Transcripts For BLOOMBERG Bloomberg West 20160509

Panamanianfrom a company show the use of michelle companies shell companies. Im mark crumpton. Bloomberg west is next. Emily im emily chang. This is a special edition of bloomberg west. We are in district tall. We will be spending the next to the techiving in companies that call boston home. Now the city is getting another huge boost from ge as it fromates its headquarters connecticut to bostons growing seaport district, not far from where we are now. Mind ofhapes the current tech leaders but the city is working to improve its elf. I want to start with a look at Venture Capital and the funding environment because a number of top vcs are based here. From nass challenge a notforprofit headquartered in boston our guest. 5 billion with over 500 million in revenue. And my cohost for the hour gentlemen, thank you for joining us. So, i will start with you. You have been on the show before. It is good to be in your neck of the woods. You guys invested in tech. What is it like to invest in when the heart of tech is in Silicon Valley . I live here. I commute quite a bit. Its smaller, but is very exciting. When we started back in 2005. , it felt very early. The market was restarting in a number of ways. A number of companies have been doing very well here. Tripadvisor. A lot of great things are happening here. John, you have been around the world. Do you think investing in the heart of boston can be an advantage . John yeah, totally, i think boston is the best place in the a startup. Vest in it is not as trendy. We have a broader spectrum of industries we support through mass challenge, including nonprofits. And boston has all of these areas, from health care and biotech to hightech, even Retail Consumer goods, nonprofits as well. I think it is a diverse, Smart Community with a lot to offer. It is a much bigger market. I think the difficulty with Silicon Valley is hiring. Its difficult. Overfished, i dont know. Its still the epicenter, to be sure. Emily how do get the facebooks to stay . Ropboxes we do not take any equity emily why would you not take equity . John startups are good. We have taken it upon herself to support startups because they benefit all of humanity and all of the community. Emily if you invest in the next uber, you get nothing . Get nothing. Instead of getting a bigger slice of the existing pie, we focus on making more pie, and when theres lots of pie, there are lots of slices and we benefit from that. Why did you pick boston for mass challenge . John i am from here. My cofounder is an hbs guy. You mentioned facebook and dropbox. They started here. Getset he first look the first look at the best startups on the planet. I think theres a reason why theon was not succeeding in 1990s and early 2000s as much as it should have been. We are very happy to be here. Emily some people may not know this, but Mark Zuckerberg actually said a few years ago if you were starting a company today he would start in boston because he felt Silicon Valley was to focus on the shortterm and he would perhaps more room to breathe here. Would a startup come to mass challenge as opposed to we take the price to zero and we offer essentially the same benefits. Can make offers to any investor, the federal level, have a Massive Network with axes to investors, marketplaces, more talent, other technology. And then you see our relationship with the corporate verizon,like fidelity, microsoft, ibm, cisco, we have g cominginto town ge into town. We have access to doctors and health care, investors. We are a nonprofit support foundation. And you can have those Companies Work with mass challenge . Is right. We have had those Companies Come through and that is one of the vintages of our model grid we dont complicate that process. We are not trying to take a slice of that pie. We just want them to be successful. Emily mass challenge is actually home to more than 40 startups. Im wondering what is the accelerator seem like here . Look, i think that was ,issing was tech investors incubators when we started smart capital. That part of the ecosystem was not that vibrant. For us andrful this ecosystem. Emily what are the most underrated boston startups . John there are so many. It is hard to pick. You will see later on the show a phenomenal company to invest in. A lot do not make a lot of noise early on. We have a lot of pharmaceuticals that are promising. Theres a really Novel Technology for diabetes. But theres a lot of great stuff in the mass challenge pipeline that will not be that prominent for the next few years. Emily bijan . Choose not tole work with mass challenge, they go somewhere else. What is the biggest reason . They do not want to be in massachusetts . John typically we do very well. Fromve had startups apply 70 countries. For ay are looking location, it is usually San Francisco or new york. People talk about the weather. I dont think that San Francisco or new york weather is that much better emily all right, i live in San Francisco. Thank you for joining us. You are sticking with me for the hour. Now a story we are following, founder hass resigned after an internal review found a violation of the companys business practices. Lending club matches borrowers with investors willing to finance their loans over the internet. Lending club shares have been struggling over the last year plummeted nearly 35 in monday from trading. Which school turns out the best entrepreneurs and engineers . And later, we will sit down with bostonbased of zip car and talk about how it selfurvive in a future of driving technology. Stay with us. Emily this is a special edition of bloomberg west, where we are looking at the innovation and creation feeding the boston startup scene. I am year with the general manager of here with the general manager of a bostonbased firm. They were one of the first to offer education in engineering in the 1800s, but the official Engineering School is relatively new, founded in 2007. Frank, thank you for being year. You just came from Santa Barbara where you had a long tenure. What attracted you to this position . Of harvard,egacy the power of the institution, the creativity of the students. I was really drawn to the innate talent, the rock creativity in the students, combined with the power of harvards professional schools writ large the medical school, the business school. Also it struck me that harvard was interesting at an historic moment in engineering. We are growing the faculty. We are moving to a new building. All of this at the same time. Hat these gifts are coming in its really an unusual confluence of amazing things. Emily that said, some would say harvards in Generic School has lagged other top programs like m. I. T. Or carnegie mellon. Topfiveed to get to a school within five years. Thats ambitious. How do you plan to do that . These metrics are based on the size of the program. If you look at the metrics at scale size of the faculty, publications for faculty members, funding for faculty members we are right there at the top. But we are a very small program. I dont think we want to change that. We want to keep the small, community, collegial field, which is part of how harvard does engineering and that will enable us to be of the top of the field on a scale basis compared to anybody. Bijan its really impressive what is going on there. How are things going with getting more women to be engineers, things like that . Are you happy with that trend . More work to do . How are things doing . Happy with the trend. We have more work to do. We are at roughly a third women in the thats lose program. What we call a concentration. The National Averages somewhere around 20 . That it is no reason to rest on our laurels, right here it would 10 rankings, but we have to keep pushing as we get closer and closer to the demographic in the population. Push that . Do you guest great question. We need to recruit High School Students into the undergrad program, and almost more important, we have to move on to our faculty ranks. If we do not address the pipeline at all of its stages, we will be falling short. We will not be a draw for the undergraduates. Some 1. 2 stanford being leave followed her the father of google and Mark Zuckerberg dropped out and went to Silicon Valley. How do you keep that from happening . Guest thats a great question. Really as educators our mission is to bring the students all the way through to fruition with the degrees that they are training for. That is our mission. Along the way, things happen. Kids have ideas. Run with them and them. Im not saying we are trying to create short circuits to drop out early, but rather focus on the complete package, and use that as the springboard. Emily bijan . Bijan those are exceptional people. I tend not to get focused on those as the mass of students you are educating. Do you think that there is room online to supplement these things. At do you have a view on online schools . D think thats a way to widen the aperture of the harvard experience . Do you think thats a way to widen the aperture of the harvard experience . Do. T i engineering, Computer Science we tend to do more there. I think a big piece of this is bringing innovation more broadly into our curriculum, so this is something i would say has been slow to change at harvard, but there has been a mindset that harvard pushes no boundaries, full stop. Over the last decade i have watched were a number of harvard faculty have been very successful osborne orders. I have a meeting with brian adams, one of our cs faculty. Their excitement is infectious. There is an increasing fraction of our faculty inclined to do these things, outside ventures. If we can capture that and bring that to the curriculum, the classroom curriculum as well as the on my curriculum, i think we can be more effective. Emily how do you do that without encouraging kids to drop out . What is harvards policy . Guest ive wrestled with this. Youre thinking about an application on a onedimensional perspective. Tech is this notion in the space i do not know if you are part of this, but the idea that there are two dimensions, elements and fundamental character. We can do both. We can push back against the classical approach to research, but do something useful at the end of this. That becomes a much more exciting opportunity for the students. Last question. Obviously Silicon Valley is much more than Silicon Valley proper. But San Francisco has a throughic advantage what he you doing to improve harvards brought a relationship Tech Community . So you have those bridges as well . Guest we do that and you dont waste. We have Great Networks on the west coast. We are recruiting students. We have great conduits. We have great connections out west. Here in boston, we do amazing things. We have wonderful opportunities arising for us. There is a startup community. It is really uniquely boston. And we need to find the opportunity. Emily all right, frank doyle, department ofds engineering. Thank you. And l. A. Judge has thrown that a media mogullenging Sumner Redstone as mentally incompetent. Bys comes after he testified video that he wanted his daughter to make medical decisions for him if he becomes incapacitated. He said he wanted his his life. End out of she is suing them for 70 million. The drama goes on. For are best known Companies Like twitter, but these days they are focusing on robotics. A much more to come this week ons robotics. We will catch up with the irobot founder, and a deep dive into out m. I. T. Is doing cuttingedge research on everything from self artificials to limbs. Stay with us. Emily this is a special edition of bloomberg west, live from district hall, diving into the companies that are driving boston troll growing tech scene. Fromng me, our guest behind the Companies Like twitter and oculus you guys were very early on oculus. Had crews animation. Bijan our job is to find exceptional osborne doors. We entrepreneurs. We were very early with osha with twitter and tumblr. Be the firstted to investor in oculus, and lily, in consumeris the next flying camera. All of these machine learning, exceptional hardware. We think robotics is going to be a massive category. That how do you know drones and robots are not the next 3d tv . Tv, we thought it was a gimmick. We did not invest in that space at all. We think entire industries can be transformed. Going to get your drivers license him a it will be antiquated. Emily we talk about you being in boston. A wonderfully gives you a different perspective on the funding environment. I wonder if it gives you a different perspective on the funding environment. Bijan we are in a time of mild correction emily that is mild . Bijan weve been able to raise more money in the First Quarter of this year than in the last decade. Investors have lots of money under management. Tens of billions. We have more startups i never, but we have this funk where the Public Markets have really taken a toll on Public Tech Companies and that is a downward pressure and we are in a little bit of a correction now. It probably will get worse before it gets better. There are too many great ideas and too much capital to not forge ahead. Emily all right. You are with me for the rest of the hour. Coming up, we have much more focus on the boston startup scene. s will hear from boston business leaders. We will hear about hydroponics and jet technology when this special edition of bloomberg west continues. Mark crumpton you are watching bloomberg west will stop lets begin with news. Paul Ryan Bloomberg west. Lets begin with news. Own convention chair, if donald trump asks them to. Donald trump plans to meet with paul ryan and other leaders. Force in ferguson, missouri has a new chief. The First Permanent africanamerican chief in the suburb. Tosaid that he felt called ferguson. He was set to retire in september. In albertaildfire has officials trying to figure out how to return residents to fort mcmurray. The temperature dipped to 45 degrees today. Extradited toe the night states to face Drug Trafficking to the United States to face Drug Trafficking charges. News is powered by our journalists in 150 news bureaus around the world. 6 30 in newfter york and im joined by paul allen with a look at the markets. Paul allen it was a flat start to the week in the United States and, if we look at new zealand, it is flat over there, 30 minutes into tuesday morning. Ofexpect a jump in the price iron ore. Japan is holding a bonds assail and the demand is expected to be robust, despite the record low borrowing costs with week, the in the sixmonth and 30 year bonds go to auction. We will look at it to be she did ubishi today. Ts they were not able to say how they will be affected by the emissions scandal. Finally, we are looking at the cpi out of china and it is likely to hold steady with a chance for a surprise in the upside with a rise in the food prices. I am paul allen. This is a special edition of bloomberg west and we are taking a look at innovation and creative thinking for boston. Now, an innovation for farmers. It is a container fitted with a Hydroponic System and growing equipment. They have had Success Stories in 22 states. We are joined now. My guest for the day is an investor in freight farms. Explain to us how this works. An app. Fi and it starts with a turnkey a light arrayis and all of the equipment you need to be a commercial farmer. Followws the user to basic construction and workflows and get started in week one. Emily chang the goal is to succeed on a broader scale, right . Whats absolutely. Double when we got started, we wanted to activate marginal spaces in the environments. It was a drag on the community and not creating value. By putting the product in the hands of more people, it really allows us to create a network of commercial farms in all of the spaces in between every city. I am very biased. We are very proud. The thing that is being built near that we resonate is a great mission, wethe really respond to the mission and this is a great example of want to give feed the world and solve a real problem. These are not founders looking to make a few dollars by splitting the company. They are looking to change the world. Emily chang is that correct . Absolutely. Of emily chang the criticism of hydroponic food is that it is flavorless. That was true when it was new. Growers, whoed our constantly experiment and tinker, to crowd source the innovation and share it across a uniform platform that our growers are using add there is a unique flavor profile that can be shared. When a farmer in minnesota comes up with a basal taste, that can be shared wherever they want. Boston is great. I am a boston guide. Born and raised. Siliconge to go to valley . There is a significant ecosystem. When i came out from undergrad in 2004, it was not here in boston. Over the last 10 years, it changed dramatic. There is an ecosystem you can tap into and it is amazing. I would not want to do this anywhere else. All right. We will keep our eyes on you. My guess is what us for the rest of the show. A story we are watching is minerr cutting off a data for information. They are selling it to newsrooms and government agencies. They say that they never authorized data miner to sell it to the government for surveillance. This highlights an intense interaction between Silicon Valley and washington. Coming up, the future of urban mobility and how it changes zipcar. We have commentary from our Senior Executive editor, brad stone. We will hear from alan powell, who sued a Capital Venture firm for gender bias. Check it out. Emily chang this is a special edition in boston and we are digging into companies here. Around and, with the arrive of massdriving services, the company may be vulnerable. The president of zipcar joins us now. Zipcars role in the future . Wellpositioned to continue to lead. If we continue to talk about what is happening with urban thatity, you mentioned this was a Founding Member of and ouring economy founders came up with the idea of giving people access to a car, without the cost and hassle of owning a vehicle. Years later, we continue to lead. If we look at the rise of all of the different rideshares, it gives ways to continued growth we have. Define this you space . Space asne leading the expansion and Ongoing Development of products and services. Of products and services. The strategy has not changed and vision is of the world we have never been so close as today. Do you think it is car and car ownership . The biggest competitor is car ownership and it is intriguing and flattering that companies, like Car Manufacturers and supply chain organizations for cars are getting into this space. Once, we were left at. Laughed at. Emily chang a company is partnering with lyft. Do you think of selfdriving cars as a threat . It as a threat. You hear about a lot of companies talking about building a car. This company is not building a car. We operate and maintain a network where the members are and where the car needs to be and what sort of car needs to be there. We will continue to develop that technology and that information for the members. Do you think that Autonomous Cars will happen in the next 520 years . I think that it is inevitable. I would not put a time or date on it. We are not building a car. We are enabling a service. If you reserve a zipcar, you walk a block. Tomorrow, you walk to where ever it is and the car comes to your door and drops you off at your destination. The smart thing is that it goes it will lock over and pick up the next member and carry on. Emily chang what is your vision for the future of urban mobility . There is a convergence of technology and mobile players in the market that will enable smarter and cleaner streets. I believe that the sharing economy, whether car or ride, will continue to enable this. Zipcarr is a leader is a leader. We encourage companies to go the distance and stay independent. Is the new owner integrating the company or leaving it alone . What is happening . T group. Budge for havinghem credit the foresight to see the revolution in the urban mobility, before others will stop before others. The second thing i credit is recognizing a strong focus on members and how we work with with sharing and mobility. The system enables the network to work and it has been left to our devices. As you know, we are still located here in boston and we continue to operate and take advantage of the skills that avisbudget has. Thank you so much. You are with me for one more block. We turn to Digital Music and video with spotify pushing into content. They will unveil a wave of original shows after adding clips from the bbc and comedy central. The programs will be available in the spotify users United States, the united kingdom, germany, and sweden. Customers torent spend more times on the service. It is to compete with youtube and apple. Up next, meets a startup working on a business jet to carry passengers faster than the speed of sound. Supersonic jets. Next, Deutsche Bank at 7 00. Emily chang welcome back to a special edition of bloomberg west all stop this is a story we are watching. Shares are plunging at the close. So, First Quarter earnings missed estimates, reporting a loss. They pulled back the installation guide and they now expect growth as low as extreme percent this year. We are watching drones filling the sky in the future. Withis a picture painted Tone Technology ballooning 127 billion by 2020. Verified insurance claims. Poland was the first country to draft laws, followed by south africa and singapore. Bostoning to focus on innovation, i turn to aerospace. The company is doing cuttingedge research to bring flyrsonic jets, that can faster than the speed of sound, mach 1. After the industrywide downturn, enthusiasm fell off of the map. Killedrde crashed and people. On for sonicng flight again. A startup is working on supersonic jet technology that will take people from london to new york in three hours. We are excited for this segment. We have talked about it all day. This. N the boston role in we think of florida, texas, the west coast. Not necessarily this. You are right that they get a lot of attention. There is innovation and technology developing here in boston at schools like m. I. T. And harvard. The innovation is great for labs. A company in massachusetts inplies parts to our company the boston area. And thennovation european market. It has a great ecosphere. We have everything right here within a quick hop. It is a great place to be. We have that. Large inng it looms this deal. How can you prove that this is safe. Concorde exploded because of the mechanical. In a tire onture the aircraft and it hit the bottom of the wing. The market has changed since market ishe european the globalnd expectations in the asian market has exploded. People go from asia to the middle east. I will do it. I will travel. We do a lot of business in europe and china and getting there would make my family happy stop exactly. I fly frequently from boston and it is not something i want to do regularly. If i could get the flight down to six hours, i would go there once a month. You need to be there, shake hands, look someone in the eye. Chang the problem is that it is so loud. Transoceanic do france flight. There are a lot of configurations to reduce the sonic boom to a background noise like an air conditioner. It can go over Populated Areas and people would rarely notice. We will start with europe and asian markets. Restrict entry for 15 years. There is a enteral regulation that prevents supersonic flight. As they see it competing, they will look at the regulations. Emily chang you have elon musk and Richard Branson getting into space. You need 100 million to account for any and. For anything. It is not easy. You can raise money for the iphone easier. We have travelers and Business Users who are investors in the thataft, if they can save much time and do better business, they will want to. How much does it cost the passengers of flight the passengers to fly . Be around ang will firstclass pricing. Not exorbitant. All right. You are in. Thank you so much. Calling asssed your a senior anchor. Thank you for joining us. That will do it for this edition of bloomberg west. We are live from start of central, as well as tomorrow, a special focus on the boston tech scene continues at the convention center. We will talk about the biotech scene and speak to the mayor. This is charlie rose. Brett is here. He previously held a number of policy roles in both the obama and bush minute administrations. Continue theyre battling to stay in office over mass protest