tv Best of Bloomberg Technology Bloomberg August 18, 2019 12:00pm-1:00pm EDT
emily: i'm emily chang and this is the "best of bloomberg technology." we bring you all our top interviews from this week in tech. coming up, a flurry of tech unicorns charging to the public markets. we work getting the most attention. we will take a look at the inner workings of ceo adam newman's company and is complex and controversial business relationships. plus, content kings. cbs and viacom finally inked a merger deal. we will talk to viacom's ceo about synergies and the road ahead.
what slowing economy? chinese online retailer alibaba defies the slowdown amidst a trade war with sales surpassing expectations. first to our top story, it was a big week for tech ipo's with fleet work and cloudflare filing to go public. the web security company cloudflare has been in the news lately, given its relationship with controversial message board, 8chan. three alleged gunman posted manifestoes on 8chan before three separate mass shootings in the united states. cloudflare stop providing services after the latest shooting in el paso, left two dozen dead, largely taking the platform off-line. so, is now the time to go public for cloudflare? i discussed it with liliana baker and will curtain. >> like many other tech ipo's,
especially in software, it is not profitable. it has a pretty good growth rate though. it's really trying to look at its competitor, fastly. fastly went public earlier this year and is doing ok. there have been some sources who were asking me why cloudflare took this long, though, to get to this point and prepare their filing. they had been preparing since the fall of last year for a public offering. emily: right, cloudflare is a company, a name we've heard often in conversations about companies that will go public soon. it did not happen until this filing. tell us exactly what cloudflare does. in the case of a company like 8chan, they basically protected 8chan from being taking down in denial of service attacks. will: right, so one of cloudflare's most popular and well-known products is ddos prevention service.
it protects a website from a denial of service attack, anyone looking to attack the website and take it off-line. they offer the service to tons of websites on the internet. they think of themselves as a utility. when you have the service it is the most effective or one of the most effective ways to protect your website from attacks like this. emily: right, and this is where 8chan comes up because cloudflare did not cut off 8chan. the site was still operational until just days ago after that shooting in el paso, texas. liana, talk a little bit about what cloudflare says about 8chan and how investors might take that. liana: it's listed as a risk in the filing. this has gotten a lot of attention because it's buzzy, it's relevant in the headlines, but i think that cloudflare was really aiming in its filing today to show the world how its financials are doing and what its prospects are.
so i think it did a good job of putting it out there that this is a solid company that serves the backbone of the internet. there's been pent-up demand among investors for these sorts of companies to hit the market. a few weeks ago, medalia went public. crowd strike has a good valuation a couple months after its ipo. so, i would say cloudflare today really is just trying to associate itself with some successful software ipo's from earlier this year. emily: that said, cloudflare only made news when they made bad news under criticism that it helped keep some of these websites afloat. if you go back to 2017, and what happened in charlottesville at the time, cloudflare was under fire for helping support a neo-nazi website, the daily stormer. and it was only after much criticism that they finally took that website down by cutting off service to it. i spoke to the ceo, matthew prince and talked to him about
some of their general policy of trying to remain neutral when it comes to content online and the websites that they service. take a listen to what he said to me then. matthew: we turn to the experts in terrorism and illegal content which is law enforcement, legislators, regulators. we say here is this content and what would you like us to do? that feels like due process, that there are actually politically enshrined organizations that can make these decisions, as opposed to these decisions being made on the political whims of me or mike zuckerberg or jeff bezos. emily: now, when it came to 8chan more recently, it was several hours after that shooting in el paso that cloudshare said alright, we're cutting them off as well. in a statement at the time, prince said they've proven themselves that lawlessness has
caused multiple tragic deaths. even if 8chan hadn't violated the letter of the law and refused to moderate their hateful community, they have created an environment that revels in violating its spirit. will, expand on the context. very complicated issues. we're seeing companies, facebook and google grapple with what to leave up and take down on their platform. for cloudflare, it's a slightly different story. will: so, cloudflare is in a really difficult position here. they don't want to make content decisions. like i said earlier, cloudflare thinks of itself as a utility. the product is so good and it is hard to find other comparable products. so, when you do not have cloudflare's ddos protection, it might be difficult to stay online.
what that means is cloudflare basically can decide who gets to be on the internet. they don't want to make those decisions. and as you've seen, they've only made that decision twice in removing daily stormer and 8chan. it's a really difficult position, and when you do things like remove 8chan and remove the daily stormer, then you get material to say why not remove this website or whatever other website that has vile content on it? so, i don't think this is a business cloudflare wants to be in. they don't want to be deciding what's on the internet and what's not. emily: wework also officially filed for its ipo this week, expected to raise about $3.5 billion. that would make it this year's second-largest ipo behind uber. wework revealed a loss of $69 -- a loss of $690 million in the first month and $3 billion lost in the last three years, along
with some unique business dealings by the ceo. ellen hewitt had all the details. ellen: anyone who has been following wework closely knows they have been giving out select financial information quarterly for the last year or so. we knew that in 2018, they lost close to $2 billion while making revenue of around $1.8 billion. there were some surprises we got more details about some of the loans and complicated financial structures that go on between adam newman and the company. we have gotten some knowledge about this before. he was famously been a landlord but we also got information about loans the company has made, the succession plan that would happen if he could no longer able to serve as ceo. emily: our colleague, shira ovide, called the office leasing company on steroids with a complicated corporate structure. they're offering three classes of stock. one with 20 times voting power as another. which takes it even a step further than what mark zuckerberg and the founders of
google have done. ellen: right, there are actually three classes and two of them have 20 votes per share. class a has one vote per share. as you would expect, that's a great consolidation of power. it's largely in the hands of adam newman. he has a lot of voting control over the company. that is kind of by design. people who support the structure think that adam has the right vision, the boldness, and the leadership to take wework even farther than it has been. for some of the people, they will look at that and raise their eyebrows thinking that might be too much. emily: now, the other thing
that's interesting is that they laid out exactly how many of the buildings are fairly new. 30% of their locations are mature. 70% are two years or younger. the vast majority of their space is incredibly new. ellen: they've changed the definition of that metric of a mature location. it used to be 18 months, they have expanded to 24 months. even with that, it's only 30% of their office location have been open for more than two years. they look at that as pointing to high-growth. exactly. like, look how fast we are growing. but it's also interesting because a lot of the most stable unit economics they like to highlight are focused only on mature locations. they say these are where we no longer have to rely on marketing to fill the buildings. but when you start to realize that's only 30% of their portfolio, it starts to raise some questions about how sustainable their growth is and how easy it would be for them to get to profitability if they stop growing. emily: and they say they may never be profitable, which is similar to what we heard with uber and lyft. how are investors feeling? are they excited? ellen: we see a lot of activity on twitter on both sides. some people think the growth is exciting and others cannot wait for it to go public so they can
short it. it will be a divisive stock. we'll see the price will be decided soon by the public markets. i think a lot of people are looking to see if it will meet that $47 billion private valuation. emily: so how quickly do we expect them to get to market? when does the roadshow launch and all that? ellen: sometime in the next few weeks. we expect and have reported that we expect a september ipo. that's just around the corner. emily: that was bloomberg tech's ellen hewitt. coming up, thumbs up. redstone cements her status as the most powerful woman in u.s. media with cbs merging with viacom. and if you like bloomberg news, check us out on the radio. this is bloomberg. ♪
it followed a marathon negotiating session and the two sides hashed out a price. i got details with lucas shaw. lucas: they finally realized that after two or three years are going back and forth that whatever misgivings they might have had, they both just needed to get bigger so they can compete in this streaming war. over the past two years, we have seen at&t by time warner and time warner sell out to at&t. we've seen fox and the murdochs sell a lot of their assets to disney. and now most of the companies that are playing in media entertainment are companies worth $100 million, $200 million. if you count companies like apple and amazon, $800 billion, $900 billion. cbs and viacom, even combined, they're worth only about $30 billion. but by coming together, they have a deep library that will get much stronger.
emily: so, how does this position, this now combined entity, against all of the other newly merged now larger media companies? lucas: you know, it's still small in comparison. most analysts and investors believe there are probably more deals to be made. i spoke to the ceo of the combined company and he acknowledged that more m&a is likely. they've been linked to companies like lionsgate, discovery. it's possible they might merge with one of them. it's also possible that the redstone family, who will own -- control the combined company, say it's now time to cash out. they might take a couple assets we've seen, but it might be stronger and might be able to entice some larger company to scoop it up. emily: that was bloomberg's
lucas shaw. after details on the newly merged companies and strategies, we heard from viacom's ceo who sat down with bonnie quinn in -- vonnie quinn new york. bob: we were thrilled that we announced the combination of viacom and cbs, creating a leading platform. when you look at the assets, it unites the powerhouse cbs, a station operator, a syndicator, the studio with paramount pictures, one of the most storied studios in hollywood. global brands in nickelodeon, mtv, comedy central, and bet. they have shaped culture for 40 years. and, of course, showtime. a premium service that is pushed the boundaries of storytelling. we've created an incredible asset base. this was a deal that was negotiated by two special committees and went through a diligent and thoughtful process. and again, the critical thing is we got the deal done because it positions us to do great things. vonnie: no question it was a phenomenal deal for both sides and there was a willingness to get it done, yet some
shareholders are nonplussed that viacom is not valued more. would cbs have given in eventually? bob: again, this deal was conducted by two independent committees of independent directors. when you need to focus on is the value created potential. these are two companies valued at particularly low multiples. a lot of that was due to the uncertainty hanging over them. also, a lack of clarity on the path forward. starting yesterday, we started talking about a three-part growth strategy really building a significant business through a
combination of cbs subscriptions, where they have millions of subscribers between cbs all access and ott. plus, viacom's ad supported structure with pluto tv being the leading free tv streaming service in the u.s. up 50% since we bought it. putting those together, you have an ecosystem. we love that and will be a very significant partner with ads, distributors, and a huge content supplier. very exciting growth strategy going forward. as that tracks out, people will see the material value here. >> you've also identified $500 million in cost savings. some of those will be job eliminations. can you give us any more detail on how many and where? bob: sure, when you put two companies together, people talk about synergies. those numbers you reference is a cost number. it includes organizational costs and sourcing benefits. some real estate benefits. beyond that, we haven't gotten into it. i think the more important thing to focus on is the power of this combination is going to create incredible value for all of our stakeholders, including the
it is presenting the system as a bigger and more affordable solution to lithium batteries, claiming it can supply electricity to the grid 24 hours a day. to discuss what this means for the energy storage market, i sat down with the ceo. >> we've designed a very new, innovative system tower. it includes a six arm crane and 35,000 metric ton bricks that are all orchestrated and raised and lowered with a proprietary software stack, so that's the whole system integration. what we do is we take excess energy from solar or wind when it's produced and not needed. that energy is used to raise the blocks. and when the energy is needed by the grid, we lower those blocks and discharge the energy. emily: and how widely deployed is this? it says you're on four continents. robert: correct. we've had a working model for the last year in switzerland. in addition, we're building our
first commercial scale unit in the fourth quarter in the north of italy. as we announced, many, many customer engagements on many continents. we're excited. emily: what do you think the draw is for softbank? robert: they share our vision for renewables and understand how important energy storage is to make renewables real and make renewables solve the problem of our reliance on fossil fuel. they own an energy company, so they own an energy generation company, so they understood this beyond just being an investor. they share our passion to be -- to solve this problem. emily: so this system, as we saw there, relies on this giant automated system that has to work reliably outside in the elements year after year after year. it seems like a lot of moving
parts. do you have concerns, or is there a risk that some parts might not function properly given all that exposure and throw the whole things off? robert: actually, that's one of the beauties of innovation. the technology we're leveraging fundamentally is proven physics. we're leveraging unique material science working with one of the largest materials companies in the world, so we're actually not using normal concrete. we're using a material composite for 95% of these bricks and raising and lowering them, so the fundamental core physics is known. where innovation comes in is with the proprietary machine vision software that fully automates the tower, as well as a lot of other innovation we thought of from a sustainability perspective. this last point is important. so, in not only the materials, we can use the soil right from the site we excavate locally to make these bricks, so we don't have bring in trucks, materials. we're not spewing omissions with -- emissions with trucks coming in or other transportation elements coming in, and from a sustainable perspective, we use some of the suppliers in a global supply chain ecosystem that exists today, so we can do it now. emily: now, we've seen lithium ion batteries start to be attached to the energy grid, but often they can only supply energy for hours at a time. how long can your system? robert: sure, that's another one of the innovations, long-duration. so, while we can support four hours of storage, we can also do 8-12 hours.
why is that important? we cannot only meet the time requirements of utilities but think about manufacturing companies. industries and industrial processes that rely on the power 24 hours a day. desalination plants are a great example. they need power to make drinking water 24 hours a day and we can now provide them for the first time that power. emily: now, we've seen a lot of pushback from local communities against giant solar power plants, large wind farms because of the fact that they don't look attractive. do you run the risk of that, as well? a large concrete tower, while it might work, it might not be the most attractive thing companies might want in their backyard. robert: actually, most of the markets, we'll be building this system. it's out where there are farms. out in typically remote areas. wind farms, where there's already turbines sitting up high, and the off grid applications which are pretty important for us to get power to remote farms, villages, etc., to areas that that need power that
can't get it from the grid. in those locations, we don't see a lot of problems. emily: there's not really another company that does this this way. what is the most challenging? what other company is working on this in a different way that might be the most challenging idea to what you have proposed? robert: the big thing that has not been solved until now are for the economics. how do you get renewable energy storage down to price when combined with solar or wind, you can do it below the cost of fossil fuel? that's really the major innovation. and we've done that through the material science, through thinking about design, and through sustainability. that's, primarily, what we're solving that no one has been able to solve. emily: you have other competing, crazy, bold ideas. pumping compressed air underground releasing it to turbines.
there are obviously a lot of different paths to get to the best results and create the most amount of energy at the cheapest price. i mean, what do you think makes this better than all of those other ideas? robert: sure, sure. three main reasons. when we designed this, we didn't want to have this dependency on things like geology or geography or topology. dams, for example, rely on mountains and things. we want to be able to deliver this everywhere, it's so big, the problem we're solving. second, sustainability. chemical battery companies, how they get the material, the batteries degrade immediately when you install them. so, through cycling, they're going to degrade. our system doesn't degrade at all over time. so, you have to solve this with innovation across material science, design, and thinking always about sustainability of your environmental aspects every day. emily: eenergy vault's ceo robert piconi. coming up, a squirrel into tech. we're going to take a deep dive into the ftc probe of facebook next. and bloomberg tech is live streaming on twitter.
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emily: welcome back to "bloomberg technology", i am emily chang. we continue to follow washington on antitrust. the chair of the federal trade commission is weighing in. joe simon said his agency is ready to get down and dirty of necessary. if you have to, you do it, not ideal because it's messy, but if you have to, you have to. the sec is currently investigating facebook. this is one of the big tech companies being targeted by the trump administration, to discuss in washington, charlotte joined us. before that, she was part of the anti-competitive practices
committee. and before that she served as an assistant attorney general in the antitrust bureau of new york state. as well as terrelle pryor. >> if you have to you have to, that's almost proctology. i think when he is talking about is that it can be difficult to force significant divestiture, something we would probably break out. and in order to get that type of remedy in court, you need to show it's necessary. sort of a tautological comment. but i think that's what he's getting at there. emily: sally, would you agree -- there's certainly been a lot of questions given that the ftc fined facebook, but critics say that didn't go far enough.
you know, do you agree that the agency has what it takes to make that leap if they have to? sally: i think he was just really stating the fact that that's a remedy that every antitrust enforcer needs to consider. i wouldn't expect it out of joe simons, given how he handled the facebook consent decree violations and really just gave them a slap on the wrist. i know a $5 billion fine sounds like a lot, but it won't change anything or protect the american people from privacy abuses. i don't expect anything aggressive out of this administration, however these investigations take a long time so it might not need joe simons making the decision on the proper remedy. or different type of contact. emily: meanwhile, you have a new piece out in bloomberg businessweek that speaks to how facebook has evolved under scrutiny from regulators after
this penalty was levied by the ftc and your assessment is facebook is only getting stronger. how so? sarah: if you think about it logically, data is the most important part of the business model and that's what is at the bedrock of 70 billion advertising businesses. the ftc telling facebook it's important that you do not share your most valuable asset with any third parties, and facebook already buttoned it up. they already don't want to share data with third parties, they understand that owning the network and owning a much bigger network and making that bigger is most important thing for the future of their business. so really, what ftc did was let the company continue on their current path and do things that are anticompetitive, like the messaging app. emily: first of all, would you agree with sarah there? charlotte: sure, i think that's a major concern. something i was hoping the ftc
might do is have requirements for interoperability with competitors. that is data sharing but it allows competition. emily: at what point do you think the ftc would say, this is a company that needs to be broken up? whether it's facebook, and joe simons spoke to amazon and the issue around third-party sellers. sally: so, you know, it takes years of investigation before an enforcer will breakup a company. in our history when it's been done, it's taken time. it may be after the 2020 election and we could have a different decision maker making the ultimate decision. and the concerns he voiced about amazon are also very important, that it's not allowed to enforce rules it said it was going to do in terms of enforcing low pricing. emily: how concerning is the amazon issue in your mind? charlotte: well, the ftc
certainly wants to make sure that competition is happening fairly on the amazon platform, so small retailers ought to be able to compete and not worry that amazon will anti-competitively interfere with them. so, i think that's the type of thing the ftc is going to be looking for. emily: in response to the ftc penalty on facebook, alex stamos, the former chief security officer at facebook, had a pretty striking tweet, saying i can't believe facebook didn't pay more for this, if the ftc ordered amazon to help consumers make money. bezos would leap across the table with a $10 billion check and a massive grin. what does he mean by that? sarah: he means basically that this is a valuable asset and facebook is no longer able to share so it's good to have this rule in place. facebook of five or seven years
ago that resulted in cambridge analytica, that's no longer how it works today. they are no longer making personality quizzes and games that operate on facebook, that used to be necessary to bring in more users. but in this current world, facebook no longer wants that. facebook mostly wants to keep that network for itself. emily: you just came out with a fascinating piece yesterday about how facebook contractors are listening to audio of users talking over facebook messenger and today, the story about facebook only getting stronger. sally, i'm wondering why don't these bad news stories hurt
facebook more than they do? sally: i think the reason why the bad news stories don't hurt facebook is because the enforcers are not making a change to its business practices. so, when it got the fine and it was just a fraction of its annual revenue and it's able to keep doing what it's doing, mining users' data in a way they don't expect, that settlement was a win for facebook. until an enforcer actually makes them change their business practices, they will not be effective. emily: what is your view of how this investigation will play out, as well as a potential investigation into amazon? charlotte: so, of course it's hard to predict. we don't have access to the nonpublic document that they are reviewing at the ftc, but we should not expect it will lead to huge changes.
the track record is not strong on that, and antitrust is a narrow and difficult area of the law. so actually, our hope is that there will be a new agency with new regulatory powers, in addition to antitrust, and i think that's how we will address the power that facebook has. emily: that was sally hubbard, charlotte slaiman, and sarah frier. coming up, tencent revenue falling short amid the chinese slowdown, but alibaba has room to run, reporting better-than-expected results. next. this is bloomberg. ♪
beat profit expectations. online ad revenue grew a worse than expected 16%, this as they grapple with competition and an economic slowdown. for more, i spoke with bloomberg's selina wang in beijing. selena: even though we spoke on expectations, the focus was really on the decline in growth along the online ad revenue. this is not the most important section, but this was a promising area and we're really starting to see that hit by broader macro economic issues, as well as the competition. what was interesting is where the company pointed out the slowdown, from the auto sector, the real estate sector, the financial sector, which really isn't a surprise given the stream of weak economic data. in terms of white dance, this is really the big elephant in the room. that company has been on a roll in terms of getting companies to buy into their ads and buying user eyeballs onto their
platform. the company didn't engine that company by name but said they would be investing more in video apps, and would be beefing up its longform quality content to try to differentiate itself from its competitors. emily: now, gaming has been a controversial part of the business in china. of course, they've cracked down and since eased up. but what did we learn about the gaming segment at tencent? selina: the worst is over, given that this is still the company's most important revenue line. we saw them monetize their important games, including "peacemaker elite." for those who didn't know, this is the new, less violent version of the popular battle royale game, but didn't get approval from chinese regulators. we did not see the full growth from game type monetization, but analysts are expecting it to pick it up later in the year.
you mentioned censorship in the media space. they have to deal with government sensors, and those regulators haven't been approving these game titles fast enough. we also heard from ceo pony ma they'll be focused on making less violent games, especially to teenagers. those ad sales around media ad sales were hurt by censorship and the expectation is that as to what content can be shown. emily: meantime, wechat, of course, is the crown jewel of tencent, a super app to which there is no equivalent in the united states. how is wechat doing? selina: we rely on wechat for everything. whether it's communication, haircuts, you can do anything. what's shocking is that this wechat app is reaching penetration but is still growing.
it grew 7% to 1.1 billion users in the most recent quarter. to try to continue to juice growth here, they're trying to add more services and content into the app, and focusing on mini apps, which are essentially light apps within the app. which encourages users to spend more time within we chat than other parts of the internet. companies have responded positively to those, which can be used for everything from booking a car to ride-hailing, as well as bike sharing. so, that's been a really successful area of growth there. emily: that was bloomberg's selina wang. she was also tracking alibaba results out thursday. they defied china slowdown, sales beating top estimates. selina and kevin carter discuss.
kevin: the real story in china and the emerging markets is the billions of consumers that are moving on up and they want better stuff. retail sales and consumption continues and in emerging markets, that consumption is going online onto a smartphone, just as it is here, but there's a leapfrogging because most of the infrastructure was never developed in china. emily: joe tsai talked about demographics and digitalization, which is driving the results, despite what was happening macro economically and geopolitically, the question is, how long can that keep up? selena: joseph mentioned is reaching markets around the
world. lower tier cities are starting to pay off, you see rapid digitization of these lower tier cities, and they are able to go head-to-head with companies that are focused on lower tier markets. and they're planning to invest more in these areas and their market share is growing. this is a big trend in china that seems to be defying the broader slowdown. they're investing a lot in personalization, in targeting these consumers with better algorithms and investing in sales promotion. so, that altogether, is trying to help boost the china commerce business by 40%, almost twice the amount of online retail sales.
emily: would this lead you to believe that e-commerce will not impacted by trade tensions in china? kevin: i think it's probably the sector to be affected the least. emily: why? kevin: the tariffs and trade war is about agricultural products, manufactured goods. it's about the 500 million people in china who do not have a smartphone and as soon as they get that, they are going to connect with their friends, play games, shop. so, the secular trend of e-commerce is a one directional thing and it's not really part of the trade war. emily: to that point, strong results said alibaba has increasing competition from not just j.d., but endo duo. what are the headwinds that alibaba faces ahead? selina: alibaba has been pretty
resilient amid increasing competition from the likes of jd.com. but we did see some areas of challenges, the cloud computing segment still has negative operating margins. we saw growth decelerate in that area. there's also losses in the digital media and entertainment sector there. they're facing increasing regulatory issues. something we poitned out, alibaba isn't truly an e-commerce company in the way that you would think of amazon, and while we saw tencent's online advertising really take a hit, alibaba's business has maintained strength there. so they are doing things to keep their customers engaged and improve the advertising return on investment or customers. emily: so kevin, if the trade war drags on, and we don't know how long. what will the fallout be in china more broadly as an emerging market?
kevin: well, i think it's likely to impact the chinese economy. and is likely to impact the sectors that are the export and manufacturing sectors. i would like to think that the tariffs are not going into affect. emily: many tariffs are already in effect. kevin: this is true, in both directions. the ones that were pushed out, i would like to think this is a negotiating tactic. we had a trade skirmish with china 10 years ago and put a tariff on chinese tires. they put a tariff on our chicken feed. but that was a tariff put in under the obama administration and it lived for three years. it saved 1200 american tire making jobs at a cost of $1 million per job, and it also cost three jobs in retail for every job it saved and the
american taxpayer-funded that, so i would like to think the mathematics are clear enough we wouldn't do the things we're threatening. the market is voting out that we will likely have a recession in our country, and i think it could be bad if we go ahead with the tariffs. emily: where does that mean you're placing your bets? kevin: emerging internet companies are not really part of the trade war. this is about people all over the world consuming, wanting stuff, using their smartphones. emily: that was kevin carter and bloomberg technology selina wang in beijing. coming up, you know him as the former head of google china. he's at the head of one of the most popular capital funds.
emily: the former head of google china is turning heads at the helm of one of china's most prominent funds. since the founding, they've invested in more than 300 companies, including one he hopes will be the fastest ai startup to hit $100 million in revenue. we spoke exclusively to selina wang. she asked about the long-term plan for capital raising. kai-fu: we don't plan this ahead of time. based on the trajectory of innovation, it's, i think today, fair to say it's fastest 200 million revenue company in the world. selina: where are you now? kai-fu: we're not quite there, but by the time we project we'll
get there, it will be the fastest to reach $100 million of revenue. a lot of unicorns are not even at $100 million revenue, i think it can get there pretty quickly, the revenue over $100 million onwards, towards $200 million. at that point, it should be well over a unicorn and can be listed publicly. selina: what's your timeline for an ipo? kai-fu: $100 million to $200 million revenue and the price sales ratio of 10 or so. which values the company at $1 billion to $2 billion. it wouldn't be far from now, less than two years. selina: you wrote that the area of technological discovery was over, and now it's all about implementation. so, how do you see this business continuing to evolve? kai-fu: we're still at a very early stage in the commercialization. we're kind of at the equivalent
of early internet portals back when everyone was using yahoo! and there was not even a google or amazon or facebook. there's a lot of room to reap rewards. selina: we're seeing venture rewards. selina: we're seeing venture deals fall dramatically. they fell 77%. is this a long-term winter or a healthy, short term place to bring valuations back to healthy levels? kai-fu: on the negative side, in an economy that's slowing down, everything slows down, including venture capital. what is happening is that everything slows down including levels? venture capital. what will happen is there will be a shakeout. the top will continue to thrive. many of the smaller first time vc's that have raised money and conventional ways will get in -- raising money using unconventional ways will get in trouble. so that is part of it. but the positive side is if the economy is challenging, and the valuations are down, it's a good chance for us to go shopping. selina: there are reports some
chinese ai companies, like facebook plus, could be added to the blacklist and cut off from u.s. technology. how do you see that playing out and does it have an impact on the ai industry? kai-fu: so, i think the impact would be much less than say, a company like huawei, which has intricate hardware software products built with multiple dependencies. selina: the u.s. has been scrutinizing foreign deals in the u.s., and many chinese funds have scaled-back their investments. how does this strategy in the short-term and in the long-term? kai-fu: in the short-term, it has no impact because u.s. investment has always been less than 5% of our total, so now it goes from 5% to 2%. in the long term, i think it is a pity if we really have to cause a total separation of two countries because one could
argue that artificial intelligence got to where it got to because the whole world has been able to work together. emily: part of our exclusive interview with kai-fu lee. and that does it for this edition of "the best of bloomberg technology." and we are livestreaming on twitter, as well. find us at technology, and follow our global breaking news network tictoc on twitter. this is bloomberg. ♪
nejra: overhaul on the way. the volcker rule could be in for an eminent revamp. looking beyond brexit with little time to extend the deadline. what will the new rules be? goodbye to the buy side. outsourcing could mean the death of in-house trading. we will look into the logic. welcome to "bloomberg markets: rules and returns." i am nejra cehic in london. "rules and returns" is a show where we delve into the reg