesforce versus alphabet, what do you see twitter getting out of one versus the other and what do they get out of twitter . Its quite different in the case of the two Different Companies. Obviously in many ways google , could be said to be the company that most could benefit from twitter if they were capable of using it properly once they owned it. But they need a social system, another way of connecting with people, interacting with people as bots and other systems that they dont have a play in become more important. I think thats why the announced the aloe messaging service this week. Twitter could help them there. Its very expensive. In the case of salesforce, its a from left field idea that an Enterprise Technology company that has been trying to move into being the de facto leader in cloudbased Enterprise Software would want to own what is more or less a consumer service. But i think from the standpoint of marc benioff, anything that really draws more attention to the company and helps underscore their ambition to be a multiservice provider to a lot of different kinds of companies, including marketers, could be a plus, and i think it would put salesforce on the map in the common parlance in a way they never have been before and that might be worth a lot of money for salesforce. Emily they certainly did not shy away from the bidding, benioff told that too is a couple weeks ago. He wanted you to do the deal but you cant win them all. Salesforces chief digital evangelist tweeted this morning, why twitter . One, personal learning network. Two, the best realtime content. Rich news. Four, great place to promote others. I think somebody internally got excited. Maybe he doesnt know direct details about a bid or anything like that. In fact we havent heard there is a solid bid from anyone right now. I think salesforce is always sort of promoted social selling using twitter. There is a blog post in 2014 were they said, make relationships with people on twitter that you want to sell to. Make it part of your strategy. And so, maybe the salesforce employee got excited by their reports and said, why make sense for them . Emily lets talk about whats happening in twitter. I spoke to ed williams, cofounder of twitter, who is on the board, who had this to say to me when i asked him about whether he wants to sell the company a couple weeks ago. Take a listen. High in jack. I fully support jack. Emily you can only go so far. But weve seen a lot of m a. Do you see twitter remaining an independent company . No comments on that. We are in a strong position right now, i think. And as a board member, we have to consider the right options. Emily interesting that no comet no comment became a comment that drove the stock up 6 the next day, at the same time you have jack dorsey, whos also cofounder of twitter, ceo of twitter right now, he canceled an appearance at a conference this week with advertising executive Martin Sorrell. Sorrell did interview dorsey by Video Conference and asked the same question. Take a listen to what dorsey had to say. Theres always been a lot of interest and passion around what we do for the past 10 years. Weve always had a lot of speculation around what twitter an where twitter would go. But we have a really strong plan ahead of us, and something that we are focused on executing. Emily sarah, is there a disagreement within the twitter board room about what to do here, and if jack sources doesnt really want to sell the company, could he hold up the process . When it comes to the twitter board room theres been a history of disagreement. This is a board that jack has recently added members to that that hes handpicked. But yeah, i think dorsey has historically wanted to give it a go, being independent. I think ed williams has historically been more open to a sale. The two cofounders still dont quite agree on everything. Emily david, at the same time, you have a company that while it is beloved by so many people, user growth and Revenue Growth are struggling. Why is that of value to any of these companies we are talking about . David i think it is a legitimate question, an 18 billion ballpark valuation that would be required at a minimum to buy it. Its often said twitter is more of a phenomenon than a business success, and it is a company with an extraordinary social presence. I mean a cultural presence almost second to none. Its almost really at the level of facebook in some ways in terms of its presence in the dialogue of society. As a business it is nowhere near in the ballpark of facebook, and thats a real dichotomy that i think would face any buyer. As one of the reasons may be salesforce might have some interest in it. I dont know whether google would. To justify this kind of money, you probably have to buy it for reasons other than any prospective profit that you could get from it in the near term. Really that is not what twitter offers anybody in a foreseeable near term that i can see. Emily i want to pick through a couple other candidates that were thrown out there. Google and salesforce are not the only ones. And sara, i know it is harder for you to comment on this as a journalist. So david, throw it out to you. Quick answers here. Facebook. Yes or no . David to buy twitter . emily would they be interested . David no. Emily apple . David they would possibly be interested. I dont think they would know what to do with it. Emily how about news corp. . David it would be the kiss of death for twitter. Emily rich greenfield of bt ag has suggested has high potential for buying twitter. Jack dorsey i believe is still on the board of disney. David i think a Media Company would be a problematic owner for twitter but its conceivable. Emily thoughts on all of the above . Sara i think david is right about the Media Company being an issue, especially as twitter has been doing these streaming deals, a gets more complicated when you bring in a Media Company that already has a set of deals for what they do. But, you mention facebook, there would be some antitrust considerations there that we would have to take a look at. Apple, i dont think weve heard them be interested in social media but you never know. I think when it comes to an asset like twitter, a lot of companies are going to take a look at it just to understand the opportunity. There have been rumors about a sale for such a long time that many boards of Large Technology companies have already discussed it. Their teams have already taken a look at the idea of buying twitter, if they havent made a bid quite yet. I think the salesforce interest, now that its been reported, may spark more looking under the hood and at least pinging twitter and seeing if something can happen there. Emily david, you get the last word on verizon. Which of course already agreed to pay a 4. 8 billion for yahoo . David i think it would be less problematic for verizon than for news corp. Or disney. And it does make sense given the kinds of things theyve been buying. But boy, would they have a lot on their plate if they tried to add twitter to aol and yahoo , which is a big problem right at this moment. I think they would be a live i ill advised to do it. They might want to do it though. Speculate,s fun to but as far as we know, salesforce and alphabet the only the game, at least reportedly as we know it. Sarah frier, our Bloomberg News reporter. You are both sticking with me. Next, facebooks market momentum was fueled by impressive video. What happens when the metrics werent as good as we thought . Later this hour we will focus on the state of seed Stage Funding. This is bloomberg. Bloomberg television was brought to you by the trade. Dont just see opportunity, sees it. Emily on friday the social network admitted to giving marketers and inflated number for the average time being spent viewing online clips. Facebook said it has taken steps to fix the problem and advertisers werent overcharged. Joining us is our Bloomberg News reporter, sarah frier, who covers facebook. New york this week for adweek. Our guest host for the hour David Kirkpatrick with us via skype from portland, maine. And a media analyst at the marketer. Paul, thank you for joining us. Sarah, tell us what facebook did wrong here and how significant the error is. Sarah facebook was miscalculating for advertisers. The average time spent viewing a video. Facebook only counted the video view if somebody looks at a video for more than three seconds. When they calculated the average video view time they only divided it by the people who had watched already for three seconds or more. So they werent counting the people who watched it for two seconds or one second or not at all, which inflated the video view time they are reporting back to advertisers and may have impacted some Business Decisions on how much more to spend on facebook video ads. Emily the ceo of a Big Ad Agency said earlier today, weve been calling for a long time for media owners like facebook and google not to mark their own homework and release data to enable independent valuation. The referee and the player cannot be the same person. So facebook is responsible for telling advertisers and analysts and investors the kind of metrics they are seeing. Theres no real police officer. What do you make of sir Martin Sorrells comments . Paul weve heard this before. ad buyers have long lobbied for more transparency and thirdparty standards. And if you look at the history of advertising with traditional advertising, you have the nielsen ratings for tv, arbitron for radio, the audit bureau of circulation for print. We dont have anything in the digital realm that compares, and that goes for both ad supported platforms like facebook and twitter and google, and its also true of the more transactional video platforms like apple and amazon and netflix. So i think this is going to revise those calls that have been going on for a while for those thirdparty standards. Emily how big an impact do you think this will have on facebook . If this was a company that generally has been performing well, the narrative has been going well, a lot of that has been based on video. Is this a big deal . Is it something that will incur big reputational damage . Or just a blip . David i think this is just a blip but the point that the often sage Martin Sorrell made is a good one that actually has a much bigger implication. This idea that the referee and player cant be the same person is something that essentially afflicts everything the facebook does and is even related to the complaints weve seen recently about how it decides what to censor in the newsfeed, etc. It is a very untransparent system, and i think the company is likely to receive more and more pressure to explain to the world how it does decide what happens inside its vastly influential ecosystem, but nobody, including Martin Sorrell, really has the good idea about how to put a referee in there in a way that would be practical. Maybe, score can help on the video adds a little bit. Advertisers are going to stay in facebook for all kinds of other very Good Business reasons. But facebook does have a longterm issue with transparency about how it works that will not go away. Emily would you agree with that . How do you expect advertisers to react to this . Paul i do agree that there is a need for more transparency, and the more influence that facebook and twitter and other Digital Media companies have, the more that need increases. But i also think its a very big challenge. These are now video companies. That wasnt true even a year, two years ago. That adds a whole layer of complexity when you are just dealing with a printbased phenomenon, that is one thing. So now you have video, now you have live media as well. Emily looks like we are having trouble with paul. Sarah, talk to us about the response from facebook, where they go from here. I assume you will be talking to advertisers all next week. What are you looking to hear . Sarah facebook right away once it was reported, it was not wisely reported by them that they messed this up but once the journal uncovered it, they had an executive come out and say, weve looked at all our metrics, were fixing this. There have been no issues with billing. We are so sorry. It was an apology, mea culpa, were going to rely on thirdparty people to measure us. But i think advertisers are now questioning a little bit the validity of some of facebooks claims about its success, and that can hurt facebook down the line. I havent heard of any people pulling dollars from facebook video ads. In fact a lot of people still feel that they are very successful and influential. But it is certainly not a good sign for them as they rely so much on video. Zuckerberg thinks that video will be most of what facebook is in a few years. Emily sarah frier, who covers facebook and twitter. We will be looking to you for all the updates next week. From adweek. Paul verna of emarketer, and David Kirkpatrick. David, you are staying with me. On todays funding board, whole foods boosted its stake in the grocery delivery service. Bloomberg has led insta car authorized a sale of new equity earlier this year and let hold sues by new shares in an expanded partnership. Whole foods first teamed up with the company in 2014. This new investment was based on the same shareprice valuing its to at 2 billion. Earlier this month the ceo said his company would be cash flow positive in the next 12 months coming up, apple stepping up plans for a smart home service, smartphone device to rival amazons echo. We will hear more about the project next. This is bloomberg. Emily shares of apple slid on friday amid speculation from unverified twitter accounts that the German Research firm gfk said iphone 7 sales would be lower than sales of the 6s last year. Its report based on data from europe and asia and does not cover sales in the u. S. Gfk said its numbers are confidentially given and should not be released to the public without confirming the veracity of the numbers. Bloomberg has not verified, but it would contrast earlier positive indications from u. S. Wireless carriers who said earlier this month that sales were better than expected. Syria andth apple, alexei could soon be going head to head in the smart home stakes. Apple is said to be testing prototypes of an collective ice based on its existing voice assisted siri. The device is designed to control appliances, light locks, and curtains. Like its rival. As iphone, apple ipad and apple watch sales start to slow down, apple is looking for new areas to generate you forms of new forms of revenue. The company has recently taken a project to compete with amazons echo and alexei device that will allow people to use an apple design speaker as a home kit hub for their home straight this would allow people to show commands, add an apple design speaker, such as turn on the lights, turn off the lights, or open the garage doors, as well as issue commands through siri for playing music, controlling your stereo, controlling volume for the stereo, watching videos, mapping information as well. So apple also looking to improve siri on iphones and ipads. The company is working on a new initiated internally called the invisible hand program which seeks to allow people to continuously talk to their iphones, ipads and macs nonstop without ever touching the phone to conduct your commands. Emily mark garman there. I want to continue the discussion with our guest host for the hour, David Kirkpatrick, who i know is a big fan of amazons echo. Part of the beauty of echo is it is tied into your amazon account. We have one in the kitchen. When i need groceries, i tell echo to put those in the shopping cart. We dont know if an apple device would have the same capabilities or integration with amazon, given the competition here. But what is your take on this . David i think its inevitable that apple is going to build a product that is comparable to the echo alexa product, just as google has announced that they will do. Its so important of a category, and amazon has so proven that there is a customer demand and its a sexy new kind of interface for information, that apple would be insane to get out not to get out there with a product that is similar. The interesting thing is siri has a lot more intrinsic capabilities than what amazon currently has with echo. But its all about the implementation, and its going to be a real this advantage not to have been first. I think, its going to be tough to beat amazon but maybe with more intelligence, more things that it can do, it could be a genuine competitor that could really take some market share. Emily apple certainly wasnt first to market in smartphones or tablets and look what happened. David kirkpatrick my guest host for the hour. You are sticking with me. Coming up, yahoo users are now part of the largest Security Breach of all time and we are starting to learn what exactly yahoo knew about and when. This is bloomberg. Im Nina Melendez and youre watching bloomberg west. Lets begin with a check of your bloomberg first were news. The president of turkey says he will work with whoever wins the u. S. President ial elections in november. President erdogan sat down with john mikel suite in new york. Erdogan noted he started his presidency working with george w. Bush and then president obama. From the new year, we will see. And accordingly we will continue our work with america. Its out of the question for us to break ties from america. Continuing is fundamental in politics. Erdogan blasted the u. S. For not extraditing an islamic cleric, who turkish authorities blame for the failed coup. He dismissed u. S. Arguments that an extradition request must work its way through the judicial system. In egypt, 162 bodies were pulled out of the waters off the coast just three days after hundreds of refugees heading to europe to round. Dozens more are feared dead. Egypt has been a traditional route for people seeking to reach europe by sea. President obama today attended the dedication ceremony for the new Smithsonian Museum of African American history. Mr. Obama offered his remarks. President obama part of the reason im so happy the Medium Museum is opening this weekend is because it allows all of us as americans to put our current circumstances in a historical context. The smithsonian said the museum is the only one in the u. S. Exclusively focused on africanamericans, but the organizers say it is also meant to capture the stories of all americans. Hillary clintons running mate tim kaine has some advice for those considering voting for libertarian gary johnson, dont. Kaine says voting for johnson could have deeply troubling consequences. He noted that if ralph nader had not pulled away votes from al gore, the u. S. Probably would not have gone to war in iraq. The brother of vermont senator Bernie Sanders says hes running for a seat in parliament vacated by the former Prime Minister david cameron. Larry sanders said he was inspired by his brothers success and is a Green Party Candidate in oxfordshire. Heidi cruise is returning to Goldman Sachs in a newly created role in the houston office. She left the bank last year to help her husband ted cruz in his quest for the republican president ial nomination. According to a staff memo, cruz will report to the head of private Wealth Management for the southwest region. Global news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. I am Nina Melendez. This is bloomberg. Emily this is bloomberg west. Im emily chang. The next story may go down as one of the biggest of the year. On thursday yahoo disclosed 1 2 of one billion of its users were affected in the biggest Security Breach of all time. For reference that is more than , twice the size of linkedins hack in 2012 and 100 million accounts bigger than what used to be considered the biggest hack of all time, myspace. Today we learned yahoo was first tipped off of a possible breach sometime in july when a hacker advertised 280 million user credentials for sale on the black market. July 25, verizon agreed to by buy the core business for 4. 8 billion. Fastforward two months to this week, when yahoo found enough evidence of a much larger and more serious hack that it had to tell verizon. On thursday, share the news with the world. Now yahoo has drawn a negligence lawsuit i when user seeking class action status. The line tree ceo who helped advise verizon on a deal sounded unworried. Knowing verizon, they are assessing the situation and trying to determine the right financial reviews, revenues, if any. Everyone is looking forward to closing the deal and integrating it with aol. Emily still with us to discuss is David Kirkpatrick in new york in here in the studio, googles now cto of shape security. First of all, does verizon has something to worry about here . One of the things thats remarkable about the announcement of all of this information over the course of the last few days has been that verizon stated they only found out about this situation two days earlier to yahoo , making it public. They are still in the stage where they need to be able to assess what is exactly the impact to them, how much work will be required to remediate, and so on. Emily are we getting ahead of ourselves here . Is this something that can make a deal fall apart or unlikely . Its possible. I think we just dont know enough and neither does verizon. One thing that is interesting for me as a yahoo user and your colleagues make fun of me for using a yahoo account, use it for so long and you get it so integrated with your life its hard to move off it. I just thought about in the last couple days how many times in the last two years they have forced to change my password, almost every time i travel outside the united states, one way or another, they end up making me change my password. Which suggests their security , has been fairly decent since this occurred, whether they knew it occurred or not. Emily is that a sign of a good Security System . It actually is a sign of some real diligence they are putting into looking at whether or not accounts have been taken over. And one of the things many people dont realize is any of the Worlds Largest websites is under largescale continuous attack. Emily so lets talk about this. When you sat down on commercial break a said, i dont understand, why doesnt amazon get hacked . They have a lot of really valuable information. You said, they do, we just dont know about it. If you are running a large website and you have the capability for anyone to come in and log into the website, there are cyber criminals using very sophisticated, Automated Software to constantly test usernames and passwords that they have stolen from completely unrelated sites in order to discover whether or not those same passwords are valid on that particular site. So this is an activity that users arent able to see on a regular basis, but the companies do see it. Emily if companies are getting hacked and not telling us, should they be . Dont they have an obligation to tell customers when their information has been stolen . I think theres a difference between a very large scale, singular incident like a statesponsored actor potentially infiltrating your systems, versus the type of fraud that companies experience on a daily basis, where you have users that are having their accounts taken over by folks i shouldnt have access to them, and because of the fact that that fraud happens on a regular basis, they dont even necessarily think of it as a security incident. They think of it as a fraud issue. Of course every retailer in the , world experiences fraud on a daily basis. But i think whats going on here is that people are now asking themselves, what do i do about this incident . The answer is, there isnt a whole lot for them to do. Yahoo has notified all of the folks that have been potentially affected by this to the best of their ability to be able to determine, and now all of those folks just need to change their passwords, then theres nothing else they really need to do on yahoo . Emily how serious do you think this particular hack is . Its very serious from the point of view of the scale of it. As a graphic was showing, its the largest set of accounts that have been taken from one particular system as far as we know. And i think that that alone means that any attacker that has access to those is going to have a much greater success rate in being able to infiltrate a system like amazon, like any major retailer or airline and so on. Emily now david, you mentioned you still have a yahoo account. What did yahoo prompt you to do in this particular instance, and what do you make of the comments here that this is happening to a lot of Different Companies and and a lot of different users who use these different products and services all the time and we dont even know it . The key point is that what they do with this data is put it into automated assaults that are ongoing and relentless, where they test millions, im sure in many cases of combinations of usernames and passwords and unfortunately, the people of the 500 million who are hacked in yahoo who use the same password on other websites are the ones who are most likely to really be hurt as a result. I dont do that, and i have calculated roughly the my passwords and email have been stolen 7 times. My credit card information twice. And my name and birthdate at least four times, based on all the Different Services i use that have been hacked at one time or another. Banks, retailers. Its unfortunate, but this is the reality. Changer take stuff all the time. The statesponsored issue is interesting if we have time to discuss that. Emily we had a couple of guests on yesterday who indicated that saying an attack is statesponsored is a good excuse for any company to use because it makes it sound like it is not their fault. We dont know what happened here but yahoo says it believes the attack was state sponsored. Does that ring true to you . One of the real difficulties when it comes to figuring out what happened with any breaches breach is attribution. Within the security industry, trying to figure out who was the attack, what their intent was and so on. In a lot of cases you are left guessing. Who knows whether or not this was it statesponsored but one of the weird things about it is the fact that the credentials then went up for sale afterward. Statesponsored actors generally dont need the money. Its possible they got the value they needed out of it and then they might as well monetize it. Generally what you see from statesponsored actions is there isnt a direct commercial incentive. Emily that is very interesting. All right. Thank you so much. David kirkpatrick, youre sticking with me. We will be right back. Emily transportation is on the verge of a massive transformation, from the race for self driving cars to the transition to electric vehicles, one company challenging the status quo is the Silicon Valley based electric bus manufacturer who released a earlier this month capable of traveling 350 miles on a single charge. The ceo who happens to be a former tesla executive joins me in the studio and is still with me in new york, my cohost for the hour, David Kirkpatrick so, you announced a bus that can go 350 miles now, further than any car, any tesla can go on a single charge. Has this boosted orders . Absolutely. We made the announcement at the American Public Transit Association annual conference in los angeles. We already had a significant number of orders ready to deploy. And were still registering and processing the new demand based on the announcement weve made but we have already selected the early adopter pilot customer, it will be in southern california. We have been swamped with interest. I saw an article earlier that houston metro will be demoing a proterra bus. This is probably a pretty good sign. Emily talk to me about how you see electric. I would also love to know about self driving buses rolling out, as compared to cars. Do you see buses going electric, going autonomous before cars . I think we are already seeing transit vehicles go electric faster than cars. Because they are fuel saving. Their consumption is higher, so the demand is greater if you are running a heavy vehicle and burning 10,000 gallons of fuel per year. We are already seeing the penetration of Autonomous Vehicle technology in transit and we currently use it to help with the alignment of the charger so the bus can charge itself. I think it will be a wild before a while before mass transit application, we completely remove a human being from the vehicle because the human does more than drive. They help wheelchair passengers, students, tourists. When you only have one driver assisting 80 passengers, the economics are pretty good trade we are moving into a world where we will have electric, self driving taxis, electric trucks and buses, and probably the last thing that will go completely driverless would be a high passenger application. David i think theres a lot of reasons why cities would want these, even beyond the energy efficiency, the Carbon Neutrality of electricity compared to the way we power things now. As a new yorker, the noise of buses is a major problem in the city and i would think just quietness is of value in itself. So that is not even a question though. Ryan, what is the price differential between these and the traditional buses that a city like new york is buying . I think there are two reasons we are driving a lot of demand for this category for electric transit technology. One, vehicles are now fully capable of replacing the traditional diesel bus. The other is the pricing. At this point, an electric bus is the same price point with your configurable items as a diesel hybrid. So for a city like new york or baltimore, san jose is already buying diesel hybrid buses, the price differential is very small. I think its one of the reasons why the market has really ramped up. We have effectively hit market fit in both range of pricing. Emily i know you are going after transit systems first, but youre also looking at new vertical. Tell me about that. I will be in montana next week for one of our first campus deployments. We will be deploying three vehicles to a student led and Student Operated University Transit system. This technology has a lot of interest from airports. Airports are looking to procure these vehicles. Theres a lot of inbound interest from Truck Companies that are looking to take this Battery Technology and drive train into other heavyduty applications. So when we did the test drive of this vehicle, we drove a 30,000 pound vehicle, 603. 2 miles on a single charge. So if you think about it, a bus is a class 7 or 8 truck optimize authorized to carry human beings. You can get a lot of with that same type technology. Emily plans for an ipo, youve been through it before . I been through it before. We have plenty of orders and we are plenty big enough to make that transition. I will say i am enjoying being the ceo of a private company for a little bit longer. When our board makes that decision and we decide lower cost capital, we will take that step. But right now we have access to plenty of growth. Emily fascinating what you are working on. Thank you for coming by. David kirkpatrick, thank you. Happy friday. Coming up, as backing tries up for earlystage startups, a new fund stands ready to fill that gap. Details next. This is bloomberg. Emily seed Stage Funding is drying up, but angel lift, which connects Hunter Partners and investors, is stepping in with new money from sovereign wealth funds, endowments, and other investors, with a 1 billion rainy day fund. The ceo sat down with the vet either that chapman, who covers venturecapital, by explaining who is committed so far. We have a lot of different kinds of investors in the platform who invest in average of 200 million a year, and we are moving towards an Institutional Capital saved up for the future. The best returns in any industry but especially tech invest are made when there is a downturn, when nobody else is out there willing to lend. You are a lender of last resort. We have raised a fund from Chinese Private equity firm called csc, a 400 million fund, dedicated to investing to range a list. We have a fund called maiden lane that raised 2 funds total. And we have more money coming. We even have a fund we opened up for smaller Credit Investors called the access fund, which lets anyone who is reasonably wealthy put 100,000 in. Get 100 bluechip startup company. So, this is essentially warehousing and slowing down capital, and then allocating it slowly to Good Companies that even in a downturn, you want to keep this as big study. So its a rainy day fund, preparing for the possibility that investment wont come back at the same level it was last year . Not for a while. Let on the other hand, what you have to realize about the seed market is it is a very small market. There is only a year that spawned these companies. These companies go on to raise billions, become titans of industry. Its only a small amount of money that keeps it afloat. I dont think seed will ever undergo a massive downturn. Just because one large fund can step in and buy all the Seed Companies of Silicon Valley and new york for a small amount of money. True. But what is different is the number of startups getting funded. That dropped off significantly, it was over 2400 last year. This year it is tracking to be well below that. Right now it is at 1500. And thats the top of the final funnel going down. You have concerns about that or do you think im over blowing them . Companies need very little funding. It takes less money to start and build a tech startup these days. It is very competitive at the later stage. To get started it costs almost no money. We will have 600 or 700 of those companies you mentioned funded on the angel list this year. All you need is one over. Thats right. Weve had a number of winners. I would not bet everything on the ubers of the world. There are other lots of Great Companies that are 10x, 20x. Most Startup Companies go to 0. Most of them you lose whatever money you invested. Its the nature of this portfolio that you can only lose 1x but on a winner you can make 1000x. It is about smart invest in investing. So theres fewer startups being funded, less money going to it, but you said its not going to be this massive wiped out because one fund could come in, just looking at the dollar amounts, and make it whole again. Yeah, and its a very attractive asset class. We just released our 2013 numbers. We took the entire index of all the companies on the platform. It is an unrealized return to date meaning its just on paper. It is just on paper. But they are attracting a 46 irr after fees and carry. That kind of return in a negative Interest Rate world 46 . Thats crazy. It is extraordinarily high. It will come down. Even if we end up in the 20s over time, that is still a great outcome. What are some areas that you see as the next up and comers, what do you see attracting the most attention at the early stage . Consumer mobile has had a good run. Social media has had a good run. I think now we are getting more into enterprise applications. I think the crypto currencies are still maturing and we could see some really good activity in bitcoins and zcash, and is a bunch of those. Virtual reality and augmented reality, more portfolios being built there. The release of the Playstation Vr Headset should create a buzz. Mobile continues to innovate and get stronger, but what is even more interesting is, mobile is now not only the new platform, but it has created it is really cheap hardware we can use to create more and more internet of things and more and more small devices. All the hot buzz this year you just recounted a bunch of them now. I have been hearing too, i am not taking away from that. But those are all areas that when we heard a lot about continuing to attract interest, drones, vr, ar, bitcoin, all of that what is no one touching . The more esoteric currencies why not . They are hard to understand. They are technologically difficult to understand. Do we have the room to expand on that on a platform that attracts specialized investors that most of them come with a tech background . Yeah, our model is that we have hundreds of Angel Investors who have domain expertise in areas that are writing their own checks and created investors on our side follow them into deals. We call the model syndicates. That helps get past this knowledge gap. Emily speaking with lavette chatman. That does it for this edition of bloomberg west. We are teaming up with twitter as the exclusive streaming partner for the 2016 president ial debates starting on monday. Tune in on debates. Twitter. Com or follow b politics. This is bloomberg. The following is a paid program and the opinions expressed do not reflect those of bluebird, its affiliates or its employees. Announcer the following is a paid advertisement for time lifes video collection. Remember when watching television was special . Ladies and gentlemen, the beatles. Each night we gathered our family and friends around us. I like you. I really do. I wish you had not said that. You just killed 48 jokes. Announcer let the greatest