Nasdaq Drops 4% and Twitter's All-Hands Meeting

Musk and Twitter employees. We're gonna talk to a former Twitter insider about the future of the social platform and crypto crisis. A conversation with Mike nova Grats of Galaxy Digital about when he expects this crisp crypto winter to warm up. First, I want to talk about the markets with Carol's Life BMO Family Office Deputy Chief Investment Officers. So, Carol, how are you reading that up yesterday down today? How

do you make sense of it all? It's t It is definitely tough to make sense of it, but I think part of it reflects investors on a day to day basis. Yesterday there was some exuberance particularly over Chairman Powell's conversation after the actual FED meeting and the FED release in the press conference talking about thinking that the number of seventy basis point um increases might be limited. So markets got a little bit exuberant about that yesterday

and relieved, if you will. Then flying into today, it's sort of like the morning after, and people decided instead of focusing on the glass half full, they focus on all of the half empty things, and how much narrower that makes the Fed's ability to traverse and trying to stick a soft landing. So at this point, are you thinking a recession is inevitable? Um, it's probably, it's it maybe high higher likelihood, if you will. We weren't going

into this necessarily thinking a recession was highly probable. Markets are discounting a seventy chance that you'll see a recession. We do think if you see one, however, that it will be shorter and then less deep than ever then then we've seen in prior recessions. And so a piece of that relates to the fact that there is so

much underlying business strength. And the other thing that goes pretty unsung is the fact that a lot of our companies have proven to be very adaptable and resilient and able to shift their business model, but they're facing a lot of challenges and so um the hope everyone is waiting with bated breath to see if we're going to have that recession, but we don't think it would be sharpened.

So how is this impacting your approach to tech? Of course we're seeing Apple, Tesla, Twitter, mega cap tech stock sinking, some other narratives going on there of course with this elon Twitter thing, But how are you evolving your strategy when it comes to big tech names. I think it's not just big tech names, it's thinking through technology in general.

And typically what we've seen cycle after cycle over decades is that what leads going into a recession isn't necessarily what leads coming out, and so we might have to be more discriminating figuring out where growth and technology comes. A lot of the growth in this in the new scenario, if you will will be reshoring, building, manufacturing, spending some of the trillion dollars in aid money that is still in the in the pipeline for infrastructure spend, that will

require your different kind of technology. So it's gonna require investors to think more carefully about where their technology goes. It's not necessarily just consumer based tech, which played so well over the last couple of years a pandemic. You know, we've been talking about the fact that Cisco, you know, kind of like a poster child for the dot com bust, hit its high before the combust and has since never recovered. What do you think are going to be the ciscos

of this generation. It's tough. We're not necessarily allowed to talk individual securities, but I do think looking at industries that will support that restoring building and manufacturing and the shifting of certain things like where individual people are in lower paid or higher risk jobs, and you're automating, so robotics, artificial intelligence, sensors, lots of different things that are going

to play into that new economy as we shift. Um. It's not like technology as an entire industry needs to be written off or pieces of it, because much of it will still continue to play. But it's looking at where you're going to have that investment and what industries are likely to be able to play into the build out. All right, uh cause life Thanks for sharing your views

with us. BMO Family Office Deputy Chief Investment Officer appreciate it. Meantime, it stocks plunge and inflation rises, some companies are trying to allure customers with new features. T Mobile just announced it is expanding its coverage to hundreds of countries around the globe and two flights. Let's get into that and how it fits into the macro environment with T Mobile CEO Mike sever Mike, always good to have you back

with us. Tell us about this announcement and why you think now with all of this going on, is the right time. Well, let's start with now. You know, consumers are concerned, Emily, as you've been saying in this whole segment, and that's not just about the possibility of a recession that may or may not unfold throughout the rest of this year. Consumers are feeling the pinch right now and our view as we can use the size and the

scale of T Mobile to help. And what's interesting is summers here and after two years, while feeling the pinch, customers want to get out there and travel. Travels back spendings up at at higher than pre pandemic levels, and so you have this dual force, a desire to travel, combined with pinched pockets, and we're here to help. And so today's announcements are all about making travel easier for

the tens of millions of T mobile customers everywhere. I have to ask your thoughts on the macro economic environment. What do you see over the next six to twelve months. If Elon Musks has a super bad feeling about the economy and Jamie diamond says we're headed for an economic hurricane, You've got the World Bank slashing their growth forecast, how are you watching all of this? Well, I can tell you that you know, we're in touch with our customers

and they're concerned. And my view is our job when we have customers that are concerned about the economic situation is to be ready to help. And that's why we're doing the things that we're doing. And it's so different than the rest of the industry. You know, our competitors over the last month have, at this very moment, while consumers are concerned about everything you're asking about, have done two billion dollars of price increases between them. And so

it really showcases how different our strategy is. Ours is to look forward at what's unfolding, understand the concerned consumers have and poor value into our plans so that we can help them. And by the way, this isn't just altruistic. If we help them, it makes our most popular plan more popular, Magenta Max. And if that continues to gain popularity,

well that helps our revenues to and everyone wins. So you did raise some fees on on millions of customers wireless bills earlier this year, and I'm curious how as we move forward your plan to navigate inflation is evolving. Well, one of the things that makes us different is that we have what's called price lock, and so what we don't do is take the fee that you signed up for and during the term of an agreement with you is change your price your ongoing price per month. And

so that's really important to people right now. And by the way, our business as an industry and as a sector is a little different than some We are probably more insulated from inflationary pressures as a company than many businesses and other sectors. You know, we have long term tower contracts, long term connectivity contracts, long term technology contracts with our tech vendors, and so those things insulate us somewhat and allow us to do things like today's news.

You know, we're pouring hundreds of millions of dollars of incremental value into Magenta Max and making travel easier for customers by doing something nobody has ever done before, which is put globally high speed data right into our most popular plan at no extra charge. Plus connect you on all of your flights for free on the most popular airlines American, Delta, Alaska and coming soon United. No one's ever done anything like this before. And you know, there's

so much to today's news, but it's about making travel easier. Now, we are seeing a number of different companies hiring freezes, layoffs. Are you considering are you having to make any cost cutting measures? Um? Do you have any plans like that? We're executing our post merger playbook and by the way, I'll remind you, was the biggest growth here in our history. The first quarter was the biggest growth queue one in our history on new accounts. And so we're executing our

successful business plan. And obviously, over time we have to be really smart about how we manage our company and we'll do that. UM. But look, this is a model that's unfolding exactly like we told investors it would unfold when we did our analysts day and laid out our five year plan last spring. All right, Mike Sivert, CEO of T Mobile, Good to have you back with us. Thanks for sharing the news with us, and hear your views on the macro environment ahead. Meantime, the world largest

theater chain is once again branching out. AMC will create a one million dollar fund to invest in other businesses. That's from CEO Adam Aaron at the company's annual meeting. A MCS board approve this plan, but Aaron didn't say where the cash will come from. In March, am C bought of high Craft Mining, a gold and silver mining stock.

Coming up. Musk stands his ground, tell us Twitter employees the platform should allow quote pretty outrageous, thinks more on his virtual visit to the all hands meeting next this is Bloomberg. Ellen Musk took questions from Twitter employees at an all hands meeting, addressing everything from potential layoffs to remote work to his vision for free speech on the platform. Musk didn't address whether he was committed to a deal to buy Twitter. We're joined out by former Twitter employee

clar Diaz. Ortiz, author of a book called Twitter for Good. She's also currently a venture scout at Kleiner Perkins. Bloomberg's Ed Ludlow here as well. And you were obviously covering the meeting in real time. We had the contents of the meeting leak to Bloomberg in real time. Just remind

us what happened, what the flashpoints. You're right to phrase it in that it's what he did not say, because he had been built and reported in the Wall Street Journal that he kind of outline his interest in buying the company, you know, and and he didn't explicitly say I'm committed to this deal, but he wasn't explicitly asked if he was not explicitly asked, And basically how this works was Twitter staff were invited to ask questions through

an internal Slack channel. Those questions were aggregated by U, the CMO, who then asked the dealon must But you know, he did give some really interesting insight into how he changed the platform. You know, he actually left the door open to advertising model, which was interesting because many assumed

that the ad model wasn't good. In his mind, he talked about subscriptions being good, but the one that really jumped out of me was this idea that he would charge users for verification to verify that you're an actual human as opposed to a bot, and obviously bought the top of mind Frelon Musk, Claire, what do you make of Let's start with the business plan. So I think

you know, some of these ideas are great. The verification program, if you can call it, that has been broken since it was created, so it would be fantastic if someone comes in with some idea to fix that. And I don't know the nuances of it, if charging is actually a good idea or not. Yeah, But I think the larger question here is just like I think all of this is sort of window dressing. I don't think Elon

Musk wants to buy Twitter anymore. Right, His idea, if you don't know, dumming, His idea was that if you charge people, and he didn't put a price on it, but to verify if you run a scam or a spam or a organization where you have lots of accounts. He kind of talks about disincentivizing bonds that to make it so expensive they're having a load of fake accounts is not worth as will be. Is that going to work?

And maybe it would work. I don't know. Twitter says they've had less than five percent boats other people say they have up to But is this relevant? I mean, isn't sort of this whole elon Musk buy Twitter, dumpster fire just kind of like extending on and on and on. What do you think I I don't think he wants it. I mean, you have kids. I have kids. There are

a lot of them in my house. When they want a cookie, they start throwing a tantrum and eventually they don't want the cookie anymore, but they're still throwing the tantrum. I don't think he wants this. So you know, today he says you should be able to say pretty outrageous things on Twitter short of anything that breaks the law. Is that good enough as a content moderation policy? That's

not good enough at all. I mean, I think you've talked to Jason Goldman, one of my favorite bosses when I worked there, and he's I think said it best when he said that, you know, if you take the guardrails off the platform, that in definition is anti free speech because you're preventing a bunch of people from being able to say anything because they don't feel safe on it. Talking to Twitter employees who are still there today, I mean, how do they feel? How do I feel for them?

I feel sad. I feel very sad. These are very smart, wise people, you know, supporting families, and they're stuck in the middle of this. And you know, I, like everyone else, makes jokes on Twitter all the time about it because it's so ridiculous and it just doesn't seem to end. But but these are real people. I think it's pointing out what Elomas said as well as it relates to

the staff. You know, the idea of work from home remote work was really went over and over, and must made the point that if you do excellent work, you may have an exception to be a remote worker. But he kind of seems to suggest that it's not gonna happen. This is after Jack Dorsey had decided two years ago that Twitter employees could work from home forever. So that and that, I think, at least in our reporting of

the meeting, was the most disruptive part of it. You had like absolute the employee chat just lighting up with it, and he's saying excellent work. That's like Silicon Valley code for saying, you know, if you're the best bro, we'll let you work from home, but everyone else has to be in the office. I think what's interesting for me and I'd love your take on this is he talks about what Twitter would look like as a private company

and compensation is is a big part of that. He said it would be like SpaceX, where you have stock and options awards a liquidity event every six months, which I think he means stock would be able to trade on the secondaries market. Um, but Twitter is kind of like a San Francisco Silicon Valley mainstay. It has a culture. How does that quote to change? I think the culture will change dramatically. But I don't think employees are stupid,

you know. I mean at the beginning of this whole sort of journey, we we all sort of I think many of us thought this could actually be an interesting but crazy idea. You know, Twitter stock has historically underperformed. All of us who are early employees have probably cried into our bank statements as sometime that we you know,

didn't work at LinkedIn instead or whatever. The talk. The stock has been performing really badly since an I p O. So I think there was some sort of a hope that maybe this crazy idea could do something good, But I think at this point it's just derailed. So where does this leave Twitter? I mean, he you know, he has these lofty goals get to a billion users. Again, we don't know if he's still really committed to to buying the platform, but he's got a deal assigned deal

that binds him to buying the platform. Nobody knows how this is all going to play out. I think we should acknowledge there is a contingent of people who are super excited about Elon Musk buying Twitter, including some people at the company. Um. I think the very best thing that could happen in this situation is like like I

act with my toddlers when they're out of control. I think we can convince Ellen he has won in some way by giving him something, but then making this all go away in some legal manner, something like what kind of something? I don't know. Well, he said he wasn't interested in the CEO role necessarily. He said he was more focused on product development than a title. But from what you know about Twitter, is the bod thing as big a problem as he seems to think it is um.

I think we all think that that's just cover for what's happening. Right. I'm sure there's a bod problem. There always has been. But this is his, this is his out. And remind us what the next steps are, the time frame for this to this this to actually move forward, standard deal stuff, schedule a vote with the shareholders. You know, the board has given its unanimous approval of this deal at twenty cents to share. As far as Twitter's concerned, mindstanding that you want to hold him to the terms

of the deal. Signed, all right, basic stuff basic indeed or not basic at home? And thank you, Claire. Thank you for sharing your very unvarnished view of the state of flight. Thank you, Clary as artees Now to a few other stories we continue to watch. Tesla has hiked prices across its line up by as much as six thousand dollars. This at least the third price hype for Tesla this year. CEO Elon must said earlier this week.

The electric car company has weathered a tough patch the last three months, facing a month long lockdown in Shanghai and supply chain snarls that have challenged production and Musk and his companies Tesla and SpaceX were sued for billion dollars over claims they're part of a racketeering scheme to back the cryptocurrency dog Point. A man named Keith Johnson is seeking to represent a class of people who have

lost money trading in DOS since April. He's asking for eighty six billion dollars in damages, plus triple damages of a hundred seventy two billion dollars, and an order blocking musk At his companies from promoting dose coin. He also wants the court to declare does trading constitutes gambling under US and New York law. Inflation market turmoil investors pulling back has many a startup tightening their belts and cutting costs. But there's one new unicorn that didn't wait for the

downturn to be thirsty or maybe it's savvy. Start up Vanta helps businesses protect against dated breaches. It's co founder and CEO, Christina Cassiopo, joins US now along with David Sachs, a partner at Craft Vncher's who led the investment in Vanta. Thank you both so much for joining us. Christina, I'll start with you. You started off in venture capital. You worked in product at drop Box and you left to form Vanta. What is the problem that you're trying to

solve here? So really broadly, we're trying to help software companies be more trustworthy with their customers and build that trust. And so the way we do that is help those software companies improve their secure artie and then go off and prove it, often through something like a compliance at it, a stock to GDPR hit the you know, showing that they're taking these regulations seriously and really using them as an opportunity to build trust with their customers and ultimately

grow their revenue in businesses. Now, David, I know a lot of investors are being very careful about where they put their money right now. What attracted you to this company? Well, Vanta as a company have been interested in for a long time. UM. We started to notice a number of years ago that many of our portfolio companies were using Vanta. You know, we invest in a lot of SAS companies and we saw Vanta becoming a critical enabler for SAS

companies that want to sell into enterprises. Basically, if you want to sell enterprise deals, you have to get a stock to certification you have to do twenty seven thousand one. You have to comply with pc I and g D p R. And we saw that the market was shifting from using high priced, expensive and slow consultants to using a software platform like Vanta. So we wanted to invest in Banta for a long time, and when the opportunity came up, despite their being this downturn, we really jumped

up the opportunity. So Christina talked to us about this costco coffee only approach. I mean, I don't I love actually food at Costco, but I understand that you guys have been very conscious about, you know, keeping costs down, you know, even before we found ourselves in this macro environment. Yes, you mentioned. I was fortunate to start my career at an early stage VC firm and unit to grad Ventures

and learned a lot there um. And one thing in particular was that investors prefer funding businesses that don't really need funding, um. And that's just informed how we've froun Banta from the early days is to grow and be aggressive, but also do so with an eye to controlling our own destiny um. And so one early example of that is we actually got to ten million dollars in revenue onjust a seed round. Uh. And again some of that were,

you know, hopefully printing business decisions. And then there's a lot of things kind of like the cost co coffee that both help cut some costs that you might be spending otherwise, and they're just a helpful cultural signal to folks that you know, hey, we're here to build a business. That's what's most important. David, you know, what's your advice to start ups right now? In this macro environment, all of this uncertainty. You had people comparing this to the

dot com bust. Mm hmmm, Well, this is clearly one of the top three worst downturns that Silicon Valley has seen in the last twenty years, along with the dot com crash back in two thousand and then the Great Recession in two thousand eight, and so I think this one is on track to be worse than two thousand eight. I don't think somebody as bad as two thousand, but I think founders need to get aware that we are probably headed into recession. The capital raising environment is very

different than it was last year. They need to lengthen their runway advising all of our portfolio companies to try and have at least two and a half years runway, because you can't wait till the very end to raise. So if you want to have two years to work on your business, you actually need to a half years of runway. So we are advising our founders cut your burn. Uh, you know, do everything you can to survive this this downturn.

And I think, you know, Vanta one of the reasons why we wanted to invest because they have been so incredibly capital efficient. What Christina did in terms of setting a frugal tone at the company, I think really worked. The company has one of the best burn multiples we've seen. That is our metric for measuring the capital efficiency of a startup. And so you know, vcs are looking two.

We're still looking to invest in high growth companies, but we also want to see capital efficiency and so the trick for founders right now is they can't just grow, They have to grow in a capital efficient way. Christina

tell us a little bit about your fundraising journey. Given all the market dynamics right now, your own background as a VC, what was it like being on the other side of the table, you know, did you have any moments of panic where you were worried are we gonna be able to close this deal in this macro environment? So what you will say, it's the fundraising in two is quite different from doing so UM, I'm going to two fold, right. There's just more scrutiny across the board

this year. Uh, and then a different set of metrics. Right In one, it was all about revenue growth and you know kind of how much are you growing how quickly? Uh? And this year, as daven mentioned, burn multiple big deal, right, So for every dollar revenue you're bringing in, how much

do you spend to do that? Um? Gross margin, burn rate, runway. Like, all of these questions were just kind of not new for us, because we've been thinking about these things for the last couple of years and trying to manage them internally and keep an eye on them. But it's certainly different than the series A we raised last year. David, You've been building and investing since before the dot com bust, and I'm so curious if you think a recession is

inevitable at this point. If so, is it a risk session with a capital ARE or a lower case are? How bad does it get? I do? I mean, I've been saying since February that I thought there were warning signs of a slowdown, impossible recession, and now we have the FED raising rates very aggressively. I think they waited a year too long. We had the warning signs of inflation a year ago, and they waited nine months before doing anything, and now as a result of that, they

have to overcompensate by raising rates very very quickly. That's basically causing the economy, I think to UH, to basically do somersaults. So I think we are headed into recession. There's already a slowdown. We had negative one a half percent growth in the last quarter. So I think everyone should be uh, I guess expecting a recession and if it doesn't material lot and I think probably a pretty serious recession. And if it doesn't materialize, that's great news.

But I think that's what founders should be expecting at this point. Which of the company, now you're old enough to remember, until them, I Cisco, you know, hitting its peak in in the dot com boom, and it still hasn't recovered. Of you know, the big established tech companies that have enjoyed this ride, do you think any of those could could become the next Cisco. Well, I think I think the big public companies aren't much better shape

than they were. The big public tech companies are much better shape than they were during the dot com crash. I mean, in the days of the dot com crash, many of those companies were just kind of illusory. They didn't have real business models, they didn't have real customers, they didn't have real revenue. That's not the case today. I think what's happening today is evaluation multiples are changing, but these are real businesses. Software is of service is

not going away. Software businesses are still incredible businesses. Their high gross margins. Uh, they're eating more and more of the economy. They're becoming a larger and larger category of spend by enterprises on software. So I don't think that this is existential. I think this is simply a big rerating in terms of valuation multiples, driven mainly by interest rates. And I think that, um, you know, what founders need to do is just make sure that they've given them

sells the runway to persevere through a recession or downturn. Christina, how do you think this is all going to impact the war for talent? I mean, obviously you have employees probably thinking twice about whether they want to make a jump. You know, do do do workers want to work at startups right now? Given the uncertainty? Yeah, I think. Look, there's a lot of doom and gloom that we talk about, you know, within an upcoming potential recession. And you know,

I don't think it's all bad news. I think, as you've both implied, like downturns or when some really great businesses have gotten built, um, and I think we'll actually become easier to recruit for the companies that correctly manage their burn and you know, stick around and are able to you know, not just persist, but almost accelerate through the downturn. David, I would agree with that, But I would agree with that. You know, PayPal was largely built

in the wake of the dot com crash. You know, my company Amor would be sold to Microsoft for unicorn valuation. That company was mainly built in the wake of the Great Recession of two thousand eight. So downturns can be a great time to build enduring companies. Uh, the warfare talent gets easier. Uh, there are fewer copycasts getting funded, so the competition could be easier the only thing that

gets harder is fundraising. And so if you make sure that you're that you raise money at the right time, and you make that funding last lengthen your runway, then uh, you know, building during a downturn could be a great time to build a great company. Well, I have to ask you about your former PayPal colleague and friend, Elon Musk. He spoke to Twitter employees as at an all hands meeting. We got some more details about his vision for Twitter.

Um the proposing the idea that all users get verified to crack down on bots, also saying that, you know, he believes folks should be able to say pretty outrageous things on Twitter short of breaking the law. Um, you know, do you think he I know you've obviously been supportive of him buying the company, supportive of his idea. Is what do you think is going to be most impactful about Elon Musk potentially taking over? Well, you know, I

already see a lot of outrageous things on Twitter. So I think what what Ellen is saying is that he believes in the principle of free speech and he thinks it needs to be applied in an even handed way. I mean, we need rules created by Twitter that aren't just made up as they go along, and that only effect one side of the debate. They need to be an honest, open marketplace for ideas. I think that's part of what he's saying. And then the other part that I hear is he's saying that Twitter needs to be

a real business. He's saying that your costs now exceed your revenues. That's not sustainable. We need to cut costs, we need to grow revenue. It sounds to me like he wants to apply some business rigor to the company, and um so I would expect that if he takes over the company there will be some cost cutting. Sounds like, you know, he believes in in person work. He said that he would prefer that people be in the office, although exceptions be made for you know, truly exceptional cases.

But I would expect him to apply some business rigger. And that's half of what you do. In the other half is um is basically creating some predictable rules around speech. Now, there are some doubts as to whether he's really committed to doing this deal, whether he's using bots. We had a former Twitter employee on earlier who believes he's using this spot issue to try to get out of it, that he's not really serious, that he doesn't necessarily really want it. Do you think he's Is he serious? Is

he committed to buying Twitter? Well, the fact he did this town hall with the employees today actually is is assigned to me that the deal is actually likely to happen. I agree that there was some question a few weeks ago about whether it was actually gonna happen, but I think the fact that he did this meeting with the employees leads me to believe it's more likely than not that it's actually going to happen, that he intends to

fall through with it. So you know, I don't know anything that he hasn't said publicly about it, but I would take that as a signal. David Sacks Craft Ventures and Christina Caciopo, CEO of Vanta, thank you both. Appreciate you covering wide range of issues today. Okay, come up, we're gonna hear from Gala see Digital founder Mike novograts on Crypto's fall from grace and the sudden exodus of investors. He's next. This is Bloomberg. It is time for our

Crypto Report. Now and there's no end to the pain in the space as the route and bitcoin rolls on now down for ten consecutive sessions. Galaxy Digital founder Mike Novograt spoke earlier on Bloomberg Today about these headwinds in

digital assets. You have the whole crypto and context what's going on macro right and we talked about there we're gonna be headwinds this year because the FED was gonna have to withdraw all liquidity and so assets that went up based on cheap money forever, if they're growth stocks or expensive watches or crypto, we're under certainly under pressure

all year long. What's exacerbated this move in crypto is, you know a bunch of leveraged players that had far more leverage I think people thought, uh, and so you can talk about Celsius or three hours capital um. That's caused almost something familiar similar to what happened with long term capital management, UH alleged. You know market neutral players with monster leverage and that's being unwound, and that's created a ton of fear in the space. And so you've

seen lots of credit being withdrawn from the space. And when credits with drawn, you know, you've seen prices collapse, and so I had hoped this year was thirty thousand fifty thousand bitcoin, and once we took out eight thousand, we've cascaded. Uh. Yeah, twenty thousand is a pretty good target with one thousand of the theory, and we've tested

that two days. You know, when I look at the US stock market, um, it looks like it's got probably four percent more to go to thirty five hundred, which is where the two d week moving averages, whereas support comes in, and I think you're seeing this liquidation of

risks and cryptos got caught up with it. Mike, tough question, but did you directly have any sort of exposure to those counterparts that you mentioned, the likes of Celsius, the likes of three urrows, or is it more third you know, third order effects that you gain the exposure and is it you get you get exposure indirectly from any big player in the space, right and when you have really big players that have borrowed money from all over the place,

it creates this daisy chain effect. And I think that's burning through the system right now. My senses, it's mostly burned out, like these fires go until they run out of oxygen, and so, uh, you know, you'd up to be one heck of a diamond handed player to have sustained all of this if you have too much leverage. And so my guesses leverage has been knocked out of the system. But humpty dumpy, doesn't you know, get put back together right away. It takes a while to kind

of sort through. They'll be bankruptcy proceeds, uh in many companies, And so I think while we should bounce off of twenty tho and bounce off of a thousand, it's gonna take a little while for a cryptot to regain and narrative regain honors. Galaxy Digital's Mike novograts who can catch up full interview at Bloomberg dot com. Rising inflation and a looming recession have hit all sectors hard, but especially retail.

But Rent the Runway was one of the few companies this earning season to beat estimates and raise guidance, joining us NOW CEO and co founder Jennifer Hyman. So, Jen, how are you bucking the trend here? I think the Rent the Runway is about delivering enormous financial value to the customer. So if you rent address for a special occasion from US, you're paying off the retail price, and if you have a subscription, each item is like eighteen twenty bucks, So it's even cheaper than shopping at an

off price channel. It's cheaper than fast fashion and abborce is the real thing. So we think that in an environment where we've been cooped up for the last two years, you're certainly seeing in kind of the earnings calls of Airbnb and bookings dot Com and live Nation that people are going out and they want ways to wear something new.

They just want to do it affordably. So rent the runways an experience that goes along with events and travel and going out to restaurants, going out to concerts, and that's why we've been able to perform. There's no question though, that inflation is going to hit folks even harder. People are paying more for gas, more for groceries. What's your forecast on how customer spending habits are going to change?

How much are they going to be willing to spend on apparel versus some of these essential items, and and how do they think about appare is it is it more of an essential because we've been cooked up for so long. I think that UM, first of all, rent the runway has a customer base that's slightly different. It's more of a higher income customer base. So I think, listen, everyone is impacted by the by inflation and buy an upcoming recession, and people are going to think about smarter

ways to spend in the category. So I think the only data we really have is what happened in two thousand eight was fascinating. In two thousand eight, Americans continued to buy sixty five articles of apparel per year, which was the exact same amount they bought in two thousand five, six and seven. What they did is they flipped into lower price per unit retailers. So they flipped into off chrice,

they flipped into value. And I really believe that re commerce in general can now be part of that cost consideration set. So even in recessionary times, people still want variety in their wardrobes. Now, how does the fact that we all went through covid um factor into this. I think that this procession might feel different, might look different than the last one. I think that we may end up spending more on experiences in this uh, in this recessionary period than we did in the last one because

we didn't travel over the last two years. We didn't really go out to eat, we didn't see friends and rent. The runway is spend that tracks with experiences. So I think that you might travel you have inflation, maybe you don't travel to Italy and you travel to Florida instead, and you kind of book a cheaper hotel. You're still going to get out there and go out. And I think that as long as we can market value, we

will be able to be more. Uh. Part of her considerations that now we're saying a lot of tech companies have to make hard decisions layoffs downstizing you had to make some tough decisions during the pandemic, and you've been very open about that. Do you have any reflections on that now, and you know, you know, potentially input for these founders who are having to make those tough decisions now. Um, we cut over our expenses in a three week period

in March, and it was a dramatic situation. And that one weekend in March, you know, over of our subscribers paused or canceled and so we had to act extremely quickly. We had to change the way We acquired inventory too, from buying inventory outright to actually revenue sharing and receiving our inventory and consignment. So I would say to other ceo s that there's not a moment to lose that

cash is king. You have to think about all of your investments and be more conservative and kind of the great thing about this environment is it's not happening overnight. There will never be another experience where, like a pandemic, we're all locked inside. You know, from March eighth to March nine, we were living different lives. So we're constantly looking at the data. Internally, we feel that we're able to react and thus far we feel positively. We gave

great guidance for Q two. But and for you know, reaffirmed our guidance for the year. We think that um we every business has to be smart right now because no business is pession or inflation proof. So last quick question, if you beat estimates and you raise your guidance, does that mean the pandemic era of sweatpants is over? Yes, Black Time twenty two like sweatpants is to I mean, people are dressing up in a way that I've never

seen before. They are bolder, brighter than they've ever been before. And I think that this is just the example, like they're dating again, they're going to parties again, like people aren't going to stop doing that now, and so I do believe that this recession might be different for service based companies. All right, Jennifer Hyman, CEO and co founder Rent the Runway. Always good to have you, Jen, Thank you for stopping by. That does it for this edition

of the show. We will be right back here tomorrow. I'm Emily Chang in San Francisco. This is Bloomberg