Programmers who can speed up its computers. The competition is designed to save money and time. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. From washington im alisa , parenti. This is bloomberg. Emily this is Bloomberg Technology. Im emily chang. We are showcasing tech giants and startups, plus breakthrough technologies. Speaking with innovators, Venture Capitalist, Venture Capitalists, and developing news on snapchat. Snares have shares have gone off a cliff. Hyde, joiningine us from the Harvard Innovation Lab in boston. Tell us what you have coming up. Caroline quite amazing. Through here, more than 800 companies have been incubated. We want to talk about the vertical, the area of tech they are focusing on. Also, a man i cannot wait to whok to, Steve Pagliuca, knows a thing about tech. He is also the coowner of the Boston Celtics. Emily stay with me. I want to dive into snaps first Quarterly Earnings report as a public we traded company. As as of snapchats publicly traded company. Shares of snapchats parent company. Nearly 10imates by million. Snap reporting 166 million daily active users. Also trailing wall street expectations. Are the copycat moves taking a toll . Joining us from new york, james cakmak. A lot to digest here. International growth flat across three quarters in a row now. 2 billion in stockbased compensation. You have been very positive on snap. One what went wrong here . James we have been giving them the benefit of the doubt. The user number was ok. The issue is not so much their. The biggest concern is on the monetization side. It followed fell significantly. You wanted to see outperformance as far as that metric is concerned. Put that together, you get to a revenue number of 150 million, 7 million below consensus. The issue coming into this quarter was the fact that you had a very difficult setup, where expectations were skyhigh and the bias was incredibly toward the downside. It was a really difficult performance for the company to meet. Inly weve been listening on the earnings call. The ceo has been speaking. Take a listen. We made significant progress in automating our advertising business this quarter with more than 20 of snap ad expressions delivered programmatically through our api. This means advertisers get better pricing, our community sees better ads, and we are able to make more money per impression. Emily as we know, facebook has basically lifted snapchats stories and spread it across all the platforms from facebook to instagram to whatsapp. How concerned are you about the competition . James not so much, yet. The users are growing at a healthy rate. Engagement is growing. Timeso learned engagement spent has gone north of 30 minutes per day. That is a very sizable number. Peg that against facebook property, 50 minutes across their portfolio apps in aggregate. Their engagement is there. The use case is different as far as messaging, the wrongness rawness of the experience. Im not looking at it as apples to apples with instagram. If you can see a situation where our monetization per user increases dramatically against benchmark it facebook, its only 10 of where facebook is, when percent of twitter. Youre not telling me 20 of twitter. You are not telling me it cant get to where twitter is today. Caroline i remember the day you came out with a buy recommendation, one of the first to do so. 25 per share still seeming reasonable to you . James im inclined to say it is at theow, just looking initial numbers and hearing what i am on the call as it relates to user growth and time spent. Monetization is a question that we need to drill a little bit further on. Its unfortunate we are not getting any more clarity quantitatively on the Financial Outlook as we look at 2q. For the year, they are pinning that on our growth is going to be stemming from the timing of our product rollouts. Questions or theres a lot more explaining we would like to see. The users and engagement are going in the right direction. Caroline still giving them benefit of the doubt. I want to ask, more broadly, a question about ipos and how this reflects on it. We have heard this could cause a bit of a cloud around ipos,. Nternetbased ipos does this make the ipo pipeline a little bit more worrying when we see this sort of firstquarter revenue numbers coming out . James the ipo itself was a success. I think the issue was its interesting. Expectations just got so high with the sentiment so negative. The most bearish people on the stock had the highest estimates. When you talk to the buy side community, that was the case as well. It was a very difficult company. A very difficult setup to perform against. They had to do well beyond the rosiest of expectations in order to put the naysayers to rest. It was kind of a loselose situation. That is a learning lesson that other potential ipos can take, but the ipo you can argue was ok. Emily snap shares down almost 26 after hours. I know you would be jumping in on the call. James cakmak. Much. So we will continue to monitor the call and bring headlines as we have them. Caroline we will do. Sells on the stock at the moment. Back to boston. We will be speaking with none other than bank capital managing director and Boston Celtics coowner Steve Pagliuca. Thats next. This is bloomberg. Caroline welcome back to this special edition of Bloomberg Technology. Massachusetts leave the u. S. In Capital Investment for biogas leads the u. S. Massachusetts leads the u. S. In Capital Investment for biotech. A hefty donation from Steve Pagliuca and his wife, the pagliuca harbored life lab opened its doors last november. Peek at the we got an inside peek at the incubator. Its a 15,000 square foot incubator, into a dead intended to support harvards life lab. Silk, developed at nearby toughs University Tufts university. We pull one protein out of silk in solution format. We are reengineering silk to encapsulate and protect that. Caroline the cofounder and ceo explains this small patch is made of hundreds of vaccinated microneedles that are wrapped in a silk protein. It makes vaccines easier to administer and, more importantly, eliminates the need for refrigeration. It is something i can administer much more easily. Secondarily, this patch is shelfstable. We can ship it around the World Without refrigeration, which is a major challenge with a lot all of the vaccines on the market today. Caroline to remain effective, all vaccines need to be kept cold from point of manufacturing to end patient. Vaccineselfstable could make it easier to vaccinate the entire world. It is roughly 30 billion. The burden of the cold chain is anywhere from the 4 billion to 6 billion range if you think of it from a global perspective. The opportunity to expand access is a pretty compelling goal. Caroline founded in 2012 when he was a student at harvard, the startup has raised 13. 5 million in funding, including grants from the bill and Melinda Gates foundation, to help in the eradication of polio and measles. Of polio patch that is heat polio patch that is heat stable and combines three dosages into one regimen, so we can get patients appropriate vaccination levels. Caroline they are partnering on new vaccines for herpes and Prostate Cancer and collaborating with m. I. T. The Company Plans to enter the clinic in early 2019. As for life after the harbored life lab we are happy to call massachusetts home. I think it is unmatched in terms of talent availability, access to partnerships. It is unique ecosystem we have here. Caroline joining us now is the man behind the name of had lyrica of pagliuca harvards life lab. Steve pagliuca, here in part of Harvard University. What made you fund the life lab that is the other key lab here . Steve when i was running for senate, one of my Campaign Promises was we would protect biotech here and Life Sciences. I wrote an editorial saying, weve really got to not let that leave, Like Technology left 20 years ago for silicon valley. We have a different structure here, the best universities, the best hospitals. That idea started five years ago. Ns came up with the idea of building a facility that would allow these startups to stay here instead of leaf, leave, be costeffective, and try to grow companies. Caroline were you worried about a brain drain . Steve we could see it already in the tech industry. 25 years ago, we had digital equipment. Many of the Technology Companies got bought and went to california. The mayor got involved. The governor. They promoted the Life Sciences. You can see the results of it now. Caroline it sounds as though innovators and entrepreneurs are committed to remaining in the area. Whenrms of competition youre looking globally or in america, are there areas you feel you can harness the crown away from or have to fight off . Is the talent pool rich enough . Steve i think the talent pool is probably the richest in the country here in the boston, massachusetts, area because of those universities, because of the hospital complex and the technology we have here as well. I think we have the crown. We dont want to lose the crown. Something like the life lab can really promote that. It gives easy access to companies. There are eight different schools that have access to the life lab. 15 businesses. Youve just seen one that is very exciting with vaccination. All sorts of projects going on. When you have that kind of they vitality, they can start here and stay here. Caroline you know investing well being at bank capital. Bain capital. Is biotech an area you would want to see for future innovation, but also as a reward . Steve absolutely. There are many biotech funds, Life Sciences funds in the boston area. We have announced a large fund that will focus on a later stage than this. There is an ecosystem financially developed so these companies can get angel capital, then moved to Venture Capital, then move to private equity capital. Caroline what about from a public point of view . There has been concern, particularly with the new administration in the white house, that the tap would be turned off slightly for biotech funding. What about longerterm . Steve hopefully the white house will look at this and see its good for america and the economy. They certainly ran on that platform. Secondly, we have been supported locally by our governor and our mayor. The mayor was here at the opening. The mayor and the at the entire administration of boston helped get this facility up in record time. The biotechnology council, Harvard University, Harvard Business school, the community rapidly. Came together 15 businesses already up and running. Its very exciting. Caroline what about diversity in terms of the pool of people you see here . Is that something you have been able to prioritize . Steve absolutely. My wife was heavily involved. She is a tech investor. My daughterinlaw is a cofounder of a biotech company. They got together and worked with the university here to make it very familyfriendly. We have rooms for women, rooms for birthing mothers to bring kids, breastfeeding, all of the kinds of things to make it a very friendly and easy environment to work for everyone. Caroline fascinating. I will be digging into some of your investment theses. Steve pagliuca, bain capital managing director, will be sticking with me. Much more ahead from our special coverage in boston. We are also broadcasting on Bloomberg Radio at 1200 a. M. A d bloomberg is the official broadcasting media partner and cosponsor of the boston pops fireworks spectacular on july 4. This is bloomberg. Caroline we are live from the Harvard University innovation lab, showcasing the power of bostons tech economy. Tech hubs basis as a could not have happened without bain capital. With me is none other than the managing director and cochairman, Steve Pagliuca, also coowner of the Boston Celtics. You have the shamrock on your tide today tie today. Before we dive into the nba, i want to dive into some of your investment hypotheses at the moment. Youre looking at stocks at record highs we are looking at stocks at record highs. What about private equity . Steve prices are high cyclically. We try to be disciplined in times terms of the deals we do. We are looking for transformational opportunities. Three of the Big Companies we have in the portfolio, we bought two companies at once and put them together to form a stronger, more Strategic Company on a global scale. Looking at areas we know very well, technology, health care, industrial, consumer, weve had Great Success of that strategy with that strategy of being disciplined. You can take a longterm approach. Totried to find we try find companies where we can invest in new products, where we can find a way to take them global. Those are the opportunities we pursue. Those are the only opportunities you can preserve pursue in a market where prices are fairly high. Caroline the us think we will see more m a do you think we will see more m a . Do you think we will see more Public Companies becoming private again . Steve when you pay a premium and prices are already high, it is difficult to make the numbers work in terms of private equity. There is a role for private equity in these transformations. These companies that have kind of lost their way and need a restart, they are companies that need a different approach. There are companies where you can transform by increasing the m a process, by taking them private. So far, we have found plenty of those opportunities. We tried to be disciplined. So far, its been a great result. Caroline talk about transformational opportunities. Sports was a transformational opportunity when you took over the Boston Celtics. Its been a process of reinvigorating. Opportunities did you apply to that . You are potentially in the run for champion. Steve its been a great labor of love. With groesbeck, who i was able to partner with, we both came from a Venture Capital and operations perspective. We came in with a Strategic Plan that involved three things. Build awanted to championship team. That brings fans and excitement to the city. The second was we really wanted to improve the fan experience. The previous ownership had not invested in large jumbotron, had not invested in technology. The third was to make a community impact. We formed the Boston Celtics shamrock foundation. That foundation has become a leader in sports the p sports philanthropy. Then finding a spectacular Management Team led by danny ainge just incredible has led to a championship in 2008. Hopefully we are on the same path now. Caroline Isaiah Thomas has been someone who has been focused on. To withhold from offering him a longerterm contract . Is that something you would be willing to do . Steve we dont talk about that. Danny ainge handles most of that. Isaiah thomas has been a real profile in courage. I was able to go to the profiles encourage dinner on sunday night. You look at Isaiah Thomas. Had a tragedy in his family, lost his teeth, and still playing for his teammates and his teammates playing for him. Now, battling a Great Washington team. Its been very inspirational for me personally and the entire celtics family to watch isaiah fight through this and do it in such a professional and teamoriented way. It embodies everything you think the good things about the celtics. Caroline when you say you have tried to foster the community and make the fans so much more engaged many people are worrying about nba teams hogging the best players. How much does that affect the business of the nba . Steve your objective is to get the best players. Theres nothing wrong with that. You have to plan for that. Danny has done a fantastic job. He takes a fiveyear perspective in terms of trying to build a championship team. We have a high draft choice. We have the highest probability to get the first pick through trades we pulled off. The combination of getting young players, getting free agents, and making beneficial trades can bring you a championship. Danny seems to have found a great formula. One of the keys to the celtics success is we have backed great folks. We have the same folks in place almost longer than anybody in the nba, and it has paid dividends. Patience has paid dividends. Caroline good luck tonight. Much more from boston, coming up next. This is bloomberg. Alisa im alisa parenti, and you are watching Bloomberg Technology. Acting fbi director Andrew Mccabe will be on the hot seat in just his second day on the job. He will appear at a Senate IntelligenceCommittee Hearing tomorrow in place of his former boss. That hearing is about current and projected security threats facing the country. President from fired james comey yesterday. Today, President Trump met with Russian Foreign minister Sergey Lavrov in the oval office. The white house says they talked about working together to end the conflict in syria, ira