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Billionaires Set Sail at the America's Cup

Want to know what $100 million will buy you? A sail boat so fast and sleek that its technology is more like an aircraft than a watercraft.

"We have the fastest sailors in the world and they are sailing arguably the fastest boats in the world," said America's Cup CEO Stephen Barclay. "Designers are pushing things to the limit."

As San Francisco prepares for its first America's Cup competition, the sailing world is waiting to see how far designers will go.

The Cup's U.S. defender, Larry Ellison's Oracle Team USA, set the bar high for the mega race which kicks off this week with the Louis Vuitton Cup. That competition will determine which challenger will race against the US in the America's Cup in September. Ellison successfully pushed for rules mandating entrants race newly designed 72-foot hydrofoiling catamarans. The boats can reach speeds of over 40 miles an hour.

"Suddenly the San Francisco Bay seems incredibly small," said Mickey Ickert, a race veteran who is designing sails for Oracle. "The first question the guys have is, 'Where's Alcatraz?' They are afraid of running into it at 40 miles an hour."

(Read More: America's Cup May Not Be a San Francisco Treat Financially)

Watching the boats practice, you can see them lift almost entirely out of the water.

"We have actually developed relationships with Boeing and Airbus during the course of this project," said Oracle Team USA general manager Grant Simmer.

Simmer has been involved in every America's Cup but one over the last 30 years. This year the boats have "wings" similar in length to passenger jets and made from similar material. "We're using flight simulation software," he said. "We're in a lower level than the aircraft industry in terms of simulators, but I see [the technology] going in that direction, strongly."

Building and racing the boats can cost $100 million. Ellison is funding about 80 percent of his team's costs. Only three challengers could afford to compete, and two of them are primarily funded by billionaires—Italy's Luna Rossa, backed by Prada CEO Patrizio Bertelli, and Sweden's Artemis, funded mostly by energy billionaire Torbjorn Tornqvist. The third challenger, Emirates New Zealand, is getting most of its money from Emirates Airlines and the New Zealand government (ironically, Air New Zealand is listed as a major supplier for Oracle Team USA).

(Read More: Dan Loeb Gets $7 Million Break on Sandy Weill Yacht)

The boats are so new, so fast, that they've capsized in practice. One of Oracle's boats overturned last fall, and in May, the Artemis boat capsized, killing crew member Andrew "Bart" Simpson, a former Olympian. Stephen Barclay said 37 new safety "recommendations" have resulted from the fatality, but this remains a dangerous sport.

Not only have the boats changed, the teams have, too. While the teams represent different countries, crew members come from all over the world. At Oracle Team USA, "probably three quarters of the people would be non-Americans," said German born Mickey Ickert, the sail designer. "But it's an international quest for building the fastest boat, so you use the best people you can."

(Read More: Billionaire Malone on Wealth, Death and Yachts)

Teams compete for talent against Formula 1 and even aircraft companies. Meantime, with so much on the line, spying is no secret to anyone. "I went to New Zealand a couple of times to see what Team New Zealand is doing," said Ickert. "It's very much part of the America's Cup. It will always be there."

—By CNBC's Jane Wells. Follow her on Twitter: @janewells.

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