Increased 300 last year. I am emily chang and this is bloomberg west. A crucial litmus test. A sunny forecast from a Cloud Computing giant. Shares of salesforce. Com had higher after hours. Talk about a solid resume, i sit down with an interview with reid hoffman. Waiting to big initial Public Offerings this week, square and match both expected to price their ideas any minute now. What are we expecting . Lets start with match. Match group is the Parent Company behind okcupid and. Ender then, of course, there is square. It hasthe company been a rocky year for the ipo market. These companies have what it takes to turn it around . Is ang me now in new york reporter who has been beating the drum. Alex, i want to start with you. Some dispute about the square valuation. It is apple to oranges, you cannot compare public to private. 5. 7 looking at a 5. 7 million valuation. Alex the most telling thing, theyre marketed range, they are looking at 11 to 13 a share. You there is some type of discrepancy. The whole conversation up to diluted share value, maybe that is time for another show. Bottom line, that private valuation is not what they are looking at. It has cast a shadow over these companies and over investors who might be looking to get into the next big private round. Emily i do want to ask for your thoughts on match. We have not talked about it as much. Tender is their most popular business. Alex it is the really well known one, but it is not the moneymaker. You own two thirds or more of this Online Dating market, it is a fragmented market. What is next . Obvious answer to what is next two years ago . Permeated the industry. Theych was under bought plenty of fish recently. It seems to be the best growth playbook for them right now. Emily match and square will start trading tomorrow morning. I want to ask you, what is the number one thing you will be looking for tomorrow . What theant to see reaction of investors is. There is a poll from investors, so excited by the growth, the celebrity ceo, they should be interested in the stock. Most people that follow square our payment analysts. We are all fairly skeptical of squares business. Is it worthwhile growing fast . Tol it be profitable enough be enough to be in the range that was set . Emily i talked to analyst yesterday who was very positive on square. This is not a tech company. This is a payments company. It is a strong solid business if you look at it as a payments company. Gil i dispute that a little bit. Theirre losing money on transactions every quarter. What all of their comparables are quite profitable. They are growing very fast because they are in a business that others do not want to be into. That is why square is losing money, they are serving the smallest merchants and giving them a very attractive price. That is why they own that niche. Emily interesting. Alex, we were talking about the ipo market in general. How much do you think the environment will be playing a factor . Environment the is definitely an overhang. This premium for this highgrowth company, we have not seen that come through. It is a bit of the overhang. That might be why we see a bit of a conservative price. It is if the business is solid and investors want in, it does not really matter so much the Market Conditions as long as we are not in a freefall. It is good enough to go out right now. That is why they are crossing their fingers. Emily we are waiting for that price. Thank you very much for helping us cover square on the road to this ipo. Another stock we are watching is salesforce. Pioneerd computing reporting a 24 jump in fiscal thirdquarter sales. It earned . 21 a share on revenues of 1. 7 million. Wall street had been looking for . 19 a share. Salesforce is raising its guidance for the year. Oflysts had expected sales 7. 9. An interview with reid hoffman. I asked him which of the Biggest Social Networks would survive. They this week, i had chance to sit down with linkedin cofounder reid hoffman for a wideranging conversation on everything from the future of social networking to the rise of Artificial Intelligence to the. Ndgame for uber in china hoffman is a noted venture capitalist investing in airbnb and facebook. I asked him the not so simple question, are we in a tech bubble . Thing, it tends to be a private market bubble. It does not have as much Public Market impact. It is not something that when you hearken back to 2000, 2001, you worry about quite as much. Emily we are not in a bubble in the Public Market. Quasis i bubble bottle. Emily Mark Andreessen saying we are in a longterm bust and tech is undervalued. Why is there such a diversity of opinion . Believew much do you that new things will be invented that are not invented yet . From anbuild Companies Idea to something globally relevant in three years, four years, five years. Dropbox. Bnb, they can move very fast to global relevance. They can be important to a impact all industries. Technology will be part of the solution and not part of the problem. On the other hand, ok, a lot of investors are betting on this broadly and you get valuations where you look at a specific valuation and go, why is that valued that way . People are not distinguishing sharply between which Companies Benefit in which companies do not. That is the key issue where breaks between the bowls and bears. Bulls and emily is it really subjective that we are in a bubble . Reid no one ever disputes bubbles in retrospect. Clearly, that was artificially inflated and had a recorrection. The question comes down to, it looks like some of these valuations are high. When you can pinpoint specific companies, which i will not do because it is impolite, that one seems a little crazy. Private valuations are much higher than one public that one companies go public. You get those kinds of things where look, clearly some elements of a private bubble. However, i think we are going to see more of these companies that go from zero to a billion numbers in less than a decade that actually have global impact. Emily are you seeing down rounds . Reid not privately yet. Emily but we are seeing them publicly . Is the ipo the new down round . Reid if private market valuations continue, we will see more of those. The Inflection Point you see is a protection. Wese investors have said ok, invested at the current price x years ago. When you choose the companys going up, you went on up ies goinge compan up, you win on those. It is not clear to me we have any actual real layups because you have the financial needs. We need to regroup how we are attacking the problem. Part of what a layout does is to communicate the message to the entire team to say, we are really shifting from this to this and we are playing a new game and we are in troubled waters. I have seen those. I have not seen, we will not the able to make payroll in two years, so we have to lay off. What do you make of that journey . Reid what happens is, and this is the reason why i think there is this quasibubble in private, Public Markets have a lot of interdependent feedback. They can stabilize the price. Private tends to be the player that puts the biggest check forward. It is very easy to get an inflated valuation. The upward trajectory of the market. That does not affect things like the internet bubble, the pension fund because it is a very focused small position. Not a general Public Market position. We will see more of them because people are trying to figure out what are the next airbnbs . That really matters to them economically. Sometimes, you get you guess wrong. Emily you are on the board of airbnb. Do you worry about them living up to that . Reid in the airbnb case, i do not worry about it. Essentially, i think there is a lot of headroom for what airbnb guestsng the most two around the world. The most to guests around the world. Over the longterm, the investors will make significant money. In that specific one, i am not that worried. I believe so much headroom where airbnb can go. Emily what about dropbox . Reid a killer team, great technology. How does their enterprise play out . They have some other plans i cannot talk about. If those play out, it will be great. If those do not play out, it will still be great. Is it the next platform for the internet or not . We will see. Emily dropbox keeps getting brought up as an example of a , ororn that might be dying certainly not living up to initial valuation. Reid i guarantee you that dropbox is not dying. The question is about expectation. Their fundamentals are really strong. They have a broad subscription business. Will they create will dropbox be a platform for a whole a lot of different applications . To thethey will live up high expectations. If not, maybe will be, it is only emailed a multibillion dollar company. Emily our special coverage continues, hoffman dishes on one of his biggest missed opportunities as an investor snapchat. That conversation is next. Continuing my conversation with reid hoffman. Revisit a regret. Reid most of those stories came from Public Market investors, most notably fidelity. It is different than how private companies operate. If you index against a Public Market, you would end up with times where you would say, you would take a Great Company x and say we marked it down this quarter because there is a variation of Public Market. That is not how the private market thinks about things. It is not the timeframe on which we should evaluate these companies. Emily do you find it alarming . Reid i do not Pay Attention to it. Emily what about snapchat in general . You are the guy who created the professional social network. Where is all of this going . Macro evolution to networks, mobile, people are spending a lot of time with it. Those macro trends continue to be an upward direction. One of the things particularly great about snapchat, and i am not on the board or investor, they demonstrate an ability to create new products. Here is a new social product that everybody pays attention to and starts building their own versions. That is very good evidence for a strong future. Emily do you see social networking as a much more disparate thing . Will there be a few dominant players . Andagram and Whatsapp Facebook and linkedin, it is just too much. It cannot possibly be sustainable because i will make a choice. Reid there are a lot of people in the world. If everybody makes the exact same choices, i agree with you. Look, teens say the disappearing content matters to me. It helps me create privacy. I do not snapchat, i presume that you do not snapchat. You can easily get to more than three to five companies because everyones list is different in different cases. Emily what does worry you right now . Reid the primary thing i Pay Attention to is, we have seen a lot of Great Companies traded, what are the companys Great Companies being created, what are the companies being created now . We have not seen an interesting mobile Breakout Company in the last couple of years. Is that because we are not finding them . As a venture capitalist, we are looking intentional intensely. Companies is more car. N addition to tesla biology,section with other kinds of things that will have macro impacts. Those are the two things. I am an entrepreneur and i am an optimist. Emily interesting that you say mobileere has not been a Breakout Company. That would concern me. Reid there are just cycles sometimes. Maybe the right invention has not happened. Maybe mobile distributions are difficult to figure out. Web, the mobile ecosystems tend to be more closed platforms. They are driven by a narrow aperture in the app stores. Maybe someone will figure out how to make that happen. Emily my interview with reid hoffman continues. We will be talking about his , on his call that a third of unicorns a herd of unicorns can exist. I just had a horrible nightmare. My companys entire network went down, and i was home in bed, unaware. But that would never happen. Comcast business monitors my Companys Network 24 hours a day and calls and emails me if something, like this scary storm, takes it offline. So i can rest easy. What. You dont have a desk bed . Dont be left in the dark. Get proactive alerts 24 7. Comcast business. Built for business. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Emily this is bloomberg west. It is 6 30 p. M. Wednesday here in new york. We are joined for a first word update. Heidi good evening to you. We will be watching how markets in this part of the world react to the Federal Reserve minutes. Cards next is on the month. It may well become appropriate to raise the benchmark lending rate in december. A couple of officials were concerned the wording could be misinterpreted as being too strong. It is decision day at the bank of japan. 41 economist said abe even so, there may be some action announced. Backresorts have pushed the opening of its casino in macau and to the end of june. It has been hit by construction delays. Shares falling almost 5 falling the announcement following the announcement. Qualcomm says the accusations are not supported by facts. Quite a tangle. Emily how much of this regulatory challenge against qualcomm is about samsung . Idi one of their competitors, but one of their top two customers as well. It is south koreas Largest Company and revenues have been suffering. Regulators are trying to give them a bit of a helping hand. It is currently based on how much a handset is sold for as opposed to what the chip actually costs. Qualcomm is facing is similar facing similar actions in other countries. Emily this is bloomberg west. We continue with my conversation with reid hoffman. As a venture capitalist, he is challenge with identifying truly innovative ideas. I asked him if he was seeing any sort of low in the flow of lull in the flow of innovation. Reid i do not think innovation is slowing down. Is it on the vector we anticipated . Emily what does that mean. It will bepps specialized Artificial Intelligence for medical applications. The innovation will go off the charts. You should not be looking at all of this mobile stuff. You should be looking over here at how the increase in data take old Machine Learning techniques and open up new ranges of applications. Inm very interested marketplaces, networks. I am always looking there. It is a scenario i know very well. Ive been spending a lot of it more time on Artificial Intelligence, biology, other things. Back toe will get Artificial Intelligence. I want to close the loop on this private versus public conversation. Privatere in a quasi market bubble, do you see it affecting the facebooks of the world . Focused ond to be series a and series b. Linkedin is a public company. What are the new initiatives . What are the things we are building at a fiveyear to seven year time frame . Emily you wrote that post, a herd of unicorns can exist. Say there are 150 unicorns right now, how many of those survive . Reid survive and thrive . Becausess given of the quasiprivate bubble, i would guess a third to half have a good outcome. Emily if you look at the list percentage, a large have valuations at a billion dollars or nara billion dollars and some or near a billion dollars . Reid who is going to win the bid to lead the next round . Just like all psychology of there isperson a a natural tendency. One of the good things about the private market, you are trying to deal with much longer time frames. Out innd of thing comes the wash over time. Emily what is an entrepreneur to do . Should they always go for person b . Easy, most most natural, most human to use the number two benchmark how they are doing. Select the partners who build the company you will build five to seven years from now. People are equivalent , take the higher valuation. You should really think about, when you take an investor, you are taking a serious partner, committed to making your company into Something Real and much bigger than it currently is and that is what matters. The current valuation does not matter at all. Itly sam altman called uniform unicorn fraud, this Financial Engineering that may or might not be happening. Would you go so far as to say unicorn fraud . Reid given the number of companies, he may have better visibility into that than i do. Not go for we do that at all. We never offer term sheets like that. Emily your competition is. Reid and that is fine. If an entrepreneur does not want to partner to build a great High Integrity massively good company and five to seven years, we are the wrong partners. Emily are you concerned about late stage investors . Reid we are cautious about them. Where we see the fraud is in those later stage private companies. We have gotten very careful about when we do those investments. Emily having lived through the last bubble and seeing the diversity of opinions, how do you think we will look back on this moment in Silicon Valley history . Reid i think we will look back you just come through a decade where interesting Network Oriented companies are built, everything from facebook and linkedin and twitter to airbnb, uber, and dropbox. All of those became significant companies. Kind of a little indecisive at the moment. Clearly charging in a particular where the valley is charging in a particular direction. If you are looking at joining the company, consider joining a compan