Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay Primily Chang in San Francisco, And this is
Speaker 1: Bloomberg Technology coming up in the next hour. Global recession
Speaker 1: fears ramp up as a federal reserve struggle to tackle
Speaker 1: widespread inflation, the NASTAC one hundred leading the charge in
Speaker 1: tumbling US stocks, lost, potential layoffs, pay and freedom of speech.
Speaker 1: It was all discussed at a virtual meeting with Elon
Speaker 1: Musk and Twitter employees. We're gonna talk to a former
Speaker 1: Twitter insider about the future of the social platform and
Speaker 1: crypto crisis. A conversation with Mike nova Grats of Galaxy
Speaker 1: Digital about when he expects this crisp crypto winter to
Speaker 1: warm up. First, I want to talk about the markets
Speaker 1: with Carol's Life BMO Family Office Deputy Chief Investment Officers. So, Carol,
Speaker 1: how are you reading that up yesterday down today? How
Speaker 1: do you make sense of it all? It's t It
Speaker 1: is definitely tough to make sense of it, but I
Speaker 1: think part of it reflects investors on a day to
Speaker 1: day basis. Yesterday there was some exuberance particularly over Chairman
Speaker 1: Powell's conversation after the actual FED meeting and the FED
Speaker 1: release in the press conference talking about thinking that the
Speaker 1: number of seventy basis point um increases might be limited.
Speaker 1: So markets got a little bit exuberant about that yesterday
Speaker 1: and relieved, if you will. Then flying into today, it's
Speaker 1: sort of like the morning after, and people decided instead
Speaker 1: of focusing on the glass half full, they focus on
Speaker 1: all of the half empty things, and how much narrower
Speaker 1: that makes the Fed's ability to traverse and trying to
Speaker 1: stick a soft landing. So at this point, are you
Speaker 1: thinking a recession is inevitable? Um, it's probably, it's it
Speaker 1: maybe high higher likelihood, if you will. We weren't going
Speaker 1: into this necessarily thinking a recession was highly probable. Markets
Speaker 1: are discounting a seventy chance that you'll see a recession.
Speaker 1: We do think if you see one, however, that it
Speaker 1: will be shorter and then less deep than ever then
Speaker 1: then we've seen in prior recessions. And so a piece
Speaker 1: of that relates to the fact that there is so
Speaker 1: much underlying business strength. And the other thing that goes
Speaker 1: pretty unsung is the fact that a lot of our
Speaker 1: companies have proven to be very adaptable and resilient and
Speaker 1: able to shift their business model, but they're facing a
Speaker 1: lot of challenges and so um the hope everyone is
Speaker 1: waiting with bated breath to see if we're going to
Speaker 1: have that recession, but we don't think it would be sharpened.
Speaker 1: So how is this impacting your approach to tech? Of
Speaker 1: course we're seeing Apple, Tesla, Twitter, mega cap tech stock sinking,
Speaker 1: some other narratives going on there of course with this
Speaker 1: elon Twitter thing, But how are you evolving your strategy
Speaker 1: when it comes to big tech names. I think it's
Speaker 1: not just big tech names, it's thinking through technology in general.
Speaker 1: And typically what we've seen cycle after cycle over decades
Speaker 1: is that what leads going into a recession isn't necessarily
Speaker 1: what leads coming out, and so we might have to
Speaker 1: be more discriminating figuring out where growth and technology comes.
Speaker 1: A lot of the growth in this in the new scenario,
Speaker 1: if you will will be reshoring, building, manufacturing, spending some
Speaker 1: of the trillion dollars in aid money that is still
Speaker 1: in the in the pipeline for infrastructure spend, that will
Speaker 1: require your different kind of technology. So it's gonna require
Speaker 1: investors to think more carefully about where their technology goes.
Speaker 1: It's not necessarily just consumer based tech, which played so
Speaker 1: well over the last couple of years a pandemic. You know,
Speaker 1: we've been talking about the fact that Cisco, you know,
Speaker 1: kind of like a poster child for the dot com bust,
Speaker 1: hit its high before the combust and has since never recovered.
Speaker 1: What do you think are going to be the ciscos
Speaker 1: of this generation. It's tough. We're not necessarily allowed to
Speaker 1: talk individual securities, but I do think looking at industries
Speaker 1: that will support that restoring building and manufacturing and the
Speaker 1: shifting of certain things like where individual people are in
Speaker 1: lower paid or higher risk jobs, and you're automating, so robotics,
Speaker 1: artificial intelligence, sensors, lots of different things that are going
Speaker 1: to play into that new economy as we shift. Um.
Speaker 1: It's not like technology as an entire industry needs to
Speaker 1: be written off or pieces of it, because much of
Speaker 1: it will still continue to play. But it's looking at
Speaker 1: where you're going to have that investment and what industries
Speaker 1: are likely to be able to play into the build out.
Speaker 1: All right, uh cause life Thanks for sharing your views
Speaker 1: with us. BMO Family Office Deputy Chief Investment Officer appreciate it. Meantime,
Speaker 1: it stocks plunge and inflation rises, some companies are trying
Speaker 1: to allure customers with new features. T Mobile just announced
Speaker 1: it is expanding its coverage to hundreds of countries around
Speaker 1: the globe and two flights. Let's get into that and
Speaker 1: how it fits into the macro environment with T Mobile
Speaker 1: CEO Mike sever Mike, always good to have you back
Speaker 1: with us. Tell us about this announcement and why you
Speaker 1: think now with all of this going on, is the
Speaker 1: right time. Well, let's start with now. You know, consumers
Speaker 1: are concerned, Emily, as you've been saying in this whole segment,
Speaker 1: and that's not just about the possibility of a recession
Speaker 1: that may or may not unfold throughout the rest of
Speaker 1: this year. Consumers are feeling the pinch right now and
Speaker 1: our view as we can use the size and the
Speaker 1: scale of T Mobile to help. And what's interesting is
Speaker 1: summers here and after two years, while feeling the pinch,
Speaker 1: customers want to get out there and travel. Travels back
Speaker 1: spendings up at at higher than pre pandemic levels, and
Speaker 1: so you have this dual force, a desire to travel,
Speaker 1: combined with pinched pockets, and we're here to help. And
Speaker 1: so today's announcements are all about making travel easier for
Speaker 1: the tens of millions of T mobile customers everywhere. I
Speaker 1: have to ask your thoughts on the macro economic environment.
Speaker 1: What do you see over the next six to twelve months.
Speaker 1: If Elon Musks has a super bad feeling about the
Speaker 1: economy and Jamie diamond says we're headed for an economic hurricane,
Speaker 1: You've got the World Bank slashing their growth forecast, how
Speaker 1: are you watching all of this? Well, I can tell
Speaker 1: you that you know, we're in touch with our customers
Speaker 1: and they're concerned. And my view is our job when
Speaker 1: we have customers that are concerned about the economic situation
Speaker 1: is to be ready to help. And that's why we're
Speaker 1: doing the things that we're doing. And it's so different
Speaker 1: than the rest of the industry. You know, our competitors
Speaker 1: over the last month have, at this very moment, while
Speaker 1: consumers are concerned about everything you're asking about, have done
Speaker 1: two billion dollars of price increases between them. And so
Speaker 1: it really showcases how different our strategy is. Ours is
Speaker 1: to look forward at what's unfolding, understand the concerned consumers
Speaker 1: have and poor value into our plans so that we
Speaker 1: can help them. And by the way, this isn't just altruistic.
Speaker 1: If we help them, it makes our most popular plan
Speaker 1: more popular, Magenta Max. And if that continues to gain popularity,
Speaker 1: well that helps our revenues to and everyone wins. So
Speaker 1: you did raise some fees on on millions of customers
Speaker 1: wireless bills earlier this year, and I'm curious how as
Speaker 1: we move forward your plan to navigate inflation is evolving. Well,
Speaker 1: one of the things that makes us different is that
Speaker 1: we have what's called price lock, and so what we
Speaker 1: don't do is take the fee that you signed up
Speaker 1: for and during the term of an agreement with you
Speaker 1: is change your price your ongoing price per month. And
Speaker 1: so that's really important to people right now. And by
Speaker 1: the way, our business as an industry and as a
Speaker 1: sector is a little different than some We are probably
Speaker 1: more insulated from inflationary pressures as a company than many
Speaker 1: businesses and other sectors. You know, we have long term
Speaker 1: tower contracts, long term connectivity contracts, long term technology contracts
Speaker 1: with our tech vendors, and so those things insulate us
Speaker 1: somewhat and allow us to do things like today's news.
Speaker 1: You know, we're pouring hundreds of millions of dollars of
Speaker 1: incremental value into Magenta Max and making travel easier for
Speaker 1: customers by doing something nobody has ever done before, which
Speaker 1: is put globally high speed data right into our most
Speaker 1: popular plan at no extra charge. Plus connect you on
Speaker 1: all of your flights for free on the most popular
Speaker 1: airlines American, Delta, Alaska and coming soon United. No one's
Speaker 1: ever done anything like this before. And you know, there's
Speaker 1: so much to today's news, but it's about making travel easier. Now,
Speaker 1: we are seeing a number of different companies hiring freezes, layoffs.
Speaker 1: Are you considering are you having to make any cost
Speaker 1: cutting measures? Um? Do you have any plans like that?
Speaker 1: We're executing our post merger playbook and by the way,
Speaker 1: I'll remind you, was the biggest growth here in our history.
Speaker 1: The first quarter was the biggest growth queue one in
Speaker 1: our history on new accounts. And so we're executing our
Speaker 1: successful business plan. And obviously, over time we have to
Speaker 1: be really smart about how we manage our company and
Speaker 1: we'll do that. UM. But look, this is a model
Speaker 1: that's unfolding exactly like we told investors it would unfold
Speaker 1: when we did our analysts day and laid out our
Speaker 1: five year plan last spring. All right, Mike Sivert, CEO
Speaker 1: of T Mobile, Good to have you back with us.
Speaker 1: Thanks for sharing the news with us, and hear your
Speaker 1: views on the macro environment ahead. Meantime, the world largest
Speaker 1: theater chain is once again branching out. AMC will create
Speaker 1: a one million dollar fund to invest in other businesses.
Speaker 1: That's from CEO Adam Aaron at the company's annual meeting.
Speaker 1: A MCS board approve this plan, but Aaron didn't say
Speaker 1: where the cash will come from. In March, am C
Speaker 1: bought of high Craft Mining, a gold and silver mining stock.
Speaker 1: Coming up. Musk stands his ground, tell us Twitter employees
Speaker 1: the platform should allow quote pretty outrageous, thinks more on
Speaker 1: his virtual visit to the all hands meeting next this
Speaker 1: is Bloomberg. Ellen Musk took questions from Twitter employees at
Speaker 1: an all hands meeting, addressing everything from potential layoffs to
Speaker 1: remote work to his vision for free speech on the platform.
Speaker 1: Musk didn't address whether he was committed to a deal
Speaker 1: to buy Twitter. We're joined out by former Twitter employee
Speaker 1: clar Diaz. Ortiz, author of a book called Twitter for Good.
Speaker 1: She's also currently a venture scout at Kleiner Perkins. Bloomberg's
Speaker 1: Ed Ludlow here as well. And you were obviously covering
Speaker 1: the meeting in real time. We had the contents of
Speaker 1: the meeting leak to Bloomberg in real time. Just remind
Speaker 1: us what happened, what the flashpoints. You're right to phrase
Speaker 1: it in that it's what he did not say, because
Speaker 1: he had been built and reported in the Wall Street
Speaker 1: Journal that he kind of outline his interest in buying
Speaker 1: the company, you know, and and he didn't explicitly say
Speaker 1: I'm committed to this deal, but he wasn't explicitly asked
Speaker 1: if he was not explicitly asked, And basically how this
Speaker 1: works was Twitter staff were invited to ask questions through
Speaker 1: an internal Slack channel. Those questions were aggregated by U,
Speaker 1: the CMO, who then asked the dealon must But you know,
Speaker 1: he did give some really interesting insight into how he
Speaker 1: changed the platform. You know, he actually left the door
Speaker 1: open to advertising model, which was interesting because many assumed
Speaker 1: that the ad model wasn't good. In his mind, he
Speaker 1: talked about subscriptions being good, but the one that really
Speaker 1: jumped out of me was this idea that he would
Speaker 1: charge users for verification to verify that you're an actual
Speaker 1: human as opposed to a bot, and obviously bought the
Speaker 1: top of mind Frelon Musk, Claire, what do you make
Speaker 1: of Let's start with the business plan. So I think
Speaker 1: you know, some of these ideas are great. The verification program,
Speaker 1: if you can call it, that has been broken since
Speaker 1: it was created, so it would be fantastic if someone
Speaker 1: comes in with some idea to fix that. And I
Speaker 1: don't know the nuances of it, if charging is actually
Speaker 1: a good idea or not. Yeah, But I think the
Speaker 1: larger question here is just like I think all of
Speaker 1: this is sort of window dressing. I don't think Elon
Speaker 1: Musk wants to buy Twitter anymore. Right, His idea, if
Speaker 1: you don't know, dumming, His idea was that if you
Speaker 1: charge people, and he didn't put a price on it,
Speaker 1: but to verify if you run a scam or a
Speaker 1: spam or a organization where you have lots of accounts.
Speaker 1: He kind of talks about disincentivizing bonds that to make
Speaker 1: it so expensive they're having a load of fake accounts
Speaker 1: is not worth as will be. Is that going to work?
Speaker 1: And maybe it would work. I don't know. Twitter says
Speaker 1: they've had less than five percent boats other people say
Speaker 1: they have up to But is this relevant? I mean,
Speaker 1: isn't sort of this whole elon Musk buy Twitter, dumpster
Speaker 1: fire just kind of like extending on and on and on.
Speaker 1: What do you think I I don't think he wants it.
Speaker 1: I mean, you have kids. I have kids. There are
Speaker 1: a lot of them in my house. When they want
Speaker 1: a cookie, they start throwing a tantrum and eventually they
Speaker 1: don't want the cookie anymore, but they're still throwing the tantrum.
Speaker 1: I don't think he wants this. So you know, today
Speaker 1: he says you should be able to say pretty outrageous
Speaker 1: things on Twitter short of anything that breaks the law.
Speaker 1: Is that good enough as a content moderation policy? That's
Speaker 1: not good enough at all. I mean, I think you've
Speaker 1: talked to Jason Goldman, one of my favorite bosses when
Speaker 1: I worked there, and he's I think said it best
Speaker 1: when he said that, you know, if you take the
Speaker 1: guardrails off the platform, that in definition is anti free
Speaker 1: speech because you're preventing a bunch of people from being
Speaker 1: able to say anything because they don't feel safe on it.
Speaker 1: Talking to Twitter employees who are still there today, I mean,
Speaker 1: how do they feel? How do I feel for them?
Speaker 1: I feel sad. I feel very sad. These are very smart,
Speaker 1: wise people, you know, supporting families, and they're stuck in
Speaker 1: the middle of this. And you know, I, like everyone else,
Speaker 1: makes jokes on Twitter all the time about it because
Speaker 1: it's so ridiculous and it just doesn't seem to end.
Speaker 1: But but these are real people. I think it's pointing
Speaker 1: out what Elomas said as well as it relates to
Speaker 1: the staff. You know, the idea of work from home
Speaker 1: remote work was really went over and over, and must
Speaker 1: made the point that if you do excellent work, you
Speaker 1: may have an exception to be a remote worker. But
Speaker 1: he kind of seems to suggest that it's not gonna happen.
Speaker 1: This is after Jack Dorsey had decided two years ago
Speaker 1: that Twitter employees could work from home forever. So that
Speaker 1: and that, I think, at least in our reporting of
Speaker 1: the meeting, was the most disruptive part of it. You
Speaker 1: had like absolute the employee chat just lighting up with it,
Speaker 1: and he's saying excellent work. That's like Silicon Valley code
Speaker 1: for saying, you know, if you're the best bro, we'll
Speaker 1: let you work from home, but everyone else has to
Speaker 1: be in the office. I think what's interesting for me
Speaker 1: and I'd love your take on this is he talks
Speaker 1: about what Twitter would look like as a private company
Speaker 1: and compensation is is a big part of that. He
Speaker 1: said it would be like SpaceX, where you have stock
Speaker 1: and options awards a liquidity event every six months, which
Speaker 1: I think he means stock would be able to trade
Speaker 1: on the secondaries market. Um, but Twitter is kind of
Speaker 1: like a San Francisco Silicon Valley mainstay. It has a culture.
Speaker 1: How does that quote to change? I think the culture
Speaker 1: will change dramatically. But I don't think employees are stupid,
Speaker 1: you know. I mean at the beginning of this whole
Speaker 1: sort of journey, we we all sort of I think
Speaker 1: many of us thought this could actually be an interesting
Speaker 1: but crazy idea. You know, Twitter stock has historically underperformed.
Speaker 1: All of us who are early employees have probably cried
Speaker 1: into our bank statements as sometime that we you know,
Speaker 1: didn't work at LinkedIn instead or whatever. The talk. The
Speaker 1: stock has been performing really badly since an I p O.
Speaker 1: So I think there was some sort of a hope
Speaker 1: that maybe this crazy idea could do something good, But
Speaker 1: I think at this point it's just derailed. So where
Speaker 1: does this leave Twitter? I mean, he you know, he
Speaker 1: has these lofty goals get to a billion users. Again,
Speaker 1: we don't know if he's still really committed to to
Speaker 1: buying the platform, but he's got a deal assigned deal
Speaker 1: that binds him to buying the platform. Nobody knows how
Speaker 1: this is all going to play out. I think we
Speaker 1: should acknowledge there is a contingent of people who are
Speaker 1: super excited about Elon Musk buying Twitter, including some people
Speaker 1: at the company. Um. I think the very best thing
Speaker 1: that could happen in this situation is like like I
Speaker 1: act with my toddlers when they're out of control. I
Speaker 1: think we can convince Ellen he has won in some
Speaker 1: way by giving him something, but then making this all
Speaker 1: go away in some legal manner, something like what kind
Speaker 1: of something? I don't know. Well, he said he wasn't
Speaker 1: interested in the CEO role necessarily. He said he was
Speaker 1: more focused on product development than a title. But from
Speaker 1: what you know about Twitter, is the bod thing as
Speaker 1: big a problem as he seems to think it is um.
Speaker 1: I think we all think that that's just cover for
Speaker 1: what's happening. Right. I'm sure there's a bod problem. There
Speaker 1: always has been. But this is his, this is his out.
Speaker 1: And remind us what the next steps are, the time
Speaker 1: frame for this to this this to actually move forward,
Speaker 1: standard deal stuff, schedule a vote with the shareholders. You know,
Speaker 1: the board has given its unanimous approval of this deal
Speaker 1: at twenty cents to share. As far as Twitter's concerned,
Speaker 1: mindstanding that you want to hold him to the terms
Speaker 1: of the deal. Signed, all right, basic stuff basic indeed
Speaker 1: or not basic at home? And thank you, Claire. Thank
Speaker 1: you for sharing your very unvarnished view of the state
Speaker 1: of flight. Thank you, Clary as artees Now to a
Speaker 1: few other stories we continue to watch. Tesla has hiked
Speaker 1: prices across its line up by as much as six
Speaker 1: thousand dollars. This at least the third price hype for
Speaker 1: Tesla this year. CEO Elon must said earlier this week.
Speaker 1: The electric car company has weathered a tough patch the
Speaker 1: last three months, facing a month long lockdown in Shanghai
Speaker 1: and supply chain snarls that have challenged production and Musk
Speaker 1: and his companies Tesla and SpaceX were sued for billion
Speaker 1: dollars over claims they're part of a racketeering scheme to
Speaker 1: back the cryptocurrency dog Point. A man named Keith Johnson
Speaker 1: is seeking to represent a class of people who have
Speaker 1: lost money trading in DOS since April. He's asking for
Speaker 1: eighty six billion dollars in damages, plus triple damages of
Speaker 1: a hundred seventy two billion dollars, and an order blocking
Speaker 1: musk At his companies from promoting dose coin. He also
Speaker 1: wants the court to declare does trading constitutes gambling under
Speaker 1: US and New York law. Inflation market turmoil investors pulling
Speaker 1: back has many a startup tightening their belts and cutting costs.
Speaker 1: But there's one new unicorn that didn't wait for the
Speaker 1: downturn to be thirsty or maybe it's savvy. Start up
Speaker 1: Vanta helps businesses protect against dated breaches. It's co founder
Speaker 1: and CEO, Christina Cassiopo, joins US now along with David Sachs,
Speaker 1: a partner at Craft Vncher's who led the investment in Vanta.
Speaker 1: Thank you both so much for joining us. Christina, I'll
Speaker 1: start with you. You started off in venture capital. You
Speaker 1: worked in product at drop Box and you left to
Speaker 1: form Vanta. What is the problem that you're trying to
Speaker 1: solve here? So really broadly, we're trying to help software
Speaker 1: companies be more trustworthy with their customers and build that trust.
Speaker 1: And so the way we do that is help those
Speaker 1: software companies improve their secure artie and then go off
Speaker 1: and prove it, often through something like a compliance at it,
Speaker 1: a stock to GDPR hit the you know, showing that
Speaker 1: they're taking these regulations seriously and really using them as
Speaker 1: an opportunity to build trust with their customers and ultimately
Speaker 1: grow their revenue in businesses. Now, David, I know a
Speaker 1: lot of investors are being very careful about where they
Speaker 1: put their money right now. What attracted you to this company? Well,
Speaker 1: Vanta as a company have been interested in for a
Speaker 1: long time. UM. We started to notice a number of
Speaker 1: years ago that many of our portfolio companies were using Vanta.
Speaker 1: You know, we invest in a lot of SAS companies
Speaker 1: and we saw Vanta becoming a critical enabler for SAS
Speaker 1: companies that want to sell into enterprises. Basically, if you
Speaker 1: want to sell enterprise deals, you have to get a
Speaker 1: stock to certification you have to do twenty seven thousand one.
Speaker 1: You have to comply with pc I and g D
Speaker 1: p R. And we saw that the market was shifting
Speaker 1: from using high priced, expensive and slow consultants to using
Speaker 1: a software platform like Vanta. So we wanted to invest
Speaker 1: in Banta for a long time, and when the opportunity
Speaker 1: came up, despite their being this downturn, we really jumped
Speaker 1: up the opportunity. So Christina talked to us about this
Speaker 1: costco coffee only approach. I mean, I don't I love
Speaker 1: actually food at Costco, but I understand that you guys
Speaker 1: have been very conscious about, you know, keeping costs down,
Speaker 1: you know, even before we found ourselves in this macro environment. Yes,
Speaker 1: you mentioned. I was fortunate to start my career at
Speaker 1: an early stage VC firm and unit to grad Ventures
Speaker 1: and learned a lot there um. And one thing in
Speaker 1: particular was that investors prefer funding businesses that don't really
Speaker 1: need funding, um. And that's just informed how we've froun
Speaker 1: Banta from the early days is to grow and be aggressive,
Speaker 1: but also do so with an eye to controlling our
Speaker 1: own destiny um. And so one early example of that
Speaker 1: is we actually got to ten million dollars in revenue
Speaker 1: onjust a seed round. Uh. And again some of that were,
Speaker 1: you know, hopefully printing business decisions. And then there's a
Speaker 1: lot of things kind of like the cost co coffee
Speaker 1: that both help cut some costs that you might be
Speaker 1: spending otherwise, and they're just a helpful cultural signal to
Speaker 1: folks that you know, hey, we're here to build a business.
Speaker 1: That's what's most important. David, you know, what's your advice
Speaker 1: to start ups right now? In this macro environment, all
Speaker 1: of this uncertainty. You had people comparing this to the
Speaker 1: dot com bust. Mm hmmm, Well, this is clearly one
Speaker 1: of the top three worst downturns that Silicon Valley has
Speaker 1: seen in the last twenty years, along with the dot
Speaker 1: com crash back in two thousand and then the Great
Speaker 1: Recession in two thousand eight, and so I think this
Speaker 1: one is on track to be worse than two thousand eight.
Speaker 1: I don't think somebody as bad as two thousand, but
Speaker 1: I think founders need to get aware that we are
Speaker 1: probably headed into recession. The capital raising environment is very
Speaker 1: different than it was last year. They need to lengthen
Speaker 1: their runway advising all of our portfolio companies to try
Speaker 1: and have at least two and a half years runway,
Speaker 1: because you can't wait till the very end to raise.
Speaker 1: So if you want to have two years to work
Speaker 1: on your business, you actually need to a half years
Speaker 1: of runway. So we are advising our founders cut your burn. Uh,
Speaker 1: you know, do everything you can to survive this this downturn.
Speaker 1: And I think, you know, Vanta one of the reasons
Speaker 1: why we wanted to invest because they have been so
Speaker 1: incredibly capital efficient. What Christina did in terms of setting
Speaker 1: a frugal tone at the company, I think really worked.
Speaker 1: The company has one of the best burn multiples we've seen.
Speaker 1: That is our metric for measuring the capital efficiency of
Speaker 1: a startup. And so you know, vcs are looking two.
Speaker 1: We're still looking to invest in high growth companies, but
Speaker 1: we also want to see capital efficiency and so the
Speaker 1: trick for founders right now is they can't just grow,
Speaker 1: They have to grow in a capital efficient way. Christina
Speaker 1: tell us a little bit about your fundraising journey. Given
Speaker 1: all the market dynamics right now, your own background as
Speaker 1: a VC, what was it like being on the other
Speaker 1: side of the table, you know, did you have any
Speaker 1: moments of panic where you were worried are we gonna
Speaker 1: be able to close this deal in this macro environment?
Speaker 1: So what you will say, it's the fundraising in two
Speaker 1: is quite different from doing so UM, I'm going to
Speaker 1: two fold, right. There's just more scrutiny across the board
Speaker 1: this year. Uh, and then a different set of metrics.
Speaker 1: Right In one, it was all about revenue growth and
Speaker 1: you know kind of how much are you growing how quickly? Uh?
Speaker 1: And this year, as daven mentioned, burn multiple big deal, right,
Speaker 1: So for every dollar revenue you're bringing in, how much
Speaker 1: do you spend to do that? Um? Gross margin, burn rate, runway. Like,
Speaker 1: all of these questions were just kind of not new
Speaker 1: for us, because we've been thinking about these things for
Speaker 1: the last couple of years and trying to manage them
Speaker 1: internally and keep an eye on them. But it's certainly
Speaker 1: different than the series A we raised last year. David,
Speaker 1: You've been building and investing since before the dot com bust,
Speaker 1: and I'm so curious if you think a recession is
Speaker 1: inevitable at this point. If so, is it a risk
Speaker 1: session with a capital ARE or a lower case are?
Speaker 1: How bad does it get? I do? I mean, I've
Speaker 1: been saying since February that I thought there were warning
Speaker 1: signs of a slowdown, impossible recession, and now we have
Speaker 1: the FED raising rates very aggressively. I think they waited
Speaker 1: a year too long. We had the warning signs of
Speaker 1: inflation a year ago, and they waited nine months before
Speaker 1: doing anything, and now as a result of that, they
Speaker 1: have to overcompensate by raising rates very very quickly. That's
Speaker 1: basically causing the economy, I think to UH, to basically
Speaker 1: do somersaults. So I think we are headed into recession.
Speaker 1: There's already a slowdown. We had negative one a half
Speaker 1: percent growth in the last quarter. So I think everyone
Speaker 1: should be uh, I guess expecting a recession and if
Speaker 1: it doesn't material lot and I think probably a pretty
Speaker 1: serious recession. And if it doesn't materialize, that's great news.
Speaker 1: But I think that's what founders should be expecting at
Speaker 1: this point. Which of the company, now you're old enough
Speaker 1: to remember, until them, I Cisco, you know, hitting its
Speaker 1: peak in in the dot com boom, and it still
Speaker 1: hasn't recovered. Of you know, the big established tech companies
Speaker 1: that have enjoyed this ride, do you think any of
Speaker 1: those could could become the next Cisco. Well, I think
Speaker 1: I think the big public companies aren't much better shape
Speaker 1: than they were. The big public tech companies are much
Speaker 1: better shape than they were during the dot com crash.
Speaker 1: I mean, in the days of the dot com crash,
Speaker 1: many of those companies were just kind of illusory. They
Speaker 1: didn't have real business models, they didn't have real customers,
Speaker 1: they didn't have real revenue. That's not the case today.
Speaker 1: I think what's happening today is evaluation multiples are changing,
Speaker 1: but these are real businesses. Software is of service is
Speaker 1: not going away. Software businesses are still incredible businesses. Their
Speaker 1: high gross margins. Uh, they're eating more and more of
Speaker 1: the economy. They're becoming a larger and larger category of
Speaker 1: spend by enterprises on software. So I don't think that
Speaker 1: this is existential. I think this is simply a big
Speaker 1: rerating in terms of valuation multiples, driven mainly by interest rates.
Speaker 1: And I think that, um, you know, what founders need
Speaker 1: to do is just make sure that they've given them
Speaker 1: sells the runway to persevere through a recession or downturn. Christina,
Speaker 1: how do you think this is all going to impact
Speaker 1: the war for talent? I mean, obviously you have employees
Speaker 1: probably thinking twice about whether they want to make a jump.
Speaker 1: You know, do do do workers want to work at
Speaker 1: startups right now? Given the uncertainty? Yeah, I think. Look,
Speaker 1: there's a lot of doom and gloom that we talk about,
Speaker 1: you know, within an upcoming potential recession. And you know,
Speaker 1: I don't think it's all bad news. I think, as
Speaker 1: you've both implied, like downturns or when some really great
Speaker 1: businesses have gotten built, um, and I think we'll actually
Speaker 1: become easier to recruit for the companies that correctly manage
Speaker 1: their burn and you know, stick around and are able
Speaker 1: to you know, not just persist, but almost accelerate through
Speaker 1: the downturn. David, I would agree with that, But I
Speaker 1: would agree with that. You know, PayPal was largely built
Speaker 1: in the wake of the dot com crash. You know,
Speaker 1: my company Amor would be sold to Microsoft for unicorn valuation.
Speaker 1: That company was mainly built in the wake of the
Speaker 1: Great Recession of two thousand eight. So downturns can be
Speaker 1: a great time to build enduring companies. Uh, the warfare
Speaker 1: talent gets easier. Uh, there are fewer copycasts getting funded,
Speaker 1: so the competition could be easier the only thing that
Speaker 1: gets harder is fundraising. And so if you make sure
Speaker 1: that you're that you raise money at the right time,
Speaker 1: and you make that funding last lengthen your runway, then uh,
Speaker 1: you know, building during a downturn could be a great
Speaker 1: time to build a great company. Well, I have to
Speaker 1: ask you about your former PayPal colleague and friend, Elon Musk.
Speaker 1: He spoke to Twitter employees as at an all hands meeting.
Speaker 1: We got some more details about his vision for Twitter.
Speaker 1: Um the proposing the idea that all users get verified
Speaker 1: to crack down on bots, also saying that, you know,
Speaker 1: he believes folks should be able to say pretty outrageous
Speaker 1: things on Twitter short of breaking the law. Um, you know,
Speaker 1: do you think he I know you've obviously been supportive
Speaker 1: of him buying the company, supportive of his idea. Is
Speaker 1: what do you think is going to be most impactful
Speaker 1: about Elon Musk potentially taking over? Well, you know, I
Speaker 1: already see a lot of outrageous things on Twitter. So
Speaker 1: I think what what Ellen is saying is that he
Speaker 1: believes in the principle of free speech and he thinks
Speaker 1: it needs to be applied in an even handed way.
Speaker 1: I mean, we need rules created by Twitter that aren't
Speaker 1: just made up as they go along, and that only
Speaker 1: effect one side of the debate. They need to be
Speaker 1: an honest, open marketplace for ideas. I think that's part
Speaker 1: of what he's saying. And then the other part that
Speaker 1: I hear is he's saying that Twitter needs to be
Speaker 1: a real business. He's saying that your costs now exceed
Speaker 1: your revenues. That's not sustainable. We need to cut costs,
Speaker 1: we need to grow revenue. It sounds to me like
Speaker 1: he wants to apply some business rigor to the company,
Speaker 1: and um so I would expect that if he takes
Speaker 1: over the company there will be some cost cutting. Sounds like,
Speaker 1: you know, he believes in in person work. He said
Speaker 1: that he would prefer that people be in the office,
Speaker 1: although exceptions be made for you know, truly exceptional cases.
Speaker 1: But I would expect him to apply some business rigger.
Speaker 1: And that's half of what you do. In the other
Speaker 1: half is um is basically creating some predictable rules around speech. Now,
Speaker 1: there are some doubts as to whether he's really committed
Speaker 1: to doing this deal, whether he's using bots. We had
Speaker 1: a former Twitter employee on earlier who believes he's using
Speaker 1: this spot issue to try to get out of it,
Speaker 1: that he's not really serious, that he doesn't necessarily really
Speaker 1: want it. Do you think he's Is he serious? Is
Speaker 1: he committed to buying Twitter? Well, the fact he did
Speaker 1: this town hall with the employees today actually is is
Speaker 1: assigned to me that the deal is actually likely to happen.
Speaker 1: I agree that there was some question a few weeks
Speaker 1: ago about whether it was actually gonna happen, but I
Speaker 1: think the fact that he did this meeting with the
Speaker 1: employees leads me to believe it's more likely than not
Speaker 1: that it's actually going to happen, that he intends to
Speaker 1: fall through with it. So you know, I don't know
Speaker 1: anything that he hasn't said publicly about it, but I
Speaker 1: would take that as a signal. David Sacks Craft Ventures
Speaker 1: and Christina Caciopo, CEO of Vanta, thank you both. Appreciate
Speaker 1: you covering wide range of issues today. Okay, come up,
Speaker 1: we're gonna hear from Gala see Digital founder Mike novograts
Speaker 1: on Crypto's fall from grace and the sudden exodus of investors.
Speaker 1: He's next. This is Bloomberg. It is time for our
Speaker 1: Crypto Report. Now and there's no end to the pain
Speaker 1: in the space as the route and bitcoin rolls on
Speaker 1: now down for ten consecutive sessions. Galaxy Digital founder Mike
Speaker 1: Novograt spoke earlier on Bloomberg Today about these headwinds in
Speaker 1: digital assets. You have the whole crypto and context what's
Speaker 1: going on macro right and we talked about there we're
Speaker 1: gonna be headwinds this year because the FED was gonna
Speaker 1: have to withdraw all liquidity and so assets that went
Speaker 1: up based on cheap money forever, if they're growth stocks
Speaker 1: or expensive watches or crypto, we're under certainly under pressure
Speaker 1: all year long. What's exacerbated this move in crypto is,
Speaker 1: you know a bunch of leveraged players that had far
Speaker 1: more leverage I think people thought, uh, and so you
Speaker 1: can talk about Celsius or three hours capital um. That's
Speaker 1: caused almost something familiar similar to what happened with long
Speaker 1: term capital management, UH alleged. You know market neutral players
Speaker 1: with monster leverage and that's being unwound, and that's created
Speaker 1: a ton of fear in the space. And so you've
Speaker 1: seen lots of credit being withdrawn from the space. And
Speaker 1: when credits with drawn, you know, you've seen prices collapse,
Speaker 1: and so I had hoped this year was thirty thousand
Speaker 1: fifty thousand bitcoin, and once we took out eight thousand,
Speaker 1: we've cascaded. Uh. Yeah, twenty thousand is a pretty good
Speaker 1: target with one thousand of the theory, and we've tested
Speaker 1: that two days. You know, when I look at the
Speaker 1: US stock market, um, it looks like it's got probably
Speaker 1: four percent more to go to thirty five hundred, which
Speaker 1: is where the two d week moving averages, whereas support
Speaker 1: comes in, and I think you're seeing this liquidation of
Speaker 1: risks and cryptos got caught up with it. Mike, tough question,
Speaker 1: but did you directly have any sort of exposure to
Speaker 1: those counterparts that you mentioned, the likes of Celsius, the
Speaker 1: likes of three urrows, or is it more third you know,
Speaker 1: third order effects that you gain the exposure and is
Speaker 1: it you get you get exposure indirectly from any big
Speaker 1: player in the space, right and when you have really
Speaker 1: big players that have borrowed money from all over the place,
Speaker 1: it creates this daisy chain effect. And I think that's
Speaker 1: burning through the system right now. My senses, it's mostly
Speaker 1: burned out, like these fires go until they run out
Speaker 1: of oxygen, and so, uh, you know, you'd up to
Speaker 1: be one heck of a diamond handed player to have
Speaker 1: sustained all of this if you have too much leverage.
Speaker 1: And so my guesses leverage has been knocked out of
Speaker 1: the system. But humpty dumpy, doesn't you know, get put
Speaker 1: back together right away. It takes a while to kind
Speaker 1: of sort through. They'll be bankruptcy proceeds, uh in many companies,
Speaker 1: And so I think while we should bounce off of
Speaker 1: twenty tho and bounce off of a thousand, it's gonna
Speaker 1: take a little while for a cryptot to regain and
Speaker 1: narrative regain honors. Galaxy Digital's Mike novograts who can catch
Speaker 1: up full interview at Bloomberg dot com. Rising inflation and
Speaker 1: a looming recession have hit all sectors hard, but especially retail.
Speaker 1: But Rent the Runway was one of the few companies
Speaker 1: this earning season to beat estimates and raise guidance, joining
Speaker 1: us NOW CEO and co founder Jennifer Hyman. So, Jen,
Speaker 1: how are you bucking the trend here? I think the
Speaker 1: Rent the Runway is about delivering enormous financial value to
Speaker 1: the customer. So if you rent address for a special
Speaker 1: occasion from US, you're paying off the retail price, and
Speaker 1: if you have a subscription, each item is like eighteen
Speaker 1: twenty bucks, So it's even cheaper than shopping at an
Speaker 1: off price channel. It's cheaper than fast fashion and abborce
Speaker 1: is the real thing. So we think that in an
Speaker 1: environment where we've been cooped up for the last two years,
Speaker 1: you're certainly seeing in kind of the earnings calls of
Speaker 1: Airbnb and bookings dot Com and live Nation that people
Speaker 1: are going out and they want ways to wear something new.
Speaker 1: They just want to do it affordably. So rent the
Speaker 1: runways an experience that goes along with events and travel
Speaker 1: and going out to restaurants, going out to concerts, and
Speaker 1: that's why we've been able to perform. There's no question though,
Speaker 1: that inflation is going to hit folks even harder. People
Speaker 1: are paying more for gas, more for groceries. What's your
Speaker 1: forecast on how customer spending habits are going to change?
Speaker 1: How much are they going to be willing to spend
Speaker 1: on apparel versus some of these essential items, and and
Speaker 1: how do they think about appare is it is it
Speaker 1: more of an essential because we've been cooked up for
Speaker 1: so long. I think that UM, first of all, rent
Speaker 1: the runway has a customer base that's slightly different. It's
Speaker 1: more of a higher income customer base. So I think, listen,
Speaker 1: everyone is impacted by the by inflation and buy an
Speaker 1: upcoming recession, and people are going to think about smarter
Speaker 1: ways to spend in the category. So I think the
Speaker 1: only data we really have is what happened in two
Speaker 1: thousand eight was fascinating. In two thousand eight, Americans continued
Speaker 1: to buy sixty five articles of apparel per year, which
Speaker 1: was the exact same amount they bought in two thousand five,
Speaker 1: six and seven. What they did is they flipped into
Speaker 1: lower price per unit retailers. So they flipped into off chrice,
Speaker 1: they flipped into value. And I really believe that re
Speaker 1: commerce in general can now be part of that cost
Speaker 1: consideration set. So even in recessionary times, people still want
Speaker 1: variety in their wardrobes. Now, how does the fact that
Speaker 1: we all went through covid um factor into this. I
Speaker 1: think that this procession might feel different, might look different
Speaker 1: than the last one. I think that we may end
Speaker 1: up spending more on experiences in this uh, in this
Speaker 1: recessionary period than we did in the last one because
Speaker 1: we didn't travel over the last two years. We didn't
Speaker 1: really go out to eat, we didn't see friends and rent.
Speaker 1: The runway is spend that tracks with experiences. So I
Speaker 1: think that you might travel you have inflation, maybe you
Speaker 1: don't travel to Italy and you travel to Florida instead,
Speaker 1: and you kind of book a cheaper hotel. You're still
Speaker 1: going to get out there and go out. And I
Speaker 1: think that as long as we can market value, we
Speaker 1: will be able to be more. Uh. Part of her
Speaker 1: considerations that now we're saying a lot of tech companies
Speaker 1: have to make hard decisions layoffs downstizing you had to
Speaker 1: make some tough decisions during the pandemic, and you've been
Speaker 1: very open about that. Do you have any reflections on
Speaker 1: that now, and you know, you know, potentially input for
Speaker 1: these founders who are having to make those tough decisions now. Um,
Speaker 1: we cut over our expenses in a three week period
Speaker 1: in March, and it was a dramatic situation. And that
Speaker 1: one weekend in March, you know, over of our subscribers
Speaker 1: paused or canceled and so we had to act extremely quickly.
Speaker 1: We had to change the way We acquired inventory too,
Speaker 1: from buying inventory outright to actually revenue sharing and receiving
Speaker 1: our inventory and consignment. So I would say to other
Speaker 1: ceo s that there's not a moment to lose that
Speaker 1: cash is king. You have to think about all of
Speaker 1: your investments and be more conservative and kind of the
Speaker 1: great thing about this environment is it's not happening overnight.
Speaker 1: There will never be another experience where, like a pandemic,
Speaker 1: we're all locked inside. You know, from March eighth to
Speaker 1: March nine, we were living different lives. So we're constantly
Speaker 1: looking at the data. Internally, we feel that we're able
Speaker 1: to react and thus far we feel positively. We gave
Speaker 1: great guidance for Q two. But and for you know,
Speaker 1: reaffirmed our guidance for the year. We think that um
Speaker 1: we every business has to be smart right now because
Speaker 1: no business is pession or inflation proof. So last quick question,
Speaker 1: if you beat estimates and you raise your guidance, does
Speaker 1: that mean the pandemic era of sweatpants is over? Yes,
Speaker 1: Black Time twenty two like sweatpants is to I mean,
Speaker 1: people are dressing up in a way that I've never
Speaker 1: seen before. They are bolder, brighter than they've ever been before.
Speaker 1: And I think that this is just the example, like
Speaker 1: they're dating again, they're going to parties again, like people
Speaker 1: aren't going to stop doing that now, and so I
Speaker 1: do believe that this recession might be different for service
Speaker 1: based companies. All right, Jennifer Hyman, CEO and co founder
Speaker 1: Rent the Runway. Always good to have you, Jen, Thank
Speaker 1: you for stopping by. That does it for this edition
Speaker 1: of the show. We will be right back here tomorrow.
Speaker 1: I'm Emily Chang in San Francisco. This is Bloomberg