emily: i am emily chang and this is the best of bloomberg technology. and why this failed. plus countless turnover. three senior executives hit the road weeks before a report of the model three goes public. and blockchain seizes the spotlight at sxsw. here from the cofounder of

ethereum. it was supposed to be the largest tech deal ever, but now it is dead. broadcom's hostile takeover of qualcomm has been blocked by president trump, citing concerns of national security, saying there is credible evidence to make me believe that broadcom, by acquiring qualcomm, will take action to impair the national security of the united states. so, what happens now? with brooke sutherland and ian king after the news broke. ian: we were talking about how it might drag on. roadcom was in the pentagon yesterday afternoon, trying to find a way forward. a number of matters later, the white house came out and said, no you don't. reporter: unexpected, right?

what kind of implications will this have more broadly on m&a? start with tech. >> the clear signal the government is sending is u.s. tech is off-limits to foreign buyers. this is not the first deal that has been blocked under president trump's administration because of national security concerns. if you remember, canyon bridge, that got blocked by trump. the broader implication is it is not necessarily china here. they've played a minor role. the primary push back was what type of company they were. they thought they would not be able to compete in the race for 5g, and that has broader implications for mma. and that is what companies do, they cut costs.

so, if that is now off the table , considered as a national security risk, there are a ton of companies that will have to hit the pause button here. francine: and is there any way forward for broadcom? is it definitely dead? note, they have not formally given up yet. there are meetings underway -- reporter: meetings with who ? ian: the only way forward would be to launch a legal challenge and even then, the most they would get would be a next formation of why. reporter: ok, and what is the explanation of why? ian: that is a matter of conjecture. they do not have to explain themselves. they just say, security concerns and that is the end of it. we don't like the fact that we

believe you do not invest in technology, that is a security concern. apparently the definition of what is a concern has spread. reporter: brooke, this administration has sent up flag n-foreign takeovers, such as with at&t and time warner. what does this mean in general? it means this administration will take a much tougher look at m&a. expectednot what we going in. trump is pushing back very aggressively against deals. the interesting thing with time warner and at&t is that it is a vertical integration deal. the companies do not have much overlap. historically the u.s. has not looked at that on antitrust basis, only looking at distinct businesses where there is an overlap. and it shifts the purview to

look at integral integration the same way european and chinese regulators do. this expanding definition of what is a national security concern and i think you'll only see that expand further. there's the legislation in front of congress right now that would allow them to take a look at joined ventures, to further define what a national security issue is to include technology and all sorts of other issues. emily: and qualcomm shares dropped, broadcom shares are only slightly down. our executives at qualcomm san diego celebrating? they still have a lot to figure out. ian: you are absolutely right. as is by no means a victory parade -- this is by no means a victory parade. they won by default. they did not convince shareholders to vote this down. going into that, shareholders, they were losing, and it looked like the board would be taken over by broadcom.

a vote of no-confidence for their management and it is something they will have to address pretty quickly. emily: what are the next steps for qualcomm? ian: they have got to get the apple situation figured out. they are in a massive legal dispute with one of the biggest customers, saying, we do not want to pay for technology licensing anymore. that revenue is of massive importance for them. very high margins. they need to get that back. emily: brooke, talk to us about the broader markets and how they might react to this bigger idea that this administration is not going to be friendly to m&a of any kind. acquisitionbig out there is qualcomm's acquisition of nxp. it has been more than 15 months at this point and there was some speculation whether china was purposely dragging its feet as a

retribution for trump because of the steel and aluminum tariffs. i think this now only feeds the fire. it will be interesting to see what happened with that. there are also questions about the cadmium and marv l deal. -- cadmium and marvel. it opens the floodgates for all of these questions and different dynamics that advisors, when they put these deals together never had to consider. emily: broadcom executives are meeting amongst themselves. what is next for them should they not move this forward? ian: i think the point brooke made is important. they are an american company, they come out of a hp spinoff. broadcom itself is an american company. buthave got a chinese name, you have been a citizen of the u.s. for 28 years.

calling them a foreign entity is kind of a stretch, at least in their opinion and of the concern here is if the policy is to buy new companies and to grow that mechanism, will they be allowed to do anything. emily: do you think they will appeal? ian: i have no strong sense. it has been a difficult race to predict. >> so you still cannot take the day off? ian: i cannot. [laughter] emily: goldman sachs has paved the way for david solomon to become the next ceo, becoming the firm's sole president. goldman has given no timeline for the retirement of blankfein. >> the year has set up in a way

that i think it should be very constructive, both for m&a activity, and for ipo activity. i feel activity started to pick up toward the end of 2017. we've got a healthy i see. we also have environment for a number of reasons, why 2018 should set up to be a pretty active year for strategic m&a in the technology sector. exclusiveing up, our conversation with london's mayo r, and his message to uber. check usut on radio, out on sirius xm. this is bloomberg. ♪

emily: whatsapp is launching a new payment service to allow the 200 million users to transfer cash to one another.

global payments caught fire after the government took 86% of the paper currency out of circulation which interrupted markets. the india digital payment markets could be worth $1 trillion in five years. here in the u.s., sxsw was in full swing this week. , theding the conference mayor of london. speaking to bloomberg's daybreak asia, he said that they have to play by the rules to do business in london. he explained why london is the place to be when it comes to technology. sadiq: there are a number of reasons why tech companies, scallop startups, tech giants come to london. the main reasons are access to talent. we have a talented population in london and are invested in the generation and second, access to capital. london has political capital and

financial capital. legal system.our politics, politicians, regulators, finance, explains life 40% of the world's companies have the european headquarters in london. 40%. number two by the way, is paris with 8%. london is a great place to start a business. to come if you are a big company. it is going to stay that way while i am there. reporter: we have seen the likes of google and facebook investing in big european headquarters as well. uber has been the big headlight, or in terms of being fire with your under administration, their license getting revoked. what do you need to see for them to continue to operate in the city of london? er is a very popular

service around the world. uber -- my message to everyone, you have to play by the rules. the rules are there for everyone. and if you play by the rules, of course you can do business in london. i want london to be a place where tech companies come, but you have got to play by the rules. the good news, the new has a veryof uber different attitude compared to the previous ceo. the noises coming from him and the language from him bodes well for the resolution of the differences the regulator has with uber. emily: that was london mayor sadiq khan. investors are lapping up the labor and's entry -- lapping up blue apron's entry into brick-and-mortar.

no word yet on how much the meals will cost in stores, but the kits will be available by the end of the year. shares have dropped more than 75% since the ipl last june. coming up, the emily: a former equifax

executive is facing charges. federal prosecutors announced wednesday that a grand jury has indicted her for selling $1 million of equifax stock before the stock was announced. the company did not disclose the breach until september 7. ceo elizabeth holmes was accused, in addition to the

ban she was serving for operating blood testing labs. they live for years about their technology and used the publicity to get investors to fork over more than $700 million. tech company recalled it -- claimed it could run multiple tests on a drop of blood for a fraction of the cost. we have the detailed from gadfly and bloomberg tech. just a fascinating story here and fascinating filing that was dropped today, accusingho holmes of defrauding investors. she was promising that you could do hundreds of different tests from the print of a finger. it turns out you could not do

more than a few dozen tests and they were using competitor technology. they made statements, such that they would have $100 million of revenue in 2014. and it turned out to be closer to $100,000. all sorts of bold statements. i think it is the symbol of silicon valley, where companies feel the need to fake it until they make it and make a bold promises and say those promises are a current reality. >> i remember the customers who came forward saying the test were wrong, talking about critical tests. what is the scale of fraud that holmes is believed to have commited. reporter: i think that is something that is forgotten when you have a long financial fraud investigation. this company come in addition to prodding investors, also ran a badlyld amount to,

run, if not fraudulent company, promising something they could not deliver. they went on to void a bunch of led tests that people would have made health care decisions based on. that is why i think, even if the sec investigation is settled for elizabeth holmes, this might not be the end of the story for her. there could still be criminal charges filed as well. emily: i remember when the wall street journal published its first investigation of elizabeth in octobertheranos of 2015. she then appeared at wall street conference to respond. take a listen to what she said at that time. >> we disagree with what was said. we think it was false and misleading. i know what we have done, which is the decision to voluntarily work with agents the full we interact with them all the time and we have chosen to take a pass that is hard.

d andke a path that is har i believe in it strongly because it is the right thing to do and i in arizona worked very hard to change the law to allow individuals the right to order lab tests directly and i cannot do that without knowing that the tests that are offered are of the highest quality. emily: meantime, the sec has said as a result of this investigation, innovators who the to i -- to innovate technology, should tell investors what it can do today, not just what they hope it can do someday. what is the sec saying/ -- what is the sec saying? olivia: this is a huge statement from the sec. i think they are saying, we are keeping an eye on you. they are using this as an example for large unicorns here, notet them know they will be able to get away with making

false statements and they are watching closely. the penalty here -- and walk us through what the penalty is, seem reasonable? was a little bit surprised. it is severe in certain aspects. elizabeth holmes has got to give up a large portion of her stake of theranos. she has got to give it voting control. fine only a $500 million for her personally and considering the scale of fraud, they raised $700 million while lying to and misleading investors. it seems pretty surprising that this is all that happened. have a recentn we point in contrast, another health care fraud for martin squarely -- he got seven years in present for what the government ended up pegging as a $10 million loss for investors. this might not be the end of the story. what does this mean for

investors? of the mostink one interesting things we will watch for here is, elizabeth holmes is one of the company's shareholders and so, is one of the largest investors herself and is the victim of her own fraud. to return she needs 18.9 million dollars to investors, but that is just a small portion of these evan hundred million dollars she raised. -- portion of the $700 million she raised. i would not be surprised if people knew what was going on. emily: it is unclear about how much theranos is one egregious example or whether other htech companies out there are pushing the boundaries in a similar way. what is your sense of that and whether there will be wider examinations or a wider crackdown in this spac.

max: i come down on the side of, this was an egregious example. theranos operated in a gray area where fda scrutiny and approval for lab tests is not quite as rigorous were consistent as you might get for drugs or other things. and i think there is still a lot of interest in the sector for companies that actually have a better track record of explaining what they do and how they do it, as opposed to theranos, which was more secretive. the acting ceo has a higher level of diligence, especially in the case of their nose, where investors were not really subject matter a experts investing in a complicated tasks. one of the biggest recent health tech private investments was in a company trying to develop basically a blood test for cancer.

people will definitely be more careful in the future. sen.y: that was max ni elon musk is getting ready to take on -- comedy? after being the but of some -- some satirical headlines, like elon musk offering $1.2 million in grants for any project that promises to make him complete, the billionaire has been hiring former staffers and writers of that satirical website. no word on whether the secretive new comedy project will make its debut before musk gets to mars. when it comes to shooting a rocket into space and landing it back on earth, that is not a problem for elon musk, but getting the model 3 out the door and holding onto tesla executives, not so much. within the last couple weeks, tesla has lost two more top executives and reports issues

with the model 3. can elon musk due to keep tesla charged? with more on that, here is max from new york? >> it is important to point out that tesla is not a normal company. in any sense. elon musk is a very hands-on manager. he has a reputation for being a hands-on manager and there has always been a little bit of this kind of turn going on. we were sort of warned about this. he had been talking about "production hell," and discussing possible circles of production hell they might be in. losing certain executives make sense and could be a sign that the predicted thing is happening. on the other hand, this is going to be a huge uphill climb and if they are not able to keep people in a factory are managing the factory are running the business

, that will be a huge problem. it will make it all the harder to get to these enormous numbers that they want to get to by the end of this quarter and later in the year. emily: bloomberg has built a special tesla model 3 production tracker. how is the company doing? max: in all credit to our colleague tom randall on this, but basically, we think that musk based the tesla based on the vin's they have been putting out there, that customers have been reporting to us and they have been -- they have been getting from the government, they have been getting a little less than 1000 a week and they are supposed to be up to 2500 by the end of this quarter, so they have a long way to go. we do not know how good the model is, but it is definitely a slightly discouraging sign. emily: that was bloomberg businessweek's max chafkin. dropbox's scaled-back ambitions.

is given a valuation well below the $10 billion it snagged in private fundraising. this is bloomberg. ♪

emily: the first major tech ipo of the year is upon us and we have more details surrounding dropbox's ipo. anywhere between $1.7 billion and 1.8 billion dollars. we have the details from alex barinka, who first broke the news of the plans. so, what happened today is dropbox told wall street that they are marketing 36 million shares for a range of $16 to $18 a share and are hoping to sell

within that range. that implies the market cap of 25% below the $10 billion private valuation they clocked in the 2014 private funding round. why is this happening? what i have heard from a lot of people today is that dropbox raised money at a time when valuations are really high, perhaps a little too elevated in private funding rounds. now, if you look back over the last few years in terms of what they have done with our growing, revenue was which is what0%, investors want to see. fear, fear ofmo missing out, is not something market investors want to take into what they pay for the stock. they privately agreed to sell salesforce for $100 million and

announced a rebirth talk split inside investors, meeting those investors will not be deluded, explain what this means. dilution is the maintain that the investors do hold the rights they had before hand, and the salesforce investment is interesting. that means that the same time they are doing the ipo they are filing $100 million to salesf orce. they announced with sa lesforce last week, announcing the customer relations management software, so they can integrate these products. not only is it a partnership, but now it seems it is clear that salesforce has skin in the game. it is akin to comcast taking a snap.rt of

we had the box ceo on the show last week. this is one of dropbox's competitors, pseudo-competitors. i asked him if he was concerned about dropbox. take a listen to what he had to say. dropbox is a tale of two types of businesses and one is a revenue kind of business, users using it for professional or personal use and one third of the revenue is b ti v, that is the only part of the business that looks like bob. towardsnue tilts midsize companies. emily: alex would you agree with his take that they do not compete as much as we seem to think?

alex: currently that seems to be the case. dropbox has 500 million registered users and only 11 million are paying. one of the biggest differences is box has a concerted sales effort and dropbox does not. 90% of the revenue comes from self-service, signing up for the products that you pay for and that is the difference. is competing, but it does seem like he and his company have been focusing on the large accounts, while dropbox is pushing more of the guerrilla approach, land and expand, get in with some teamsa internally across big companies and sell across customer bases from there. -- turnow, let's tuen to spotify's public debut. this is the week of april 2.

caroline hyde spoke with an early spotify investor in london. think bona fide does not need to raise money. otify not need to raise money. unconventional. reporter: what about against companies like apple, which have amounts of cash. why else have the ability of going public at all? , it starts with the consumers using the product. spotify was launched in october of 2008. they were one step ahead of the

competition. they are extremely good at the delighting in surprising of customers with their products. and their suggestions and playlists, and the suggestions. others were doing this at the time. and apple, which is what everyone is inking about, they came to the market late. they thought downloading would be the predominant way to listen to music and it turns out that was wrong. they came to late to the party. reporter: so, spotify will always be able to remain a step ahead? even when there are avenues that are becoming blocked? we have voice assistants now. i use alexa with my google home. will they not stop putting up roadblocks? in howould be a change

people want to consume and the music with the voices systems. -- alexa and we see the reason why it should not be an all the other devices. that is one of the hallmarks of spot of five. these success they have been ubiquitous. there is some integration that's what i had done. -- there is some integration that spotify has done. emily: why come to the market now than? >> well, i think it's fair they earlyfounders, a capitalood this was business and they needed to rely on the capital market.

promise to most of those investors is that at some point in time there will be a liquidity event. spotify, the best way to get to that point is a listing. are the owners of 10 years. we are in the latest stage of its existence and it is natural that we will at some point in time exit our position there. it can be done in various ways. one is to sell. another is to distribute our shares. some of our investors are intrigued by spotify. it's a very well functioning option. caroline: what price would you

have to see for spotify to exit? par: that is hard to say. good there are many spotifyles you can peg against? emily: like who? stopwas a netflix netflix.d say there are a massive amount of subscribers. i think what is perhaps even stronger with spotify is that it is a much more cash efficient model. otify gets paid on day one for the subscriptions and they do not have to fund entire

productions, like netflix, and the cash required to run the operation of spotify is substantially less. emily: you talked about how this is a liquidity event, which investors like yourself need. what does this mean for the european tech ecosystem? >> i think it is phenomenal that we have the biggest listing ever of a technology company. from a smallg country up north and it has a dynamo of the stock ecosystem, during my 22 years as v.c. has surprised even me. and there are a lot of companies shadowsnging up in the

of spotify. and a few of the other big players. that it consists of people who have first-hand experience with these great companies and spotify is probably the biggest and finest of them all. go, but: we have got to i have to ask you, will we see other people take the route of spotify? >> i think very few companies could match the kind of branding required. has thatoldman sachs business ahead. emily: that was bloomberg's caroline hyde. a story we were watching. one of the biggest investors and vmware wants to and talks about a merger. he argues it would be a terrible deal for the company and shareholders. ashael dell controls vmware, well as owning his namesake

company and is trying to bring all the members of his an s empire together. the midwest, which has long been overlooked might need a start of world's new darling. why silicon valley is no longer where it is at. sxsw and a talk with the cofounder of the world's second-largest cryptocurrency. this is bloomberg.

emily: a u.s. district judge has ruled that the of the data breach can seek damages because yahoo! executives did not do enough to protect consumers, given what they knew about the breach. yahoo! reached a settlement with executivesver feeling the have to inflate

the young shares. now back to the coverage of sxsw in washington. bloomberg spoke with the cofounder of consent this, -- of consensus. fors perhaps better known being the cofounder of the world's second-largest cryptocurrency ethereum. he explained blockchain's role. >> we had an event with 4000 people are so in attendance. we were running the ethereum l ounge. is running that and we have a women in blockchain event going on as we speak. we had a steven woolfe from of mathematica there. just walking around, being at all the different events around is talkingverybody about blockchain either in the

event or just peripherally. reporter: when they talk about blockchain, to what extent are they not highlighting bitcoin? the bitcoin bubble has seemingly burst. there is a lot going on, when you check out the action of the other platforms and look into the demand for blockchain and cryptocurrencies at large. be hard to tell because we are so focused on building decentralized applications on the ethereum platform and so much less focused on cryptocurrencies like bitcoin. it powers applications on the decentralized world wide web. , but i would argue that we have seen a correction in our space, but calling the bubble to have been popped is a little shortsighted. i think there is tremendous foundational fundamental work being done in our ecosystem and

it is very early days. reporter: throughout the first several quarters of 2017 we saw an explosion of initial coin offerings, many of which were built to run on top of the ethereum network. lately there has been a lot of anxiety about a regulatory crackdown and the status of many of these coins. how much does that threaten the if one ofn ethereum the main applications of it is under regulatory scrutiny? we are extremely happy with the way things are going with regulators. there are many jurisdictions we or excited about, securities tokens that would be security tokens. that is true in this country as well, in the united states. there are many great applications being built worldwide on ethereum and other blockchain technologies. but there are many bad projects.

it is perfectly reasonable for a bit of a puasae in our legal system. it is important for many projects to do their legal homework and issue tokens properly. talking aboutare all of the projects that have been launched on ethereum that you announced as promising. the underlying platforms are not particularly robust with respect to the scaling. a few months ago, there was a card game that brought the entire thing to a halt. what is the timeline or a roadmap where somebody could launch something and it could be expected to run without slowing down the network. >> it is remarkably robust with respect to security and throughout history, software developers have been pushing the balance on scalability for every platform. there is a new trust infrastructure that enables better collaboration. we are seeing technologies like

state channels. we are seeing technologies like plasma that will rim of five and the next few months for different kinds of applications. the cryptokitties application was a test that showed us where some of our clients where week and where some of the issues have been fixed already and it shows us where we can build better, more scalable architecture. short-term there will be some excellent fixes in 2018. over the next two years we will see dramatic scalability increases. ,mily: that was joseph lubin cofounder of consensys, and. caew opportunity arises for pitalists. this is bloomberg. ♪

emily: one half of the venture capitalists in the united states go to the u.s. alone, but is all that happening here? olson.am he and chris drive is now on the second fund at $300 million and has invested in 29 companies to date. the cofounder joined us from ohio. >> i think what we are seeing here is they have dramatically exceeded our expectations. wegive you some statistics started out and saw 1800 company. and last year we saw 3500 opportunities coming into drive.

these were inbound referrals midwest technology companies. that compares to what the silicon valley firm would see, which is 4000. we are not at that level, but there is a lot more here than we had anticipated. reporter: so, peter teal is leaving silicon valley for l.a., calling toxic. "over."valley is do you agree or disagree? is not over. the amount of $50 billion or so that is invested into bay area companies from the venture world on an annual basis, to say that is the and, i do not know how that happened. but what i do see is what is happening on here that is just starting and we are seeing today a thriving ecosystem of a lot of technology startups, with real innovation and entrepreneurs and founders who are pretty next

generation official joseph of generation platform. it is anything other but the frontier of innovation. i see what is coming out here start to emerge and catch up to what may be initially started in silicon valley. emily: so, is the amount of investment going into california and new york, if it is indeed nearly the majority of all the venture capital invested in the united states, is that a mistake or misallocation of capital, or are companies in the midwest just coming into their own and will garner a larger share of that investment going forward? what i seely say inside our portfolio, which is that our company is raising more money. if i look at the portfolio now, we have raised about half a billion dollars of capital from the coast, where venture firms from silicon valley, the arc, boston are flying on airplanes

and coming here and saying, i would rather invest in the midwest than in my on backyard and that is a new thing and is a growing number. and as the number continues to double on the year basis, it is notable that these people will start staying here. you will find that more founders will get more capital and the efficiency of the capitaland ase goes so much further until the have also seen a lot of technology companies that have started on the coast they are moving their businesses here. seven of now moved here. you are going to read more about these companies getting a fair and they are going to be more in the newspapers there may have in the past and i think people will pay a lot more attention. talent is a huge hurdle. your firstred

female talent. >> the midwest has always been cheaper than the coast. it will always be that way. the only reason people should move here and join jobs and technology companies, because they believe this is the opportunity of a lifetime and if you are highly skilled and highly technical and you have the opportunity to work in anywhere on planet earth, you will choose to go to the place where you have the best opportunity and people measure that in different ways. one of those ways is looking at the impact individual can have. a plethora of people from companies like twitter and facebook and amazon and google -- go down that list of technology companies -- they are joining the senior leadership of our portfolio combine ease. but there is also an awful lot of people in these western cities that are now trained as engineers, who have a

fundamental understanding of these industries that they have been working in and they've apply that to what is now a west coast approach to startups. they can unleash a lot of potential. we had 1800 people in our 1900 -- andd we had we hadn't 900 year ago. the access to talent here is a lot easier than it is arguably in markets that have more startups that are competing for that same level of engineering and the same level senior managers. emily: thank you to chris olson with drive capital. that does it for this edition of the best of bloomberg technology and we will bring you the best of all the bloomberg technology throughout the weekend tune in this wednesday. 5:00 p.m. inday at new york and 2:00 p.m. in san francisco. we are live streaming on

twitter. on technology weekdays. that is all for now. this is bloomberg. ♪

anna: good morning. i'm anna edwards. matt: and i matt miller. this is "bloomberg daybreak: europe," and this is today's top stories. anna: sweeps to victory. he was a fourth term as tensions escalate. we are live in moscow. matt: change in china. gang is named the first pboc governor and 15 years, what does this mean for the world's second-largest economy? anna: and our excuses, the billionaire prince tells us he is ready to move on from the corruption crackdown.