♪ emily: live from pier 3 in san francisco, welcome to "bloomberg west." israel a prime minister benjamin netanyahu has a fourth term in power, reaching a last-minute deal with the home party, giving his allies just over 50% in parliament. stocks took a dive today. that will reserve chair janet yellen had a warning. janet yellen: the equity market valuation at this point

generally, quite high. now, they are not so high when you compare the returns on equity's two returns on safe assets like bonds, which are also very low, but there are also potential dangers there. emily: yellen also said that they could see a sharp jump if the fed raises rates. and the time warner cable deal, calling for more diversification in the business. mr. wheeler: we do not have a lot of competition, especially at the speed that are important to the consumers of online video. a fully competitive marketplace would bring with it the intense and constant pressure, pressure to improve just as it did in the days of cable dsl competition.

more competition would be better. emily: at that same show cablevision ceo james dolan said he wants the cable tv market in new york to consolidate. tesla shares are rising in after-hours trading. the electorate carmaker saying revenue rose to 1.1 billion dollars, while the company reported a $154 million loss. tesla says it is on track to deliver 55,000 vehicles this year. and job cuts at zynga ceo mark pincus cutting 18% of the workforce one month after returning as the eos part of a plan to save the social gaming company $100 million annually. first-quarter results show improvement in mobile. now, to our lead. the money keeps blowing into tech startups in silicon valley and shows no sign of slowing down. and the last week, we have seen

a firm raise millions in funding, a drugmaker pocketing $75 million, and an hr startup zenefit scoring a $4.5 billion valuation. after they broke the dot com hi gh before pulling back, and you heard janet yellen's concerns and joining us is cory johnson and parker conrad, the ceo of one of the companies i just mentioned, and that is zenefits. parker, thank you. first of all, congratulations on your $4.5 billion valuation. parker: thank you. emily: why do you need that kind of money? parker: they are going after some of the largest companies to sell them software. zenefits are going after the 5

million, and there are so many companies out there that there are just a lot of people out there that we need to have conversations with that we need to give pitches to and field questions from, and then there are a lot of folks we need to hire. long-term, a lot of the costs are frontloaded, so when you want to go very fast and very far, you are going to burn a lot of gasoline, and so in this car we are driving at high speed and want to get a lot of customers we have got to make like the mother of all pitstops to fill up on gasoline and beef jerky. emily: i appreciate the metaphor. you and i have been speaking over the last year. how do you as these eeo make the decision to take on this kind of responsibility? is it scary? parker: there is a little bit of celebration like this and i think a lot of humility about sort of what is in front of us because obviously investors are

investing on the promise of a a lot of future growth and a lot of future execution of the business. we feel that the market we are going after is absolutely enormous. it solves a really big problem for almost any business in the united states and if we do not screw it up, in a couple of years, a lot of the guys in this round will look prescient. corey: what kind of growth rates are we talking about, and what could we imagine we are talking about now that you have fueled up on beef jerky? parker: zenefits is the fastest growing in silicon valley history. we are two years old. we started out in 2014 with the run rate revenue and closed out the year having growing 20 times , and the planned for this year takes as past $100 million in run rate revenue by the end of the year, and we want to keep growing at those kinds of rates

into 2015 2016, 20 17, and when you want to grow that quickly, it means you need to really capitalize the business well. emily: let's talk about what you do. you tie together payroll and health insurance and all of these payroll things into one software, right? parker: that is the idea. the buddies today have all of these disconnected systems or their employees, and things like payroll and time tracking software, and it creates a logistic nightmare for these businesses, and this gets rid of all of the administrative burden, a lot of the compliance headache, and the best part is we give the core software away for free because we make money on all of the adjacent systems. cory: it is sort of like a lead generation basically, for these other businesses, right? parker: yes, that is kind of one way to look at it. it is sort of a freemium market. the affordable care market makes

it simpler to price health insurance, which makes it easier for us to do online. it also just, quite friendly, as to the compliance burden for a lot of small businesses. there are a lot of filings to make and compliance they need to deal with, and what it does, it makes it harder and harder for a small business to kind of role their own, and we take this off of their plate and handle all of it for them, so it makes us very compelling. emily: silicon valley? parker: i sometimes watch the show, and it is a little too close to home, and i topped watching it. emily: there is a scene in the show this season where the main character is talking about raising money, and someone tells them, look, don't raise that much money because you may have to and of going through a down round, and that will be absolutely devastating, and he thinks, maybe i will raise less money at less of evaluation and there were a lot of people who were trying to write him checks. with that happen in real life?

do you as a ceo say you should not be raising that money because it is too risky? parker: all of the underlying metrics are pointing in the right direction. every customer we acquire long-term we think is extremely profitable. science points towards us stepping on the gas, so for us my goal is to run the company so that we never need to raise another round of financing, and we want to capitalize the business in a way that lets us run the company in a way we want to run it, scale at a speed we want to scale it, and run and get this opportunity we see in front of us. corey: i hate to lump your company in as we are with the other companies raising money, but i wonder if you do see some similarities about, i don't know, what is it, the freemium model, using something like amazon services, not having to build up the kind of

infrastructure that companies had to build up when launching software companies, say, 10 years ago -- what do you think are some of the commonalities with these companies that are seeing such big, rapid growth in early stages of development? parker: i do not know much about the ecosystem at large but even as recently as 5, 7 years ago selling businesses on outsourcing a lot of this stuff and having the software be in the cloud and accessing this over the web, that was something you had to convince people to do, and now i think a lot of companies are sort of bought into the idea that that is a good way to go, and are so many industries. we really focus on the health insurance and hr stuff, where a lot of the legacy systems, and there are no systems to speak of, or the software is 20 years old so they are looking around, and it is so frustrating to deal with all of this stuff, so there is an opportunity for businesses like ours to make life a lot easier for businesses in these

very unsexy corners of the world that happened to be fairly lucrative. emily: and the software is available for free, right, to all of these businesses? so how do you make money? how do you get a $4.5 billion valuation? parker: the micro levels, we connect all of these systems. we give the hub away for free, but we make money on all of the spokes. remit money and lots of different places. big picture, the way i think about valuations like this there are only three systems of record. there is a system of record for their financial like quickbooks, intuit, oracle, and customer information, like salesforce, or for employee information, and there is sort of a giant hole in the universe for any company with less than a thousand employees on this third leg of the stool so we have a decent shot of occupying that space and being the place, the

system that businesses use for this, and that is a very big and very important and i think very lucrative thing long-term if we can get there. emily coleman would you ever take $3 million off the table and by a red ferrari? arco: -- parker: no, i am more a toyota corolla kind of guy. emily: good to hear. parker conrad from zenefits, thank you. back with us later on the show. ♪

emily: welcome back to "bloomberg west." i am emily chang. the home shopping network still doing well. a new democratic party swept the power ending 44 years of conservative rule, pledging to

boost corporate taxes, phase out power, and scale back oil pipelines. and campaigning in great britain with the national election tomorrow, and it appears brightest or david cameron may be making some last and it inroads. the biggest u.k. bookmaker now gives cameron and ed miliband the same odds. miliband was the favorite last month. we just heard from the zenefits ceo, parker conrad, about his fund-raising round, and raising more than 35 million in venture funding, are these investments secure? are we taking on it too much risk? what goes into these fund-raising routes? what diligence goes into them? joining is a founder of a natural -- national venture fund.

guest: in its early stages. emily: i just asked parker the same question about taking millions off the table and buying a red ferrari. what do you think about a move like this for a founder? guest: i think risky. it certainly can be an irresponsible thing, and the worry is it changes it. emily: how much follow-through goes there? if they buy a red ferrari, for example, and takes the money for themselves? mike: how are they thinking about spending it before they raise it? they will spend money with the management team, understanding why they need this capital and where it is going to go. emily: so do you think investors knew they were going to take that much money off of the table for themselves? why do investors allow that to happen? so for a start up at that stage why would they do that?

might: -- mike: that is a bargain they strike. emily: it was extremely buzzy but then he was completely shutdown. what kind of diligence is done to determine whether the company is actually going to be successful? mike: it depends on the company. zenefits is different than with secret. with secret, it is much more data. you are looking at user behavior and retention, and how many are coming back and how frugally they are coming back. is it something that becomes habitual behavior? emily: should we be concerned? secret is not the only one and then on the opposite and of the spectrum, you are seeing a company like zenefits raising so much money. mike: we should be concerned.

we all know that every up cycle is followed by a down cycle and none of us knows when that is going to happen, but when it does, it will be a painful thing. the bunnies tend to grow into the amount of capital they have raised, which means their burn rate goes into that, so if a company gets in a situation where they are going through the capital very rapidly, the market turns, it is going to be very difficult to raise more capital and that can be a very dangerous place. emily: so you think this down cycle is definitely going to happen? mike: yes, it is writing a high and it will not continue to go up. none of us know when we all know it will happen. emily: what do you advise companies to do in terms of taking on this kind of risk? mike: i was having this conversation with one of my ceo's, who raised a lot of money and has opportunities. the conversation is be very very thoughtful.

raise the maximum you can at the highest valuation is often not the answer. emily: really? so you would do with the guy on silicon valley did, take less for less? mike: this ceo i am talking about did that. emily: so it does happen. mike: it does happen. there are thoughtful and don't go for the biggest numbers. emily: mike hirshland, thank you. coming up, how the home shopping network is keeping people glued to the phone and the website. next on "bloomberg west." ♪

emily: welcome back to "bloomberg west."

i am emily chang. hsn reported first-quarter earnings today. sales were up 8%. profits grew 39%. meanwhile, digital sales continue to rise, up 12% year over year. shares are up on this news, and joining me now to discuss the digital transformation, mindy grossman joins me from their headquarters in st. petersburg florida. mindy thank you for joining us. retail is sluggish overall, but your business is booming. why? mindy: hi emily, thank you for having me. there are several reasons. the first is we have spent a lot of time in tools and talent to really use our data and analytical capabilities to drive meeting and personal and customized relationships, and it

has had an impact on acquisition, assimilation retention, and overall growth in the business, so our customer files are the highest in history. second we have invested significantly in the digital experience as a whole particularly in mobile and that is everything from how do we optimize the experience to the content that we have incorporated through all of our applications and all our programs, and then the third which goes without saying, is the strength of our product, our experiences, our events, and our content, and it is really the carbonation of all of those hangs that really differentiates us within retail because we are a media company. we are a technology company. we are a commerce company, and we are using all three of those things in tandem to really create a very different experience. emily: now, a lot of people still think of hsn as a tv network, which, as you just said, is more than that.

i know that about 70% of the things you sell is exclusive. mindy: i think differentiation of every kind is important to be able to compete today, so that is differentiation of product so at hsn, 70% of all of the products are exclusive to us, and with some of our businesses, it is even more than that, like front gate or with garnet hill. the second is how are we also in gauging the customer, so that is everything from our having an arcade which allows her to play games, or integrating social all of the way through the site and the experience, or partnerships -- emily: we have got about 30 seconds left. i just want to ask you in a future where tv might not even exist, where is hsn? mindy: from our perspective, it

is not the court, it is the content. it is not just hsn. it is hsn off platform, so partnerships with aol and univision. it is going to be so broad. emily: mindy grossman, thank you so much for joining us here today on "bloomberg west," and we will have more on the republican race and what is happening there on twitter. ♪

just because i'm away from my desk doesn't mean i'm not working. comcast business understands that. their wifi isn't just fast near the router. it's fast in the break room. fast in the conference room. fast in tom's office. fast in other tom's office. fast in the foyer [pronounced foy-yer] or is it foyer [pronounced foy-yay]? fast in the hallway. i feel like i've been here before. switch now and get the fastest wifi everywhere. comcast business. built for business.

emily: this is "bloomberg west," where we focus on innovation, technology, and the future of business. the flash crash that rocked the market and the british man accused of helping cause it is spending the day in jail. bail for sarao, and his attorney says he had done nothing wrong except be good at his job. and the germanwings pilot who is believed to have deliberately crashed his plane into the alps

was supposed to be on another flight earlier that day. he had set the jet on five different occasions before setting it on a cruise mode. this from an interim report. the justice department says it may open up a civil rights investigation into the baltimore police department. mayor stephanie rawlings blake called for the inquiry after the death of freddie gray while in police destiny. senator bernie sanders of vermont has proposed to break up some of the biggest bank including j.p. morgan chase and bank of america. he is challenging hillary clinton for the democratic nomination, and that could put pressure on clinton, his some feel is too cozy with wall street. and turning out to the race for the 2016 republican presidential nomination, there are now candidates in the field, and two

of them have never held political office. carly fiorina and ben carson. how can they stand out from the rest? the secret may be in their digital campaigning. joining me is a former digital director of the mitt romney campaign and cofounder of targeted victories. thank you for joining us. there is a perception that democrats are better at digital band republicans. how fair is that? guest: i think that is predicated on the presidential campaign for president obama being so successful for a reelect, but what we saw in 2014 is that is not the case, that everything is different, and everyone starts out in a position whether incumbent or not. emily: given that the number one candidate on the democratic side is hillary clinton, and everyone

knows who she is, and then you have less known people such as carly fiorina and ben carson and what should they do to change that? zac: to ultimately help them be successful in november, what they are looking to do is remove any barriers of entry to make it as simple as possible to participate, whether that is with volunteering or to participate and share their opinions. that is the goal of any one of these campaigns to make it as easy as possible. emily: what kinds of things are you seeing in the digital trends unfolding in terms of the republican candidates and how they are managing their digital strategy? marco, rand paul, ted cruz. what are you seeing solidify here? zac: i think you're seeing more of digital as a platform of choice. years ago, it was hard to get people to focus on twitter. even the hardware and the

software, the bandwidth was not there. we were carrying massive backpacks around in order to allow people to anticipate in the campaigns. for me, social media provides a level of access to the campaigns that would be almost impossible otherwise, so it is the ability to leverage this which helps improve the process and can improve one's success. emily: should they be spending more on digital media than they did in the past? should they be allotted more of their budget to this? zac: yes, i would argue they should. there is human capital and investment up front. i think every dollar spent now comes back fourfold later. technology is very disruptive to the way campaigns have historically been ron. that is on the set up, and then in the paid media, we are still completely disconnected with how people consume content. 87% of the spend last cycle was on broadcast, even though it has only got 40% of the viewership.

the whole model is broken, and it needs to be fixed in this title. emily: you managed the budget when you are with mitt romney. how differently would you spend that now? zqac: it moves to 25%. i think you would spend earlier. the difference is you have to win a primary, and it is about resource allocation. that everyone gets the coronation that hillary clinton has right now. you have a very reactive approach. left to build things that have value to you right now. what i would do differently is invest heavily in the technology side and then the human capital to build that out to be prepared not just for the primary but for the general and have those resources to be successful. emily: more broadly, what do you think has changed in this so-called digital arena since you worked for mitt romney? what can candidates tap into? zac: there such a greater

adoption for online. people are raising more on the first day. there is much more participation. they are much more condition in that they do it all along. netflix or amazon. you are used to online. one out of three did not watch television except for sports recently. i think the whole model has changed, and presidential, that is the way most people will see that scale. emily: something else you're seeing is a lot of infighting among republican candidates over social media. how does that play out, and how does that affect their digital strategies? zac: the way campaigns are being run, people are inserting themselves personally into the process. i think that is the way social media has allowed it. even reporters inserting themselves and a shared point of view. unfortunately, there is still a

little bit of a lag in terms of comprehension, but it is new and different, but it is interesting that gap is driving as much as some of the candidates sometimes. emily: who is doing the best job so far? who has got the advantage? zac: i think it is too early to tell. ted cruz has been successful but i think you will see over the next two months a lot of people learning from the experiences of the last couple of of the rollout and office being what they lacked from four years ago, so it will really lay out who is your sleep investing in technology and data and how successful they are over the next year through the primary process. emily: all right, that is a very politically correct answer. zac, formally with the mitt romney campaign, thank you. up next, the lending club ceo on the earnings and rising competition. plus, a megaproject in the saudi

desert led the way for smart cities. is it leading the way for smart cities around the world? ♪

emily: this is "bloomberg west." i am emily chang. big banks get into this this, plus, an entire desert city and first, a check of the bloomberg top headlines. teaming up with ibm, offering a product suite, the goal to help advertisers reach specific groups of people. ibm has also partnered with twitter on a similar offering. comcast is going to hire 5500 people over the next few years to improve customer service. the new service centers will be billed in new mexico, arizona, and washington. comcast is going to triple the size of its social media team to respond to customer complaints

on facebook, twitter, and other sites. comcast has some of the most unsatisfied customers in the country according to the 2014 customer satisfaction index. online retailer pret-a-porter looking to share their style. they are called the net set and they already have more than 4 million fans on facebook and twitter. and some banks like goldman sachs are getting ready to take on startups in the peer-to-peer lending business, so should the lender in this area, lending club, be worried? they reported loss in the first quarter, a revenue of $81 million in the first quarter facilitating one point $6 billion in loans, and i am now joined by the founder and ceo, renaud laplanche.

how do you respond to this? renaud laplanche: our strategy has been to deal with banks. partnering with us and being a participant in the marketplace, i think the banks are increasingly realizing that they earn a higher yield by making loans to their old customers. we have such a lower operating costs and there is technology enabled. we are seeing banks with a partnership and there was an announcement from goldman sachs. partnering. emily: interesting, so do you consider goldman sachs top edition? renaud laplanche: not really.

being the leader in the marketplace lending with growth of 100% year over year. with the results such as you have seen yesterday beating the street and guidance, three things, and one is about corporation, and two is a very friendly brand, and three is a really deep part of consumer marketing. these are not things that goldman sachs is known for. i think goldman sachs and other banks are very complementary. partnering and driving down the cost of credit. emily: so you guys have been cutting rates, which has been attracting customers but how long can you guys continue that? renaud laplanche: also to borrowers, many of our customers use our loans to pay off an

existing credit card balance. most credit card balances in the country are at 17%. the average interest rate is 11.5%. there is a significant value. there is a network effect and a lot of appetite from investors for lower interest rates. i think we are at the right place now where we have a good balance between investors and borrowers. borrowers are getting a great deal, but investors are happy with their return, as well. emily: so you guys have been public for about four or five months. what is different about being a public company? do you enjoy it? renaud laplanche: we have the ipo in december, and since then, we have more attention and

there is better brand awareness better brand credibility. we have seen that with traffic. we have seen that with retail investors in a greater number in the first quarter than the previous quarters again benefiting from the momentum of the ipo. there is the ability to attract top talent, and we have also seen it in the partnership strategy i was talking about, a partnership with citi and other banks, as well as with sam's club, and we have benefited from our status as a public company and he credibility and transparency that it brings. emily: you do have an all-star board, with larry summers and others. what kind of advice have they given you in terms of warnings of not taking on too much risk? i mean, what kind of advice have they given you? renaud laplanche: a strategy to

grow fast but in a deliberate way and not taking on risk especially in financial services to put our customers at risk, so we are in the marketplace supply and demand, no constraints, and we have decided to work at the current pace which is a very sustained pace more than 100% year over year but we could be growing faster and we decided not to and instead focus on continuing with risk management and controls and compliant and also a lot of automation with higher, more engineering over the past several quarters and also adding to this year continuing to deliver a better experience. also automation, to help you manage risk better, because there is the human factor that you get out of there.

emily: all right, lending club ceo renaud laplanche, thank you. becoming a model for high-tech urban planning, the king abdullah economic city, next. ♪

emily: this is erik schatzker -- this is "bloomberg west." i am emily chang. saudi arabia, a country building a massive city called the king abdullah economic city. the project is divided into four district focused on creating jobs. 80 companies including ikea and pfizer have agreed to lease land, so how can silicon valley play a role in this in the desert? they are meeting with silicon valley company, joining me in the studio. first of all, what is this city? how long has it been in development, and what do you hope to accomplish with it? guess: it has been in the process for nine years he we will have the largest port on the red sea perhaps the largest

in the world, and we are the largest developer in terms of sales. and we want it to be the most innovative place. emily: $100 billion. it may be larger than washington d.c., by the time it is done. how do you assure that this place is going to be the future? fahd al rasheed: the idea is to give them applications that will enable them to help us the streets really -- clean. emily: housing, transportation. how do you prioritize? fahd al rasheed: basically, the idea is simple. if we give you information about your energy use, then you can manage it better, so we are having a lot of smart applications in terms of how you are using energy and which the stems are efficient.

emily: who are you talking to in silicon valley? fahd: a lot of them. it is packed, my schedule. basically be network and the applications, so the hardware and there is one piece that on the applications himself, and that is why i am saying that these small companies are as important as the big ones. we can scale. there are 400,000 units we went to build, and we can scale them. emily: so when will this be completed? fahd: by 2035, we think we will have 2 million people. we are starting to have people move in. 3000 people have moved in. we hope to get to 15,000 a year. emily: are people uprooting themselves rather parts of saudi arabia just to move to the smartest cityfa?hd: -- smartest

city? fahd: many are under the age of 30, very young and very mobile, so we are giving them opportunities to live in work in one of the most progressive cities. emily: so what is the sales pitch? what are they going to do for work? fahd: we have great job, as you just said about pfizer and so many great companies invested. for the first time, they are setting up in the country, so they can and have a great career. the red sea, one of the most beautiful cities in the world. emily: all right, fascinating what you are working on, the king abdullah economic city. we will have to check back in in 2035. fahd: 2020. emily: it is time for the bwest right, one number who tells a whole lot. corey, what have you got today.

corey: 90. that is the number of seconds that the capsule from spacex was in the air in a test of their a board scenario. they wanted to see what it was like to take a manned rocket in an abort situation. rather than sending the astronauts flying out in parachutes, the entire capsule. it's blast landed. according to spacex it went according to plan, and this will be a part of their contract to try to find a way to bring astronauts to the international space station. they will be developing a new rocket for that, and the entire capsule separates. it is cool space stuff from spacex. emily: thank you. fascinating video there, just how much spacex is trying to accomplish. corey, thank you, and thank you all for watching this edition of "bloomberg west," all the

headlines on bloomberg.com, your phone. we will see you later. ♪

>> from our studios in new york city, this is "charlie rose." charlie: samantha power is here. she is the u.s. ambassador to the united nations. previously, she served on the u.n. security council. in 2002, she won the pulitzer prize for her book, "a problem from hell: america and the age of genocide"." time magazine named her one of the 100 most influential people in the world. i am pleased to have her back.