Unbreakable encryption. It also requires companies to help government access data on devices with a warrant. The draft is reportedly being finalized but its unclear when the measure will be introduced. Global news 24 hours a day, powered by our 2,400 journalists in more than 150 news bureaus. Emily im emily chang, welcome to our onehour special here on bloomberg west, unicorns, bubble or boom. The numb of unicorns has soared to more than 200 worldwide. These are private companies with a billiondollar valuation or more. Some are starting to wonder if soaring valuations are another bit of financial make believe are unicorns in for a reckoning . The market is seeing some correction. Some are writing down the value of onceprized startup and the reigning unicorn giants are holding off on going public, wary of a volatile market. Well talk about these issues this hour, and speak to two of the biggest unicorns around. Abnb and dropbox with two of the y. C. , s to come out of the big incubator, and who better to help us walk through yc founder. An joining me now is yc president , taking over the reigns from cofounder paul gram. Great to have you back here on the show. You guys just took in another big batch of companies , in fact you funded 1,129 companies. I didnt know the exact number but i assume thats right. Emily thats what ive been told. Ts called the harvard for startups, some say its even harder to get into than harvard. Our goal isnt to be hard to get into. Emily 44 Enterprise Companies but the numb of Consumer Companies about half that. Why . We dont have really strong feelings about what we want to invest in, we want to look at the smartest founders in the world, whatever they want to start we assume they can call market trends. There was clearly a lot of interest in people starting Enterprise Companies. Emily and hardware. Is hardware a bigger bet . Not particularly. Its one of many areas where we think people can build new 10 billion companies, its something we want to support. Enterprise, biotech, still believe in consumer. One of the great things is you can start great startups in all areas. Emily you have such good visibility into how valuations are trending. Startup funding dropped to its lowest level in four years. Capitalists want later stage and more Mature Companies rather than early stage. You guys are investing early and late. What trends are you seing . We were worried for the match that just finish. I think we got tricked by the media ourselves that winter was here and these companies were going to struggle and so we advised them to sort of be willing to accept lower offers and take money more quickly. I think we ended up giving bad advice there. At least it was bad in the conservative direction, that was good. But i think the seed valuations are probably different in later stage where theres been a pullback in investors. Emily in response to the question, bubble or boom, are all these unicorns really union corms unicorns . Id love how to id love to buy both airbnb and dropbox stock. Emily what about the rest . If we look at the basket as a whole, i think theyll outperform the u. S. Equity indy cease. I think it makes good tfings to talk about boom or bust but we invest on such a long cycle, were going to hold the shares for 20 year, these companies will go through multiple up and down cycles. If theyre building real longterm value, building a product consumers love and a nice Network Effect in their business, theyll be worth a lot someday and well leave market timing to other people. Emily we talked to the c. E. O. What he hadisten to to say about how important y. C. Was for there. When we came into y. C. , we said three months from now, we will decide if we want to continue to work on abnb that should give you an indication of what we thought our chances were. The good news is at the end of three months, we never had that conversation. About thatm thinking conversation to being told, youre the ebay for space. Without y. C. Would you be here . It may not be here, if it was it would be a lot smaller. Emily nice to hear for you, im sure. They have a combined 5. 2 billion. The combined market value of y. C. Companies is 6. 2 billion. Has that ebbed and flowed in the current environment . That was super nice of brian to say, super heartwarming. I would still buy their sense, i dont make the value myself but i would say its going to be worth more than that. Emily what about the combined market value of y. C. Companies . Are you seeing fructuations . Yes, going up. Its no longer 65, its higher, in the 70s. Emily as you continue to build this company, how do you continue to scale y. C. But keep what makes it great . One thing about our model that i think works well is that we try to have very hands on guidance with companies. And so we have to scale up the number of partners, basically linearly, with the number of companies we fund. The model works in this very onetoone kind of way. We try to do that and build a stronger and stronger platform. We do things to help our companies, we have events, software, resource lists. When a Company Joins ycominator, they get a list of vendors system of we try to keep building a better and better platform and we have a bigger and Bigger Network was y. C. Is a network of smart people who help each other. But we try to make sure we have the oneonone guidance brian talked about. I know diversity is something youre trying to focus on but its something y. C. Has been under fire for. How are numbers trending when it comes to women founders, black founders, latino founders . I dont think y. C. Has been under fire for this recently. I think at this point we probably, we have a long way to go still for sure. I think 23 of the last batch had a female founder on the team. I think it comes out to 10 or 11 of the founders themselves are women. And i think 12 of the founders were black or latino. Not where wed like to be, not where the nation. Is but if you look at us relative to other people with startups, its working. Weve made efforts to reach out and its working. Emily thank you for being here. Apples fight for customer privacy isnt over yet. The u. S. Government saying it will proceed with an appeal of a brooklyn judges court order. That judge denied the request for aple to help unlock the iphone of a convicted drug dealer. The issue rumbles on even after the f. B. I. Says it successfully unlocked the iphone with the help of an Unnamed Third Party and without the help of apple. Coming up, we talk the theme of for the hour, the fate of unicorns. Answer the 10 billion question he cant escape, that conversation is next. Later we hear from y. C. Founding president also dubbed y. C. s secret weapon, jessica livingston. Emily continuing with our special edition of bloomberg west, unicorns, bubble or boom, we focus on those who have billion dollar plus valuations with y combinator. Mutual funds have poured money into startups hoping to hitch a ride to a lucrative i. P. O. But now theyre riding down writing down valuations by significant amounts. They dropped values of Companies Like drop box by 20 . 9 s peak, dropbox was at million. One of its closest rivals has gone public but its market value is 1 billion less than it was at the time of i. P. O. But dropbox has more than 500 million users and its main product is beloved. Joining taos put it in perspective, drops do box president and y combinator president is still here as well. I want to talk about the elephant in the room, what do you have to say to the mutual funds . We dont pay much attention to it. We have 500 Million People using drop box, eight Million People using dropboxes, 500,000 of them paying, Companies Like expeed expedia and others. Emily would you take that 10 million valuation . The markets were different then. We like any company will be affected by the public markets. Whatever we are today, well be Something Different tomorrow. Valuation is an output. You have to focus on the inputs. Emily on one hand people say this is just on paper, weve seen like snapshots written down, then written up. It does seem to be having a Ripple Effect on sentiment. How much do they matter . I think this is a dumb conversation. It doesnt matter that much. The stocks go up and down. You know, fidelity marks them down and up. I know fidel tall marked down dropbox shares at one point. Its unclear if they believe the markdowns because i once offered to buy shares from them after they marked them down and they didnt sell to me. Ill offer again if they want to sell dropbox. Id love to buy them. Emily it is affecting sentiment. Even if its not changing the decisions youre making at dropbox, its affecting sentiment about dropbox. You have private companies on a scale where they never were before or they would have long been public. I think everyone is trying to figure out how to talk about them and theres a new playbook being written. When you talk to investors, the markdowns, markups, whatever, its a bookkeeping thing. Its not like the fun manager fund manager is sitting there, evaluating the performance of the company. So they kind of roll their eyes at it, honestly, too. So they focus on, what we focus on is, what are the ingredients of a Great Company . You have to have a big market, awesome team, product people love. Thats what you need to spend time on. What dropbox has is a product that people love so much they spontaneously tell their friends about it. And there are five million of these people and they use it for something really important. There are a lot of other things we can talk about about dropbox that maybe are problems, may be threats but valuation markup, markdowns, i dont think people care. I think if youre willing to hold dropbox share farce long period of time, which you should do whenever you buy a stock, like any stock, markets misprice things up and down at different times. That is not what matters. If you make this has work forward long time. If you make a product people really, really love and figure out a Business Model and effect, youll be in great shape. Emily what do you care about when it comes to dropbox . What are your questions . Im a huge dropbox user. I dont know how i would like organize my life without dropbox. I use it to sync my computers and files, thats how we share files at y. C. Wed be in a really bad place without dropbox. Dont go away, i would say. Well be around for a while. Emily in the early day, people were worried google would kill you. What did you do to make sure google didnt kill you . Y combinators motto is make something people want. Our customers love dropbox. We have spent so much time building a product people love. This is the one thing that we do. And weve built a huge audience. Were solving a problem that every person, every company in the world has. So that is really at the heart of building a successful company. One thing ive wanted to ask you related to that, when you guys were in n. Y. C. , people were say, google is going to kill people were in y. C. , kept saying, google is going to kill them, apple is going to kill them. How did you motivate the team or deal with the uncertainty when you have 800 pound gorillas always just around the corn her i think a will the of people, probably most of the people that join the company have been propbox users for a long time and love the product. And when you step back you realize that any company that becomes great always has competition. Facebook was worried google was going to come after them. Google was worried microsoft was going to come after them. Microsoft was worried i. B. M. Was going to come after them. If youre not having competition, youre not doing something important. Competition is a fact of life. I think jeff bezos says it well. You want to be customer obsessed, not competitor obsessed. Emily youve gone from y. C. Founder to global c. E. O. How has your role changed and what are the lessons youve learned along the way . So as a c. E. O. , when you start out in your my partner and i started in an apartment not far from here when we moved to San Francisco. Just the theres a lot manufacture ballsed in the air, not only do you have to build a product, which is all youre worried about in the begin, you have to get customer, make sure your Business Model works, open offices all over the world. A lot of what i focus on is really getting the best team in place, im always recruiting and really designing the architecture of the companies that we can scale as we get better, we can still be fast and solve bigger problems. To that end, you did what youre going to do in your interview. You have sort of accomplished that vision where you said youd be 10 years from then system of where will you go in the next 10 year, now that we never have to move our data around manually, what will you build next . What we think about is, dropbox is moving from keeping your files in sync to keeping your team in sync. So whun is about storage but more so one is about storage but more and more its about collaboration. How do you make it so people can Work Together more easily . Its kind of crazy. When i visited my dad in the office for like bring your kid to work day, like he had the fastest computer, fastest internet, best everything compared to what we had at home, dialup, slow, old versions of everything. Now its flipped. Now my tools in in my personal life are better than work tools. Its crazy. With google, you can search all of Human Knowledge more easily than you can search i can search my companys knowledge. I have one search box over here, at work ive got 30 9 11 a born in the cloud kind of company. So much has changed with how we work, so much changed with technology, so much has changed with how we live, its amazing im still using the same tools as my dad, cleaning out my inbox, using these things that were designed 30 years ago. Emily so brian has told me an i. P. O. For them is at least two years out. Whats the answer from you. How are you thinking about an i. P. O. . Is that still going to happen and when . Would you be open to selling the company . We dont need to raise money so its not something we need to be too worried about. Some things have to line up. You need to have controls and foundation in place. Business needs to be doing well. And then the conditions, the market needs to be good. So the market has not been very kind to public company, or Public Tech Companies lately so were not exactly in a hurry. Thats why its part of the flexibility weve gotten by raising money and now more and more is the flexibility we have because were funded by our customer, not our investors. So quickly, how do you keep employees motivated as you, you know, put off whatever exit there is to be had . I think we keep them, we help everybody understand that the best thing we can do for anyone who is a shareholders is make the stock price go up in the long run. You do that by building value. So we try not to get fakes ated on whats the valuation right now. People will get liquidity. Well solve these problems. But the most important thing we can do is just build a Great Company. Emily all right. I quse it, as well as 500 million other people. Drew house, c. E. O. Of dropbox, thank you. Can this electric skateboard disrupt the industry the way airbnb disrupted hotels . Well test it, next. Emily youre watching a special ition of bloomberg west unicorns bubble or boom. Lets focus on a more recent y. C. Graduate, boosted board. Trying to solve that last mile commute problem, the last stretch from the bus stop or train station to your destination. But its not cheap. The lowest model costs 999 and runs up to 1,500 for a model powerful enough to climb the hills of San Francisco. So does boosted have what it takes to take on the Transportation Industry . Lets take a look. Im the c. E. O. And cofounder of boosted. We started with a long board, different than a normal skateboard, its a lot more for transportation. The biggest problem is we were trying to get around this dense campus where other vehicles like cars didnt work. We wanted to get quickly between buildings that werent that far apart, a mile or two at the most. About 20 of u. S. Commutes are under five miles. Theres a broad group of people who want to get around short distances. The board was designed with the idea you could walk outside, put the vehicle down and start moving and get to your destination, right up to the door and pick it up and go inside. Think about the car lane, bike lane and sidewalk. Sidewalk people walk about an average of three miles per hour. You have platforms like hover boards that are good for a block or two on the sidewalk but you wont use them to cover a long distance. R lane is great, with things changing. And the bake lane is expanding a lot, cities are investing in it. We see support from legislators and regulators. California passed a law that kind of formally legalized electric boards, with this power limit and speed limit they can be used like an electric bike would be used in any place in california system of were focused really strongly on the bike lane. Im bringing some of the advancements in electric vehicles to the bike lane but within the same speeds and ease of use from vehicles that are currently there. Emily that was the cofounder and c. E. O. Of boosted board. Coming up, abnb set to wrap up its first year in cuba. Whats the companys next move . We speak with cofounder and c. E. O. Nathan kaparsak next. And listen to us on Bloomberg Radio on the Bloomberg Radio app or bloomberg. Com. Mark you are watchingk. A suspect in the november 13 carries a taxes been arrested in belgium. He is believed to be the mysteries met in the hat who escaped the double bombing at the brussels airport. If confirmed, it would mean he played a role in both attacks carried out by an Islamic State cell in paris and brussels. John kerry made an unannounced visit to baghdad. Secretary kerry placed 155 million in new usa. He also discussed the fight against the Islamic State. Billions of dollars it would been used to finance terror have instead gone up in flames. Daesh has been forced to slash his budget and cut in half the salaries of some of its fighters. Daesh is u