This article was originally published on Hypepotamus.com.
The rash of recent tech IPOs — Lyft going first last month, then PagerDuty, Zoom, Pinterest, and more to come— has startup enthusiasts and investors eagerly watching the markets. But beyond the headlines and listing prices, the road to an IPO is a long and laborious one.
“Arduous,” is how Lynne Laube, co-founder and COO of Atlanta-based adtech company Cardlytics, describes the IPO process. One year ago, Laube and her partner, CEO Scott Grimes, rang the Nasdaq bell in the first tech IPO of 2018. Cardlytics sold 5.4 million shares for $13 a share, raising $70 million.
“We’re really optimistic about our growth opportunities,” Grimes told Hypepotamus immediately after the IPO. But public stock can be volatile, and Cardlytics has seen its shares soar to $28 and drop to $10 in the year since.
On March 26, the Atlanta chapter of entrepreneur support organization Endeavor hosted Laube at their signature Scale-Up Breakfast, a closed door event where a group of founders and CEOs at scaling companies can hear firsthand from a top local entrepreneur.
The purpose of the breakfasts — and Endeavor as a whole — is to give the most high-potential founders an advantage, help them grow faster, generate more revenue, and create more jobs. The audience was naturally highly curious about the decision-making process behind the IPO, the positives and negatives, and how Cardlytics has changed and performed since becoming a public company.
Similarly to how she says she addresses Cardlytics employees, Laube spoke candidly about both the benefits and the downsides of being public. She described the emotional drain of the process, her strategies for dealing with employees, and the struggles they continue to face (hiring is still as competitive as it is for any young company).
More than anything, Laube emphasized that the work does not stop after the roadshow is over and the bell rung. Cardlytics continues to grow — they are now at over 400 employees — and Laube says that she and Grimes are constantly focused on building a strong company “where people want to work.”
“It was always our destiny to go public”
Because Cardlytics’ business model hinges on their partnerships with large banks — think Bank of America, SunTrust, JPMorgan Chase and more — Laube and Grimes knew from the very beginning that they would need to operate with the discipline of a public company.
Being public comes with a much higher level of scrutiny and regulation than private companies need to comply with.
“When you work with banks, being trusted to handle purchase data doesn’t come lightly or easily. And it shouldn’t. We knew we needed to set up our business from the beginning in a way that would meet banks’ strict requirements. So, when it came time to go public, our technology and systems were already in pretty good shape,” says Laube.
Even in the early days, when she and Grimes would gather in coffee shops to talk through their goals, they saw an IPO as the preferred exit strategy
“Our philosophy was that the only destiny you can control is becoming public. You can’t control if someone’s going to buy you, you can’t control if someone is going to merge with you, you can’t control really anything other than, let’s build a big company and someday take it public,” she says.
And the fact that they had raised over $200 million in venture capital before the IPO was certainly also a factor, she says. The public offering provided a liquidity event for investors including Polaris Venture Capital, Discovery Capital, Canaan Partners and others.
“It is a lot of work on the front end”
Despite the compliance Cardlytics already had to go through to work with big banks, Laube says it still was a long process from the moment of “we are ready” decision-making to ringing the Nasdaq bell.
“There are a lot of rules that you have to follow. You have to really gear up for it — and spend a lot of dollars on lawyers by the way,” she says. Laube projects that a company needs at least a year of preparation to complete the whole process and distribute the costs over time.
Even the S-1 form — the document required by the Securities and Exchange Commission to announce an IPO — was tougher than she initially expected.
“The lawyers scrutinize every word. You have to go through it again and again to be sure every section is validated.”
The IPO roadshow “is not as glamorous as it might seem”
“It’s certainly a lifetime experience, but the actual process of going through it is arduous,” Laube says.
If raising venture capital financing sounds like a lot of meetings, try a pre-IPO roadshow — Laube estimates the team met with about 200 investors in seven days, in 2-3 cities a day. Sometimes they were presenting to a room of five or six investors, sometimes to 50 or 60.
“You’re presenting the same thing over and over and over again, they’re asking the same questions over and over and over again. You’re just on rinse and repeat.”
She does have fond memories and fun photos from the roadshow to look back on, and says it ultimately brought the team closer together. And there was one aspect of the roadshow that was as high-flying and glamorous as she expected.
“Now what’s really cool is, because of where you’re going and the number of back-to-back meetings you’re in, you have no choice but to get a private jet. And let me tell you, that is the way to go.”
“You can’t time the markets”
Despite a successful roadshow, Cardlytics hit poor timing. The same day they priced the IPO saw one of the biggest point drops in the history of the Dow.
“We landed and we were driving to the pricing meeting after the roadshow and from the moment we landed in [New Jersey] to the point we got into New York City to start the pricing conversation, the Dow dropped something like 550 points in a 35 minute car ride,” Laube shares, adding that the theory around timing the market is a “false thing.”
Despite the volatility, Cardlytics stock did close that first day slightly above its IPO price of $13 a share.
Leading a public company is “extremely emotional”
“I often refer to Cardlytics as my third child,” says Laube. “All of a sudden, your child is out there for the whole world to judge on a second-by-second basis.”
That turbulence started on IPO day, when the stock initially opened trading below price and Laube was “emotionally devastated.”
One year later, she still checks her stock at least once a day, usually more.
“It’s this thing where I want to know, what is the market saying about my baby right now? I just don’t think I was quite as prepared for the externalization of people judging my company.”
Employees’ moods can “go with the stock price”
Laube worked at Capital One when they went through an IPO, and says she has seen the same phenomenon happen there and at Cardlytics. Employee morale tends to follow the perception of how the company is doing, as determined by the barometer of stock price.
“It’s not just me who sees how the street is externalizing what we’re doing every second of every day. It’s all of our employees,” she says.
While the general company mood doesn’t fluctuate as much as her own, Laube says the lows are something they’ve had to be prepared to deal with on a company-wide basis. Her strategy is to go head-on and address it directly.
“We just tell them the truth, which is that we’ve got to believe in the journey that we’re on. On some days the street’s going to love what we’re doing, on other days you miss a little bit. You’ve just got to stay the course and believe in the course.”
Of course, this mood shift also means the employees care deeply about their work and its reflection on the entire company. Every employee at Cardlytics is given equity as part of their compensation package.
“People have the right amount of equity for where they are in their career,” says Laube. “Everyone has enough equity that can be meaningful for them relative to their career, and so they care deeply.”
Despite joining the public companies club, Cardlytics is still relatively small — 400 people total, with a little over half of those in the Atlanta headquarters. Laube says their size can be both an advantage and a disadvantage when it comes to getting the best talent.
“It’s something that I spent a lot of my time thinking about — how do I try to give people different experiences, even when I can’t necessarily give them that promotion or that bigger team,” she says.
To expand employee mobility even when they can’t necessarily provide a promotion, Cardlytics has established several employee-led activities and groups, like a Women of Cardlytics organization run by an internal employee board.
Their relatively small size has also allowed them to put unconventional policies in place — or in some cases, refuse to have a policy — to help create a unique environment. Some employees bring dogs or kids to work, there are no formal vacation or leave policies.
“Where we don’t have to have rules, we try not to,” says Laube. “You try to make it in an environment that a Fortune 500 can’t replicate.”
The work doesn’t end when the bell rings
“I tell people all the time, the IPO is just another step in fundraising. Where it’s different is the externalization of the company — that’s where it’s very emotionally and personally different. But really, it was just another fundraising and we’re still here building the company.”