>> live from pier three in san francisco, welcome to "bloomberg west" where we cover innovation, technology, and the future of business. i'm emily chang. are highly valued startups spending their cash to quickly and taking on too much risk? some are warning that tough times might be ahead. we look at whether silicon valley is in a bubble. a german company cloning american businesses like airbnb and groupon has doubled the size and there are other startups like spotify and rovio.

amazon ceo jeff bezos has a wide variety of investments and now he's betting on home renovation. he just sunk money into a seattle startup focused on making from projects easier. first to the lead. the top of a bubble is starting to gain speed again. some are sounding the alarm. startups are burning through way too much cash leaving many with multibillion-dollar valuations. andreessen recently tweeted when the market turns, and it will, many hibernate companies will vaporize. andreessen is not stopping. tweeting up a storm.

another man wrote on his blog that valuations can be fixed and you can do a down round, three or four but earn rates are exactly that, burning cash, losing money, emphasis on losing. bloomberg contributing editor paul kedrosky, do you agree? >> it's hard to disagree with math. and whenever the market turns they will be vaporized. there are high burn rate companies. they are a perennial problem with bubbles coming and going. >> josh, what do you think? >> when they talk about a bubble they are usually focused on valuation. i think they're focused on burn rate. in the 30 years in venture

capital, a high burn rate can impact a company's ability to execute. whether or not the burn rates are too high on average is something to debate. >> lots of people, big shiny offices, the fake "we made it" feeling removing the pressure to deliver real results. you do see a lot of startups moving into these beautiful new offices, the most expensive place in the country. >> it is a beautiful place to be. >> they have a fair point. a startup is like a car. sometimes you want to go really fast when you have a great opportunity ahead of you. when you go fast, you burn. >> i love his tweets. the notion that it gives an

entrepreneur the feeling of success. we've made it because we spent this venture capital money on rent. i remember the dot com bubbles. they cap that money long after those companies were out of business. >> you have to focus on building a real company and not getting distracted by that. that being said, high burn rates are not indicative of a problem. two years later they had a profit of $260 million. >> that's the mass that paul was talking about. they had moments where they could pull back. they are moving away from free cash flow. >> we are hearing from venture capitalists that the high venture capital is not high enough.

is there another side to the story. >> i like capital scarcity. i do not want them out there putting so much money into these because we would like capital to be scarcer. it's good for returns. having said that, there is this kind of temptation out there right now to confuse a financing event having raised a lot of money with a customer event and the two have very little to do with each other, certainly not in the short run. more companies are blowing up on that point than anything else i can think of. >> over invest, escalate burden, vaporizing when the market turns or under invest. vaporize, implode. is this a reality for some of

these companies? >> it's a conundrum and why we work with entrepreneurs over a long time. it will be specific to each company but that is the trick. the talk of the bubble is generally overblown. >> no bubble? >> they also have very high revenue. if you went back to the bubble, that was not the case. >> i think we see a little bit less of that right now. the other issue though here is venture capitalists -- you. you see a binary result. >> blame me. >> i usually blame paul, but i will blame you for a minute. you want a binary result. this can either be huge or zero.

when i see some of these business ideas might actually like to have 10 years to figure it out, a modest success. i feel like a lot of venture capitalists are pushing for only home runs. >> we do push hard and that is due to the technology markets that are very asymmetric. winner takes most. competition moves very fast. you have to invest otherwise you will be left behind. we push them for that reason. >> the young founders today have only been around in an environment where money is easy to raise, where valuations are high. this will not last. will the money dry up? is there a bubble that's going to pop? >> remember that old show "mystery science theater 3000" where people talk over a movie? we should do that and just talk about mark andreessen for the whole day. [laughter] i totally agree. this part of the problem is

cultural and generational with young entrepreneurs who have never seen anything of the age of 20 whether it's the money that comes to them almost a free when they are in a tech startup or accelerator or what they see when they are in a hot space in the bay area. the thing we see about capital is it is intensely cyclical and it will go away even faster than it arrived and they will be shocked how quickly it disappears and shame on them for not paying attention. >> paul just did the "old man." these kids today don't know how good they've got it. >> emily started it. >> i never said you were old. >> alan greenspan said irrational exuberance will give them all of the confidence for that but that was back in 1996 four years before that bubble blew up. it's one thing to spot a bubble.

>> i think the whole young entrepreneurs haven't seen a crash is a little overstated. it was not a picnic to raise money. i think the current generation of entrepreneurs have seen a down market. that said, it's very important to focus on building a business not on the vanity metrics, fundraising, image. >> generally you think mark andreessen is exaggerating. >> what he's saying is at the end of the day in the long run, the only thing that matters is cash flow and profit between here and there there are other things you need to focus on. as they're focusing on growing eyeballs, keep in mind some point you have to make profit. >> josh stein, paul kedrosky, thank you for the debate. i'm sure it will not stop nor will mark andreessen. how a german startup has built a $1 billion business by cloning american companies like ebay and groupon.

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>> i'm emily chang and this is "bloomberg west." blackberry is already planning a second edition of the passport smartphone selling out 200,000 units in the first few days of sales. as for earnings, revenue fell in the second quarter but their loss narrowed to $207 million. i asked ceo john chen when they would become profitable.

>> i told people that we will be profitable in fiscal year 2016. depending on the reception of these phones and this one coming out and about two months, the software releases next month, i'm expected to see some growth next year. if i could get some growth on the top line, i would be able to make it profitable sooner. >> he would like blackberry to return to the consumer market but it's too soon to do so. rocket is a german investment company that replicates businesses like groupon and airbnb. they plan to close the ipo october 1, one week ahead of schedule.

the plan is to list october 2. for more on the public debut, cory johnson is still with us as well as paul kedrosky. and aaron ricadela joins us via skype from frankfurt and covers rocket. what do you make of all the enthusiasm in the markets? >> hey, emily. you have these twin german ipos going out right now. rocket internet is the startup vehicle controlled by a pretty prominent figure here. they just moved up their first trading day five days to october 2. a big e-commerce retailer out here, very popular in europe for online fashion retailing where spun out of rocket some years ago. they started trading october 1. >> rocket has gotten a lot of criticism for copying companies whether it is amazon, ebay,

foursquare. is that fair or do they have original ideas? >> oliver is the front man, the ceo of rocket. he just spoke for about two hours at a press conference here in frankfurt i was at just the day before yesterday and he's been at this for a long time. they are well-educated young tech savvy germans. 15 years ago, they did a take on ebay forcing ebay to buy them out. then they did other startups imitating u.s. websites. sometimes they've been successful in getting them to buy their knockoffs and sometimes they built the business on their own kind of like what they did with the knockoff of zappos and became a stand-alone business. >> i first became aware of them

in the groupon offering when they were shareholders and were responsible for a lot of groupon's growth. i wonder what you make of these guys. >> mostly despair. [laughter] i don't have a lot of patience for these geographic arms strategies predicated on fast knockoffs in new geographies. it is a pox on both businesses. it shows you how low the barrier to entry is but it also says there is an opportunity to knock it off quickly. you cannot continue to play that for long. developed markets become developed really quickly and the whole business of bringing in new geographies does not last very long. it's a phenomenon that has a very natural course that will

run quite quickly and it's an offering i don't have a lot of confidence in him. a lot of the companies from the 1990's are singing along the corners with me. >> cmgi? that might be the first reference to that on "bloomberg west." >> aaron, you seem to agree this company has copycat and u.s. companies. they want to try to reinvent themselves. >> i quizzed all of her at the press conference in germany the other day and he has almost made cronyism into his calling card. it's amazing. he's very well trained, obviously, but he's made that into a selling point and eight perverse way. perverse way.f

when i spoke to him, he said we are not the german auto companies. we want to do it leaner, more efficiently, cheaper than others have. our talent is execution. he's wrapping it up in a cloak of something else. he's become very good at selling that story. >> interesting. we will continue to follow rocket internet. aaron ricadela in frankfurt and bloomberg contributing editor paul kedrosky. how amazon is taking delivery into its own hands for the holiday season next on "bloomberg west." you can watch us streaming on your phone, tablet, bloomberg.com, amazon fire tv, apple tv. ♪

welcome back to "bloomberg west." i am emily chang. amazon is hoping this holiday season goes better than last years with a surge in demand and bad weather causing shipping delays with its largest partner, ups. to make sure packages are going to be shipped on time, they have built 38 new fulfillment centers and 15 smaller warehouses known as sortation centers. amazon is also starting to put its own delivery trucks on the road in certain locations. expanding amazon's supply chain, is this all jeff bezos has been up to. most recently investing in pro.com for contractors and home improvement project. they raised funding with andreessen borowitz and others. why is he backing them? what's going on here? >> the service business, plumbers, babysitters, interior

decorators, this is kind of like the last frontier. maybe $1 trillion per year. they've been trying to crack it for a decade. now with the success of uber and airbnb, every professional out there has a smartphone in a computer in their pocket, it's possible. not just pro, thumbtack raised 100 million dollars recently from google among other investors and amazon may have some interest here as well.

optionality and backing in some form or amazon executives in this space. >> these are former amazon executives. where does this go? >> it is very much like zillow trying to offer some data in an opaque real estate market. you can kind of price out your home project and they're hoping to parlay that into connecting you with professionals. >> i went to visit when i was in seattle. first of all, i love the fact when you are talking about burn rates, they are in an old enterprise rent a car office. it still has that sort of we are saving money feel. >> very amazon-like, capital efficient. >> every time this gets used, they start to gather data.

>> like zillow, the data is not perfect right now. i went to price out a painting job i wanted to do in my living room and gave me a value. then i called a professional they hope me up with and he thought it would be a little higher. they are facilitating with the officials in seattle. >> "bloomberg businessweek" brad stone. we will be back with more from "bloomberg west." ♪ >> time now for "on the markets." i'm julie hyman. an interesting week with a lot of ups and downs. saw a late day rally from yesterday's decline that was the worst since july. today's gains in the s&p 500,

the most in five weeks among other reasons we saw the gdp revising higher. ♪

>> you are watching "bloomberg west" where we focus on technology and the future of business. chang.ly yahoo! acknowledges they received a letter from an activist investor urging them to take steps to create shareholder value including cutting losses in the display ad business. in response, marissa mayer says we have maintained and will continue to maintain an open dialogue with all the bear shareholders as part of the strategic initiative to drive sustainable shareholder value reviewing the letter carefully and look forward to discussing it with them.

marissa mayer says she has great confidence in the strength of yahoo! business. how is yahoo!'s display ad is this doing? would it better for them to abandon? we spoke to josh stein an expert in the field of digital ads and an investor in chart b about the prospects for yahoo!. should they expend on new ad technology or not? cory johnson started by asking him what's next for yahoo! in the ad space. >> they have a high-class problem. they've been a holding company and they just realized about $6 billion after-tax but they are flat. you have search, number one and the biggest, google. social is facebook and twitter. brand is big, about $15 billion, but it's always underperformed expectations. >> what do you mean by brand? >> cars, movies, coca-cola, budweiser. they are trying to get your

engagement and attention. tv is a big medium. the nfl by itself does like $6 billion. you feel the resonance. the internet has fallen on delivering results for advertisers historically. >> thing with brand -- the publisher of people when i worked there 1000 years ago said it's fundamentally about belief. you have to believe that advertising works. you cannot measure it. >> i agree. i think people are measuring the wrong thing. that is like assuming they are all the same. >> the nfl does not just tell viewers that. viewers are paying more attention than are more engaged. one of the hottest companies in our portfolio is called chart beat. there are the first technology that lets you actually directly measure attention and not just page clicks. >> you say it disproves most of what we take as fact like what? >> there is a sense that banner ads don't work.

they can work great if you put them in the right places, in front of audiences that are engaged and care about the content. we all know that there are click bait articles. people click on them all the time, that it just down to soft. they do not pay attention. that is versus a much more in-depth article that people care about and scroll to read for 10 or 15 minutes. chart beat helps you find those audiences input it against that. >> what did chart beat disprove? >> i'm a v.c. it's not that you cannot do successful brand advertising but the capital has been misallocated spread like peanut otter over everything. when you allocate correctly you can deliver exceptional results. >> good, in-depth content and not these listicles.

>> the trick is knowing where they are paying attention and that's what they can measure the entire audience pixel by pixel and they are doing that for about 80% including bloomberg. >> this is bad news for buzzfeed, demand media, these websites getting lots of clicks. >> buzzfeed is changing the model to be more in-depth. >> they do not find sites very good for building the engagement they are trying to get. if you are coca-cola or a movie trying to get awareness it's not where you want to be advertising. >> i'm wondering if that changes the valuations of those companies because we see them get a lot of interest and the notorious e-mail that went around "the new york times" about how much does they were

getting. the nature of journalism is changing to respond to those clips you are saying are high calorie, low value websites consuming time but not interest. >> it is not a zero-sum game. by getting the ads where they are supposed to be an getting better results, you will see dollars flowing from tv to the internet. the whole pie will grow as a result. >> top 10 most annoying things about cory johnson. we will not click on that now? >> that would get a lot. >> what about video? obviously i have a selfish interest, but it has historically been difficult. will people still want to put their money and television even though that might not be where

the ad dollars are? >> chartbeat is testing different technologies. jack defined where people really engage. -- you have got to find where people really are engaged. if the person does not really see the ad as an engagement it wastes money. -- and is an and gate, it wastes money. >> all sorts of tech companies will be there and advertisers. what will people be wrong about? >> they will continue to put all of their money and to search and social. social in particular is great for driving traffic. brand advertising in the real world is more than half so you will want to focus on engagement and attention, not clicks and shares. >> dfj partner josh stein. you can watch us streaming on your phone, tablet, bloomberg.com, amazon fire, and apple tv.

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>> i'm emily chang. this is "bloomberg west." this is raising privacy and safety concerns. a new technology that could turn off car starters. cory johnson has more on that. >> they can prevent subprime lenders stop him from the starting their car. they have sold 1.5 million of these things. hudson cook partner nicole munro. talk to me about the legal

ramifications of this technology. >> there are a few legal ramifications. most states do not legally address whether or not you can use a starter interrupt device. what states do is they address when you can or cannot repossess. there are states that do address the use of a starter interrupt device. tell a friend and connecticut do specify. these are new and legislatures have not dealt with them for the most part. they can be used legally within the confines of state law. >> how's business? >> business has been well. we've seen a change in the marketplace. consumers are really excited to have the device because it's giving them a better vehicle, a better experience with the lender.

they're getting a chance to drive the vehicle that they want. it is becoming much more accepted in the industry. >> it also may be makes them want to pay more because they know at any given moment their car will get shut down. >> the device has really helped change the way that consumers are dealing with the lenders and dealers. it gives them an opportunity to actually work with them and it is a tool and gives them payment stability. it also creates a positive step to rebuilding their credit. they are excited they did to change things that have been difficult for them in the past.

>> nicole, i know we've seen a huge boom in subprime lending. is there a particular shift towards a certain price of car for these subprime shutoff devices? the subprime industry is really concentrated on used vehicles. these devices are not typically used with respect to new vehicles. the devices can be used in vehicles that range from 5000 dollars, 15 thousand dollars, but they are lower-priced vehicles than sold by your typical franchise dealer. >> subprime borrowers are not paying back not only more than prime but more than they were even a year ago. does this mean your devices are going off a lot more and you have a digital repo men out

there flipping the switch killing cars all over the place? >> it's providing an opportunity for the consumer to work with the lender. they can call and say i'm struggling and having a hard time. can you work with me? even though they can work with the consumer to get a little extra time to make a smaller payment or a couple days late thomas and allows them to change the way the communication happens. -- a couple days late, so it allows them to change. they are allowing the consumer to work with them so things can change. this is giving the consumer more opportunity to stay in that video and -- vehicle and making it a more positive experience for them. >> corinne kirkendall, we appreciate your time as well as hudson partner nicole munro.

>> let's get a look at the other stories making headlines right now with mark crumpton. >> a fire at an air traffic control tower causing major disruptions to chicago-area flights at both o'hare and midway grounded earlier this morning resulting in hundreds of cancellations. local officials say the fire was intentionally set by an faa contractor. derek jeter's yankee fare well was the most viewed game in 13 seasons on the yes network. the game received an average 1.25 million viewers turning a rating of nearly 12 in the new york market. more new yorkers watched the giants beat washington last night than they did the baseball game. now that he's no longer coo of oracle, larry ellison might be

gearing up to buy a franchise. he may be a potential bidder for the atlanta hawks. he has won the america's cup sailing race and is worth an estimated $42 billion. >> how much does it cost per year to charge the new iphone? find out how much energy it takes to charge the latest devices next. we are streaming on your tablet, phone, bloomberg.com, amazon fire tv, apple tv. ♪

>> welcome back to "bloomberg west." i'm emily chang. the iphone 6 and 6 plus may offer the biggest apple screens yet but charging will not make a dent to your energy bill. it costs just $.47 per year to charge your iphone 6 and $.52 to charge your iphone 6 plus. how did the company figure out how much electricity it takes to power the new iphones? barry fisher is here with more. cory is still with us as well. i thought that mine was charging faster but maybe that is just perception.

>> we did a study and we drained the iphone 6 and the iphone 6 plus two 0% in may measured the electricity through a power monitor device and we extrapolated what it would take through the course of one year multiplying by the average retail price of electricity around $.12 per kilowatt hour and arrived at the 47 and 52 cent figures. >> how long does it take compared to the iphone 5? >> the iphone 6 took around one hour 15 minutes and we were using the 12 watt usb power adapter. we found the similar links of charging time for the iphone 5. the iphone 6 plus takes about two and a half hours because it has a larger gas tank.

>> what's interesting about this to me is that you think about the battery charger for all kinds of stuff, the tech around your house. i bought a new house and i'm amazed that my power bill. i have a solar array and it's still not enough. i have tivo machines, tv's all over the place, the wine fridge. are we seeing homes consuming a lot more electricity even though we have these more energy-efficient appliances because of all of the tech? >> the biggest area of home electricity consumption of the last three decades have been electronics and appliances. now we are moving to the smaller superefficient devices we are seeing somewhat of a reversal there. compared to these larger devices that you mentioned -- >> dvr, fridge. >> it's using 50 times the electricity than your iphone 6. your xbox one, if you have one, uses 60 times electricity.

and your big screen uses 70 times. we are offloading a lot of the activity that we used to do on those clunky devices onto superefficient device like this. >> are we? my tv is still on all the time and my xbox particularly when matt miller is around. >> my computer is not on. >> at maybe your house, but with the aggregate data tells us as the majority of time we spend consuming digital media is now happening on mobile devices. 60% of our consumption of digital media is happening on smart phones and tablets rather than a desktop device. >> what is it that the apple is doing that even though the phone size is increasing the charge does not change that much? >> i do not know too much about the internal working of the device.

they can increase energy density of the battery in making the processor of the phone more specific. whatever they are doing it's a good thing. it's good for the environment. it's good for consumers, of course. they may not realize it uses such a small amount of electricity, but consumers do want to save energy. they do shop for more efficient devices. >> is there a time shift as well? one of the biggest issues on the power grid is moving the consumption of lots of energy to more different times of the day. >> one of the biggest challenges is the electricity demand. hot summer afternoons really puts a lot of stress on the grid for every extra plug load your

dues in. we have worked with utilities to encourage consumers to use electricity during off-peak times. unplug your devices, manager thermostat better, delay loads of laundry. >> does make me feel a little better. when i plugged it in every single night i'm just thinking i charge this thing all the time. barry fisher, thanks so much for sharing that interesting data with us. it's time now for the "bwest byte" where we focus on one number that tells a whole lot. what do you have? >> 95 is the number. the oklahoma city thunder m.v.p., kevin durant, his rating 95, his player rating in the nba franchise. what we learned last night on jimmy fallon is when he plays the game, and he plays it a lot,

he does not play as himself. lebron james is at 99. >> you play as you? >> no, that's kind of arrogant. [laughter] >> no! you have to play as you. who do you play? >> everybody. >> who do you play? >> all right. lebron. [laughter] >> he has the m.v.p. playing as him in this very successful game. >> lebron has a lot of other things. >> this is just one more. >> cory johnson, thank you for watching this edition of "bloomberg west." all the latest headlines anytime on your phone, tablet, and bloomberg.com. we will see you later. ♪

>> tonight on "titans at the table," i will be chatting with robert benmosche. former executive of aig. i traveled to croatia to spend time with the wall street titan. >> there are not many views like this in the world. >> when you come here, do you relax? he recounts how he turned a company left for dead. >> you thought you had a company of zero value. today, the market value is almost $80 billion.