Billion. We will have complete coverage. But first, top headlines. Versionreleased a new of its Flagship Smartphone called the htc one ma. M8. It features a dual kamran up to design. It is counting on the phone to reverse nine straight quarters of decline. That bitcoin should be property, not currency. That means that bitcoin income will be subject to normal federal taxes. Investors will also have to pay Capital Gains on any bitcoin money that they have made. Google wants to become a bigger player in cloud computing. They just cut the price of some Cloud Services by as much as 85 . Theyre trying to win over customers were storing data as amazon web services, microsoft, and other companies. First, to the top story. Cory johnson is with me here. Facebookking about announcing a major acquisition, buying oculus for 2 billion. This is a market that does not exist yet. This is not even available to consumers. A company that does not make a product. They have given it to developers but we cannot buy it. A this has been acquired by publicly traded company for 2 billion, including 400 foreign Million Dollars in cash. 400 billion in cash. Huge let form today. Theyre looking at the platforms of tomorrow. Facebook really missed the early days of mobile. It was not really that good. We just had the former cto of facebook on the show and he said that was a really tough time for them. See if you want to think that that was a lifechanging experience for facebook, missing mobile, recovering is amazing. I dont think they get enough credit. Looking at instagram and saying, it cannot grow and take away our users sunday. We are going to buy. Looking at whatsapp and sang, it cannot grow and take all the Text Messages in the world. We will buy it. Now say, what else can be out there . Virtual reality. It is not out there in any way right now so it is an aggressive mood. They will explain more with a Conference Called investors Conference Call with investors. That starts in a few minutes. Someone pointed out the zuckerberg is two months away from turning 30. That is ancient in the tech universe. Is he having a midlife crisis . I would not say that 30 is ancient. Trust me, kid. This is an aggressive use of cash. Know, some of us that saw 30 in the rearview mirror, that that does not last forever. This company is making some really big bets here. The board of directors has to be involved in some way in counseling the company. Sheryl sandberg is involved as well. It is a big deal. Lets take a look at oculus in action. It is a cool idea at the very least. Brad stone tested it out. Right now, i am wearing an headset. St rift im flying into space. I now see my enemies. Im firing my machine gun. This is crazy. The oculus rift headset is promising that Virtual Reality will finally feel real. Reality wereal perfect and we could have an experience of fidelity with full body line which, full presence, feeling like we are in the same space. It is like the matrix, except everyone realizes they are in it. Palmer lucky created the rift headset in his parents garage. This was your hobby and personal passion. Now youre the cofounder of the company that just turned 75 million, moving towards a commercial ruddock and you get to live your passion. It is pretty great. A lot of people are smart at what they do, not just me. One of the people he is networking with is brandon. About virtualcal reality because i grope in the 1980s and 90s but it didnt work. Now the technology is there. It finally works. Oculus has acause new technology called positional tracking. Ford, theyer leaves character leaves for his as well and sees the world with a new perspective. Technology has advanced. We are able to deliver on synthetic 3d environments. We could not do that before. We have accomplished a lot with this version. Unlike previous vr systems, i am not feeling nausea. It is almost like i am there. Announced product morpheus, its vr product for the waystation for. Aystationtion for pl 4. Take it seriously and deliver something great. I open makes the are a bigger industry. I hope it makes the vr a bigger industry. They have a lot of hurdles ahead of them. There is no release date. When can consumers buy and oculus rift . When it is ready and not a second before. Is that in 2014 . We will see. He literally just did that interview. That guy must have known. He must have known that he was about to sell to facebook. Lets dive into this a little more. Kedrosky is with us from san diego. Paul, the visual of the oculus on your face is so powerful, but it does not exactly look like a social product. . Hat is your take on this of things areunch going on. It is the emergence of a Virtual World as a new environment for interacting with social. The other is i have to imagine this was hotly competitive. What seemsok spends like and i bleed amount of money, it is probably because a lot of people were bidding i bleed minus ae little bit. It isoculus is getting a huge amount of attention because of the demos and the impression that someone cracked the kno and done it in a way that it is not a novelty. The idea of er has been around for 25 years. Has been around for 25 years. Is this different from other game makers over the years who have tried things like this . Yes. What youre seeing is the technology is there right now. The machines are powerful enough. The equipment yourself you can do positional tracking. It is much more in the picture. It is smoother, more reactive. You feel part of the scene that they put you in. It is really interesting that way, they are really trying to make sure that you feel part of the system. Do you feel that Virtual Reality could be the next big platform like mobile is today, or is that way far out . It is interesting. If you look at what mark mentioned in buying this in his blog, he is saying that, look, we are recognizing that mobile is there. Theyre climbing into the share of gaming. The oculus will be a big gaming platform. Once sony jumped in, there will be wait i did. Sony will put effort behind it and he realized that this is a market that this will go somewhere. Sony is doing well the playstation 4. Game Developers Conference last week that this is where theyre putting their way. Zynga was a big growth platform. Do you think when they see oculus, their single glass they are seeing a google glass . Yes. I dont see them spending 2 billion straight up for a billion a gaming platform. I think this is oneupsmanship. You think it is defensive . I do. I think it is a great win. It is a fantastic venture deal for the early stage investors. Be talkingoing to more about gaming coming up. Also, peter fenton of benchmark will be joining us next. Startup megadeals are happening. Other startups are raising megarounds of funding. Private hedge funds and mutual funds are pouring money into Silicon Valley at an unprecedented late. ,he latest example is blackrock giving a 100 that Million Dollar investment 100 Million Investment of hortonworks. In theenton joins us studio. Jon erlichman is with us from l. A. The megarounds of funding, there have been 11 ninefigure rounds this year. When it comes to hortonworks, how did you come to the decision to raise more money as opposed to going public . We have a response ability on the board to make sure the public the company is ready to go public. Were finding that there is such pressure from the public investors to participate early, they are fighting for ipo allocations when they dont realize they can go to the Company Prior to that. It allows us to build a company that has the foundation to be, not a groupon or a zynga in the book market, where we have predictability in the performance of six plus quarters. We know what the future looks like. We have also started a relationship with their longterm capital base. Blackrock and passport are fantastic holders in the public market. The company gets to know them and it puts pressure on the traditional latestage venture market because there is a new after. Your partner was on a couple of weeks ago, saying that there are ridiculous amounts of capitalchasing deals right now. You think it is ridiculous and you think it is at all bubbly . I think, without question, being a child of the last bubble , i started in the Venture Business in 1999 and i saw what happens to companies when capital was free. You start to take routes to acquire customers that in many cases are nondurable. The challenge we have as directors we have this flow of capital is to try and maintain the discipline and responsibility to have a Financial Model that works when capital is not free. It is less capital availability. Competitively, you can get access to a. What you do with that and how does it affect how you build for the long term . That becomes a big problem when you have Companies Whose underlying free model without capital will not work. A structural problem of not being able to generate longterm returns for your investors. Despite that, there are extraordinary companies that deserve these evaluations. There are some that dont. As the market gets more frothy on latestage, were going to push the boundaries and have companies in the dont then we in the duke category. Which ones dont . Is a matter of competitive advantage. Something we assess on his leverage in the marketing model. If you spend more per quarter to acquire customers and sell to them successively, that is a massive red flag. To me stand out in the dont category for the show Less Efficiency and capital versus more. At the moment, everyone is thinking that growth equals value a. Valuation. Some games that should not be played is played because the models do not supported. You have snap chat in los angeles, which is a company that edge mark has invested in. It got a lot of headlines when it said things, but no thanks to facebook. I spoke to osborne was around the time that said they would have liked to have seen a sale of that business almost as a theation validation of ellie market. What you think the public down the road and how that helps to validate a market . I would actually have the opposite perspective if i was an hour late i think the single most important thing to validate a market is building an iconic company. Every great company, google, twitter, goes back to facebook, face an opportunity to sell early, where they were given a multibilliondollar offer that they rejected because they have their days on the horizon gaze on the horizon. It is the biggest problem i see in new york. There is a more shortterm mindset around monetization. , itsalley has this belief purpose, to build the next google. You cannot build the next google if you sell before you reach your potential. Ask that snap chat investors, that is the game we play. We worked shouldertoshoulder with these teams so that they can realize their full potential. Along that road, your conviction gets challenged because there is a number that is put in front of you that is so irrationally large, you have to be a rational to stay independent. The best thing for los angeles and new york is that they will get their google or facebook. You cannot do that if you sell early. We will continue this conversation. We will have a quick break. Were going to talk more about the landscape and social. Welcome back. I am emily chang. We are back with peter fenton for an early investor in facebook and snap chat. Islichman with the with us from l. A. L. A. Or newt is york or Silicon Valley, you obviously made this decision to relocate to San Francisco from Silicon Valley, midmarket, not too far from twitter. Now that you have done that, how are you measuring for success . What has it done for your brand . San franciso became an epicenter is a place to build Tech Companies. The reasons for that are fascinating to us because it is a somewhat unintended consequent consequence of the google buzz. They give them an opportunity to San Francisco to live in San Francisco and bust down. If you are living in suburbia or a city as a young engineer, you pick the city. That started the process. The benchmarks standpoint, we work with entrepreneurs and have a fieldbased business and we measure success by the time of companies. It has got a meaningfully by being in San Francisco. 2 3 of our investments have been in San Francisco in the last five years. There was something going on which is not resolved between the Technology Industry integrating more deeply into the and itncisco historic, is something we are interested in because it is created tension. One community has been hypersuccessful and the rest of the rest of San Francisco needs to be brought into that. Whats that about one company that is thereby that is mentioned in terms of your success and that is twitter. We talked about it in l. A. As well because of ties to belarusian ties to television. About the ties between twitter and television for a longterm. In terms of twitter versus facebook, if you had to pick one as they both try to be the second screen, which one ultimately wins . I dont think it is an either or in that sense. Twitter has always been compared to facebook in a way that i think misses the unique wes the uniqueness of twitter has built. Aeir model is very much humanpowered network, much like a Telephone Network or other networks that we now use in our daily life. Twitter has established itself as a parallel channel two television, a nonsubstantive. Were not taking hours away or measuring time on site. ,e are trying to be a parallel consummate three channel to television. Agendak has a different or model. Both have a role to play. Twitter has been symbiotic to the content industry and has try to stay engaged with the online experience and not steal it away but amplified the success. Facebook bot whatsapp, instagram. There is twitter. How does this evolve . What is the dominant social Network Years from now . The question we ask is the chewing gum question. If you lose your flavor after or pick your timeframe, it is a question of durability. Snap chat is an example. Fad. Dnt know if it was a there are fats in our fads in our industry. We took a chance. The medium is the message and the tools that we create as much create us as we create them. Snap chat has created a flourishing set of Human Behavior that did not exist before. , the carefree, you are in control of your motions in reflecting to your friends in a private way. That is a different experience than existed before. Benchmark is a believer and a plurality of the networks. If you look at your phone, there is not one app that does everything. There are purposebuilt apps for things you are trying to accomplish. That allows for an ecosystem of multiple success stories. Thank you, peter fenton of benchmark. It is great to see. Jon erlichman as well. Were going to talk about president obamas lan with the nsa and changes that are coming. Watching bloomberg west, where we focus on innovation and the future of business. I am emily chang with our editor, cory johnson. Atg digital price their ipo 22. 50 setting their valuation of more than 7 billion. Billion according to the great leslie picker. Also with us is Paul Kedrosky from san diego. Leslie, this price is in the middle of the range we had expected to read expected. Is all about psychology. The high end of the range was already a discount to its peers. The number sounded high, 7. 6 billion is what it had been valued at the higher end, but it is psychology. The middle of the range helps investors feel like they got a decent deal on this if they decide to buy shares. All, when you look at this deal, i see a deal that prices the sales ratio cheaper than any of the other game industries other than Electronic Arts. What you make of this . I am torn. You sound sad. I am not sad at all. On onern because i feel Hand Commission applause and say the growth is flat line. Were going to make this thing she because we are a onetrick pony. Theyre not preying on investors, but it is a onetrick pony. We have been down this path many times. There is nothing different here. Is it cheap enough to discount . We know the likely trajectory of the company and that is a hard problem. It is not that cheap only know the history of Companies Like this. It is difficult. To credibly build a pipeline of mobile games or games on any platform. It is a very hard thing to do, among the hardest thing to do in technology. I think it is highly unlikely that they have cracked that particular not of building a process to do that. I think it is expensive. Lets talk about the one trick. They make this game, candy crush saga. It is 78 of the revenue. Leslie, what are investors and analyst telling you about how interested they are to getting into canaan king . Do they see longterm potential . Countless reader emails from Retail Investors on how they can buy shares of king. That is interesting me for me to receive those emails. It is from a fundamental point of view, they have been cachedfull positive for nine years. Theyre profitable, which is different from many of their other social media peers. There is a bullish case to be made from the fundamental side. That just terrifies the living daylights out of me. That is exactly the problem. It is a classic retailcentric deal. The only reason they would get involved now is because they think they could flip it to a bunch of wahoo Retail Investors. That is the danger here and that is a dangerous sign, that most of the interest, anecdotally, has been in retail. You said they were not trying to say that they have other games in the pipeline. I would argue that that is exactly what they are saying. There is a weird statistic that they came up with at the ipo filing. s, game eyepiece ip intellectual properties. Develop,ames they intellectual properties. Not patents, roberts. Products. Back in the day, Electronic Arts use things like that. They called it on the inside eight new tom ive got one. Dude, ive got one. Are we seeing, with box revealing their ipo filings, the numbers do not let great. It was called a house of horrors. Are we seeing the beginning of Tech Companies taking advantage of the window, taking too much advantage of the window that is open right now . I was speaking with a banker today and asked him the question. That is at a Company Health care i. T. Company that had 13 million in revenue last year. More than doubled on their first day. What are investors looking for . He said growth over yield. They want growth, no matter what it costs. I think it is Interesting Companies liking to get out in this environment. It is an interesting environment for these growth Tech Companies. Similarities . The huge. What youre seeing is massive amounts of investor would from inventory, meaning companies on their respective funds statements and they want to push them out and get them out as quickly as possible. In doing that, they do whatever they can to get them out. You look at the acceleration and boxes an example. Example. And you have a picture of a top line that looks impressive and that is great, but it comes with consequences. Split to sail to try to put these numbers, a giant burn on the sales and marketing line. These are not longterm credible companies. These are events to go public. This is not a Company Going public. Here is a nonworthless metric. There are 174 ipos pending in the u. S. Right now and that is up to under 65 from last year. That is kind of mean to you because you have to they are up to under 65 from last year. 265 from last year. The events in russia, a stock market correction. People, if they have companies where they want to go public in the future, they are going to push them out now. It has been close of the past couple of years and there have already been a decentsized backlog. The window was open and companies are ready to take advantage. How do you see this playing out over the course of the year . Thee are already firstquarter of numbers is the best quarter of 2004. Every ipo that price in the quarter priced in the top and are outside. That is stunning. The only metric that we are missing is a significant fraction, more than half of the companies, is doubled on firstday issuance which would take us back to the battle days. Bad old days. We are headed for the battle days . Bad old days . It yanks out junk. I want to look for the ways right now that this bubble is so different from 1999. The ipo thing right now is so similar. Leslie, and your coverage of your coverage of this, surely people are making comparisons of this. I see this bifurcation of bubble theory. On the east coast, eager bankers you hear bankers talking. It is all sectors, they are saying that things look fine. They are Mature Companies with long business models. Everything is fine. They have sector diversification. On the west coast, totally different story. People are saying, we are in a bubble. We are not sure if were in 1996, 1997 and 1999. It is interesting. What year are we in, paul . 1998. That is my bet. My favorite fact of last week was when we were told that irrational exuberance was a phrase coined by al greenspan. It was coined in 1996. Bubbles tend to build up very slowly and when they pop, and happens really fast. We will be watching for that. Paul kedrosky and leslie picker, thank you. Welcome back. I am emily chang. Google is hoping to make google glass more stylish. They have announced a partnership with a company that owns the rayban and oakley sunglasses brands. Theyre going to design and distribute new versions of google glass. The hightech lasses are beected to be able available to mainstream consumers later this year. Were focused on Architectural Design today as we sit in front of the new bay bridge which you cross every day. Once in a while. What you think of it . Its all right. It is growing on me. I have watched it go up. It is more open. Some of the other designs were more interesting to me. It is interesting. Jerry brown, the governor of california but then the dollar mayor of the mayor of oakland opposed the bridge over design issues. Big inign was actually his mind. The mayor of San Francisco did not oppose it. It shows this growing an interesting concern with design these days that was not around 15 years ago. To sign is so critical to building things. Design is so critical to building things. You are involved in the shanghai tower. When it comes to design problems, are all of those different problems or are the principles in the approach the same . That is a good point. It is a process. Most people think of design as the shape, the style. Something that is a linkable product that you want to hold. We think of design is a process. It is a way of dealing with complex situations. An mba has financial spreadsheets and they try to resolve for one variable. The sign is a team sport. It is checking the ego at the door, doing prototypes early, making mistakes, and finding out what works. Getting the input from the customer. It is a process you can apply to anything. What you think of the bridge . I love it. The western are the new one, of course. I think it is a fabulous bridge. It is an iconic style. Everything you are saying is also functional. Is working with highly ambiguous situations. Think of all the variables that come into play to make something that could survive an earthquake in the bay area. The bridge had nine inches it good movie for it would fail. This could make move nine feet. Light toy it uses illuminate itself, it is an interesting design. I feel like Bridge Design has spectacularen in this country. There are great bridges throughout the midwest. Bridges of Madison County is a terrible movie. Thei am interested in reasons, or what you think the reasons are, why great design is creeping into everyday pcs. N into things like 20 years ago, they were horrible. What is different . It comes down to competition. In the world today, design is differentiator. The 1980s, it was customer service. Nordstrom said that pretty well. In the 1990s, you had or more in an southwest walmart and southwest and lines airlines. It was about cost. Design is limitless. Being able to innovate and differentiate in the market. If you look at the markets today, capital is nearly free. Anyone can get capital to start a business. Marketing is an expensive. You can do small run manufacturing. Global competition is immense. The product has to stand up for itself. What Tech Companies out there are doing design well . There are many. I think the bay area is great. We have that team sport, the ability to innovate and have a lot of failures. In the valley, you have lots of failures that are finding what does not work but theyre doing it cheaply. I look to the teslas of the world, the nest is an example. Examplennocent is an , how they have integrated so many different elements. The functionality wrapped within that, a real form and function allinone. About making the product stand out to the people who wanted. You cannot market your weight to a successful product in this market. There are too many competitors. Ryan mathews, thank you so much for stepping by stopping by. If the broadcasters when this fight . Welcome back. It is one of the most closely followed Court Battles right now. Aereo taking on top broadcasters over the rights to stream television. The case has made its way all the way to the supreme court. Areas expected to submit a brief is expected toeo submit a brief tomorrow. Jon erlichman sat down with them in salem. They have been unapologetic. Is that still the tune . Definitely. This is someone that does not believe it is a sneaky workaround to avoid paying broadcasters. He feel strongly that what they have is a legitimate offering. In context, when you go back to why he started the company in the first place, heres what he had to say. My last company was a company that created technology for measuring viewership in cable companies. It collected data from a use of homes. When you look at the data, it was shocking. The majority of people watch seven or eight channels and half of them were broadcast channels that were free to air. Prices keep escalating. Technology does not keep pace. People are consuming more content online. People are expressing their interest in moving away from the traditional model. How close to the company is the company today for the one startups have a strange major. You start something and you test and you pivot and pivot again and you have a couple of mishaps. It is a common story. This is the first time that i have observed what i would call a clockworklike execution. It is exactly what we set out to do. We knew what we wanted to do so well that we moved extremely fast. This is to the t. What about the legal side. You must event is a bit of legal hurdles. The joint is because kind of fight did you expect this kind of a fight . The things i did not expect where the direct impact of the computing cloud and these things. If i had taken a moment to step back, but you never do. The controversy we had dissipated, but the scope and scale of what has transpired was a surprise. Outside of court rooms, broadcasters continue to speak about what their options are in terms of where they can take their channels. We can move our broadcast networks to cable. We can take our broadcast network to the internet. What you say to that . They have had an agenda to go to cable for a long time. Ariel has nothing to do with it. Aereo has nothing to do with it. Are they capable of disenfranchising that large number of people . I dont think so. I think that is a very difficult issue. Clear, if you are not to be successful in the supreme court, is there a plan b . No. There is no plan b. Believe in our merit and not just believe in it, we do things. It is the right thing. Progress is important. The mission of the company is to try to create an open platform, try to wedge the system open. If we do not succeed in that despite our best efforts and good law on our side, it would be a tragedy but it is what it is. Have you ever thought about maybe selling the company . Say, we started to grow pretty quickly. Let someone else worry about the legal hearings. I am an openminded businessman at the end of the day and then engineer. I was look at what is the best in to get your idea out front of as many people as you can. I always look at partnerships through a particular lens. Thus far, we felt that a striving the bus and innovating and pushing boundaries is the best approach. If that context changes, we will entertain things. Whatens that we apply is, is the best experience, best way possible to get in front of as many people as we can. Aereo ceo. The tomorrow, we will go inside the manufacturing facility in New Hampshire to show you how they make their tiny antenna. Looking forward to that covert struggle week. It is time for the bwest byte, one number that tells a whole lot. What we have today . Is 361,166,00. Has is how much money box lost. They have money on hand. I think it is reasonable to look at the business and wonder how they can truly differentiate themselves and never make a profit. You to spoke to aaron leavy down and away. What is your take . They like to moves lou they like to lose money at the studio sometimes. He worked at miramax. He could have a future in hollywood if he was not a tech ceo. He is very entertaining. He does magic for emily. Thank you for watching. Welcome to lunch money. Im adam johnson. Heres what we have today. The ceo sees only one way out of this battle of broadcasters winning. Gms road bump is getting bigger. The carmaker slammed with some lawsuits following that massive recall. A wage war in nation. Two sides of the wage debate. We will duke it out right here. One of the Worlds Toughest sailing races. Virtual reality