Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York city, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism, right here, right now at the NYSE, and at ICE's Exchanges and clearing houses around the world. And now welcome, inside the ICE House, here's your host, Josh King of Intercontinental Exchange.
Josh King:
Salesforce made its debut on the New York Stock Exchange on June 23rd, 2004, ending its first day of public trading with a robust 56.4% pop. As the Salesforce team entered the NYSE that morning, it's then chief financial officer, Steve Cakebread, arrived in style, catching a ride in a brown unrestored 1998 Buick. Interestingly enough, this wasn't the first time Cakebread had been at the NYSE. Cakebread's parents were well known for holding wine tastings on the exchange floor after hours. Their family business, Cakebread Cellars, wasn't a public company, but its winery was a fixture on the St. Helena Highway in Napa valley, and they developed their own globally recognized brand and image. Perhaps among the Sauvignon Blancs and the Pinot noirs is where today's guest acquired his business acumen. But how different is harvesting a vintage from preparing for an initial public offering? A recognized expert in readying maturing companies for their IPOs, Steve Cakebread led the financial teams that took Yext, Pandora, and Salesforce to successful debuts on the NYSE.
Josh King:
He serves on the boards of Bill.com, which went public here a year ago. We had Rene Lacerte, its CEO, on the program shortly after its IPO, and sat on the boards of SolarWinds and eHealth, as they too went public. Those who are into the study of grapes and the magic elixir derived from them, look no further than the world Atlas of wine by Hugh Johnson, now in its seventh edition, but those who want a deeper understanding of just what it takes to nurture a firm from the first hires, to listing shares on the exchange, will now look to Cakebread's, The IPO Playbook, an insider's perspective on taking your company public, and how to do it right. After the break, Steve Cakebread takes us on his journey leading three successful IPOs, and how your company can do the same. Our conversation on the path to becoming a public company with Steve Cakebread, comes right after this.
Speaker 3:
Board diversity is important.
Speaker 4:
Board diversity is important.
Speaker 5:
Board diversity is important.
Speaker 6:
Board diversity is very important.
Speaker 5:
Not just because it's the right thing to do, but because diverse leadership at companies creates better companies.
Speaker 3:
This is about value, not values.
Speaker 7:
With board diversity, you build better companies.
Speaker 8:
Diversity of thought, diversity of perspective.
Speaker 9:
Different perspectives often yield better outcomes.
Speaker 5:
We need to have different perspectives with different backgrounds to really inform and find the best solutions for our organizations.
Speaker 3:
Companies that have more diverse boards perform better.
Speaker 10:
Diverse teams are better performers. That is absolutely true in the boardroom as well.
Speaker 11:
It makes a difference to the employees who work for companies. It makes a big difference for the communities in which they work.
Speaker 12:
Our business is about building leaders for the future. And that talent cannot be only half the population of the world.
Speaker 13:
What are you waiting for? 50% of the population, for some reason, isn't qualified? Let's put the smartest people we can in the boardroom, and why ignore people or to exclude people for any reason, other than that they're not qualified.
Josh King:
Steve Cakebread is a recognized expert in preparing for IPOs, having led the financial teams that took Yext, Pandora, and Salesforce, to their successful IPOs. Earlier in his career, Steve served as CFO for Autodesk, vice president of finance for Silicon Graphics, and director of finance for Hewlett Packard. Steve earned his bachelor's degree in business from the University of California, Berkeley, and his MBA with a focus on international finance from Indiana University's Kelley school of business. Welcome, Steve Cakebread, inside the ICE House.
Steve Cakebread:
Thank you very much, Josh. Great introduction, much appreciated.
Josh King:
So, despite the pandemic. Steve, September and October were the busiest months in history for IPOs on the NYSE, what do you attribute that to? Does the marketplace sense, perhaps, that the conditions for going public might soften under democratic administration, and that CEOs and their boards might think it's time to get public while the getting's good?
Steve Cakebread:
That's a great question. I think that IPOs and getting your company listed on an exchange, transcend all the troubles that everybody has. It's about raising awareness of your business, it's about providing liquidity for those employees that got you to that point, and it's about letting investors, and in my case, I'm a very big advocate for individual investors, to get into stocks to participate with growth. For sure, getting listed gives you access to broader capital raises in various different ways that you typically don't have as a startup company, but, I think you've looked at it, IPOs have been going on and on and on through all these different dilemmas, 2007, and even before that, and I think it's just great that founders want to get their companies public, and get the recognition that they deserve, and the opportunity for investors to invest in those great opportunities.
Josh King:
So, Steve, given that we are in the midst of a presidential transition, and will soon be watching the opening months of the Biden administration, let's start with what I suspect might be an obscure moment in your career. 27 years ago, in early 1993, just as Bill Clinton and Al Gore were beginning their eight-year run in the White House, the young president and vice president need to show their Silicon Valley cred, and picked Silicon Graphics, then led by Ed McCracken, as the place to do it. They've got a VP of finance named Steve Cakebread. Do you remember that visit?
Steve Cakebread:
Yes, I do. They had us all blocked away from the room, but we could see through the windows Bill and Ed talking when they had that conversation, but it was an exciting day, because it's not often you get to see candidates and presidents in a room. It was great that they started to embrace technology, because, as you well know, technology has always been offshore from the East Coast, to some degree. And so, that bridge has to continue to happen, and I think you're seeing it today, clearly with the vaccines and the fast pass, the world needs new technologies, and I've been fortunate to be part of a lot of those companies from Hewlett Packard, and as you mentioned, SGI and Autodesk and Salesforce in particular.
Josh King:
Well, I was talking with Andrea before we talked, and she said she'd ordered a book that I had written a couple of years ago, but I raise that particular moment, Steve, because I went back to my own files the other day and found a picture of this moment, because I was the advanced man in charge of Clinton and Gore's visit to SGI that day, and I'm right there in the front row giving Ed and Al and Bill their cues about how to go, because I remember, the cafeteria that we were in was actually small, and everyone saw the event piped in from different locations around the campus, but you had already had 20 years under your belt as director of finance at Hewlett Packard, what was unique about the SGI value proposition? It was a totally unique company at the time.
Steve Cakebread:
Yeah. That's a great question. It was. There was a lot of energy, it was breakthrough technology, and for me, fortunately, it's tough to move from a very large company, which Hewlett Packard had become. Interestingly enough, when I joined Hewlett Packard, it was about a $200 million revenue a year company. When I left Hewlett Packard to join the folks at SGI, it was over $18 billion. So it was a very different company from what I joined, but I also got a chance to go to work with people that had worked at HP. So the cultures were similar, more fast paced, more direct and accountable for results was a big part of the SGI culture, and I loved it. They did a great job with their employee base, getting us engaged. I was very fortunate to work with some great people in that company, like Gary Lauer, that's how I ended up at eHealth, and obviously, Ed McCracken, Stan Meresman. I mean, it was a league of a company being able to promote other companies going forward. That, in my book, is one of the things you have to look for; work with great people, because they're going to start great businesses around you as well and give you even more opportunity.
Josh King:
So, then, let's wind the clock back a little further, Steve, to the beginning, really. You began sweeping floors in your parents' garage as a 10-year-old, you had a paper route, you worked at Long Drugs, which was subsequently acquired by CVS. Now, many know you as the master of taking tech companies public, and you've added author to your resume. Why did you decide that it was finally time to put all the lessons in this tone, The IPO playbook?
Steve Cakebread:
Great question. I get two or three calls a week from founders or CFOs in startups asking questions about, "What do I need to do? How do I get this done? What's the most important thing when you start down that IPO roadmap?" And, a 30-minute phone call just can't communicate all the information that one needs to know. So I said, "Look, I ought to just write a book about this." I'm certainly not an author, but it was an enjoyable experience and a learning experience. And I'm hopeful that the founders, other financial people, other people in the industry can take a look at this and say, "This is how I can do it." It's not as hard as everybody makes it seem," and we can go into that, but it's a process, but you got to have good people, and you have to have a great vision. I was really fortunate to work with Marc Benioff. I mean, he has a great vision for his startup, and look where it is today; 16, $17 billion business. Crazy.
Josh King:
Did the kid who was sweeping his parents' garage, or working in a drug store, imagine himself with a career in finance as storied as yours?
Steve Cakebread:
You know what? I don't think anybody grows up thinking they're going to be a chief financial officer any place. At least I didn't. I actually went to Berkeley to get an accounting degree, because at the time, I didn't know what I wanted to do, and I figured, if nothing else, I can go do the books at my parents' garage, and have a job. So that's how I got into finance, but I have been very fortunate to follow a path of opportunity, and the one rule of thumb that I always had is go take the job nobody else wanted, because if you screwed it up, nobody else wanted to do it either. If you made it successful, you started to build a reputation. And so, one thing about having a base case that I could earn a living when I left the house, and another one about, take all the stuff nobody wants, because maybe you won't screw it up, and I'll make it successful.
Josh King:
So your first job out of college was with a CPA firm. Was that the job that nobody wanted at the time?
Steve Cakebread:
I think everybody wanted it, but as it turns out, I was no good at it. One of the things, and you've been around long enough too, you have failures, if you will. I won't describe my work at a CPA firm as a failure, but clearly, they knew, and I knew this wasn't my career. And so we mutually agreed to part ways, ad that's how I ended up at Indiana University getting my MBA there. And ironically enough, the way I paid for it was graciously through IU. They made me a teaching assistant to teach undergraduate accounting, which is where I actually learned accounting.
Josh King:
Was the move to go to the Kelley School of Business at Indiana, did your parents look at you a little cross-eyed, this person who'd grown up on the Coast, and suddenly heading to the heartland?
Steve Cakebread:
That is a great question. No, not really. They said, "We'll pay for four years of school," which got me through Berkeley. I got a job, then I didn't have a job, and they're going, "Well, what are you going to do next?" And I did get into Indiana, which was great, but I also took the opportunity to move from the West Coast, because I had been there, growing up, pretty much my whole life, and I had met people from Indiana in the Midwest, and just said, "Hey, this is a great opportunity to go see another part of the country, you don't often go to." Although Bloomington is well known for its little 500-bicycle races, and I was into the Indianapolis 500, and it was only two-hour drive away, but it gave me a chance to start to see other parts of the United States, and that started my wanderlust going and working in different countries for Hewlett Packard, traveling the world.
Steve Cakebread:
So, it was one step in that process that got me started. So, they didn't think I was crazy. They let me follow my path, which was really nice, and they let me earn my own way, because the only way I got to eat is if I had a job someplace else.
Josh King:
So, Steve, after the SGI years, you approached Autodesk as they were looking for a new CFO. You were warned by the recruiter that their CEO at the time, Carol Bartz, wouldn't like you because you had no C level experience. How did you overcome that hurdle?
Steve Cakebread:
Right. That's the toughest thing for any executive in any function to move from that managerial director function into a C-level opportunity. I simply was working at SGI in Mountain View, and living in Napa Valley for all the right reasons, and so, on weekends, I would drive past the Autodesk headquarters. And one Friday, I just told the guys at Silicon Graphics, "I'm going to leave a little bit early." I drove up, stopped off at Autodesk in San Rafael, dropped an envelope with my resume on Carol's desk, literally on Carol's desk, Carol Bartz, and said, "If you're interested, give me a call." And, by Monday morning, I got a call, and stop by on my way down on Monday to Silicon Graphics, had a great conversation with Carol. And at the time, Eric was the CFO, and they were transitioning him into a chief operating officer role, so it was a perfect setup for me.
Steve Cakebread:
I got to learn from two of the best people in Silicon Valley at the time. Carol clearly had worked on different companies, actually worked as a competitor at Sun Microsystems when I was at SGI, and then Eric was just a great teacher. So, I had a great opportunity to learn from the best, and I've been lucky. That's been part of my career all along, is working with some really great executives that helped make me even better.
Josh King:
Talk about great executives, when your time at Autodesk is coming to an end, you're asked by MarC Benioff to recommend CFO candidates for his startup. I think it was something called Salesforce, and after studying the company and its plans for about a month, you decided to ask Benioff, why not me? I mean, with Benioff, you were like Dick Cheney to George W. Bush. What was it about Salesforce that made you decide to going from leading the search, to becoming the searchee?
Steve Cakebread:
Yeah, it's a great question. Well, part of I stalled a little bit, because I had to do a two-week trip over to India for Autodesk, and by the time I got back, everybody at the time, in the valley, and particularly financial people, one of their markers was to take a company public. And I had not done that. I'd worked for Hewlett Packard, Silicon Graphics, Autodesk, they were a couple of billion dollar businesses. And so, I finally got home and said, "Well, this might be my opportunity." And that's how I got to go back to Marc and say, "I don't know anybody better than me," which was kind of true. I didn't know any CFOs better than me at the time, and didn't really understand cloud or utility computing, if you go all the way back, it was utility computing and all the charts that we did to convince you what that was going to do for you beneficially. And, he and I just started a conversation, and I think that conversation, both because he and I had that dialogue, because as you know, you have to have a rapport with your founder or CFO, he was taking a risk. I'd never done this before.
Steve Cakebread:
He was 20 years younger than me. I still had the gray hair, and he still had hair. So, it turned out to be a great team effort, and I thoroughly enjoyed the time there, but we found a match where I could get what he asked for done. And Marc always had this thing, "I have the vision, I need you to help me implement that vision." And I really bought into that scenario, and we had a great run at it, for sure, at Salesforce.
Josh King:
So, Marc has the vision, you are his implementer. In the book, you highlight some of his brilliant decisions regarding the company's sales organization and its structure, were these decisions an important step in the path to Salesforce actually getting to its position of going public on the NYSE?
Steve Cakebread:
I think it was, because we had started in the dotcom bomb days. I mean, talk about take a risk, join an internet company in 2002 when everybody believed the internet wasn't going to be commercially successful, and Salesforce was selling product to all the technology companies in that arena. So when we started talking, and I joined them in that period of time, we actually changed the business model for Salesforce from pay-as-you-go to subscription model. It was one of the first technology companies that used subscription accounting, and the subscription model to sell. We changed the sales organization, and Marc, as you know, was a great sales executive at Oracle in the early days of Oracle, and had this vision that when you're selling to small businesses and medium size businesses, there's one pace in sales motion, but when you're selling to the very largest corporations in the world, there's another. And so we actually split the sales organization, but both of them worked under the subscription business model, and it made both the sales organizations successful.
Steve Cakebread:
To this day, when I get into of companies and they talk about, gee, they should have two cheap revenue officers, I'm going, "Yeah, it worked at Salesforce." Because the focus is so different between trying to do a two to $5 billion business and work with them as a customer, versus the 100 million, 50 million, $20 million. And it worked out brilliantly.
Josh King:
I mean, you took Pandora public in 2011. What was the Pandora story in terms of, well, if it was around today, its valuation would be a whole lot higher than it was in the early days of audio streaming?
Steve Cakebread:
It's interesting, it was a big change for me too, because you read my litany of business to business executive companies that I worked through in all technology, and Pandora was interesting, because Tim Westergren had a different approach to music discovery. That's really the heart of it, is categorizing music in these 100 different values, and then assigning them, so that when you listen to a song, and that song had certain values, he could go find other songs with similar values. It was brilliant, and to this day, I still listen to Pandora because of the discovery aspect of it. But the streaming was early days too. I mean, Apple was doing the Apple Music Store, but you still downloaded it to your iPod. So the streaming technology that Pandora began with as well, was innovative and interesting. So I got a chance, again, to work outside my comfort zone, take a risk, work with a group of people that thought very differently, and that's how I started to learn about advertising, and demographics, and markets in a different light, and yet build a team that could take a company public, because that's what I brought to the table, is how to get Pandora public, and the processes there.
Steve Cakebread:
When I joined, the board, as typically, would say, "Gee, we'd like to go public in about three to four months." And I'm going, "No, I don't think so. Let's go look at your billing systems and all this other, and let's go look at your team." And I got to build a great team at Pandora, some of which are working with me today at Yext, as we got through that process. Took it public, had a great run at it, but you have to stay on top change, and Spotify came in, Apple went to streaming, Netflix showed up. And so, some of the learning is, you can have a great company, but you really have to keep up with inventing and have that new vision to bring your company forward every year.
Josh King:
So, Steve, it's now been 13 years since Yext was founded by a small group of employees, most of you in ponytails, and today, Yext is an enterprise value at nearly, eh, 2.3 billion, having gone public just 24 months ago. When your company grows that quickly, there's surely many highlights, but what makes the IPO the most important turning point for a company like Yext?
Steve Cakebread:
Yeah, it certainly is a turning point, because it puts a stake in the ground that you're qualified in a real business. The New York Stock Exchange is willing to list you is a big deal, and it puts credibility to that business. Even though the model may not be making money at the time, you're talking to large corporations. We have some very large US corporations and multinationals as well, they need to feel comfortable that you're a long term viable player. And it's not going to happen, if you're not listed on an exchange somewhere, you don't take your company public. So, it raises the visibility, and puts credibility into your business and your company. And that's what we needed at the time, and we've done great since.
Josh King:
You mentioned in the book, the SEC's emerging growth company classification, and how you listed Yext under the EGC rules, how is this helpful for these early stage companies going public?
Steve Cakebread:
I think it helps you get started, but it's somewhat delusional. And if you have a really successful company... And I have two examples now. I went to Yext, we went under emerging growth. We didn't think we need to do some compliance and SOX and all that stuff for a year or two out as we grew, as it turns out, we were so successful, we actually had to start SOX and cross the $700 million threshold that made us an accelerator filer within 12 months. So now, all of a sudden, instead of having a two-year runway to do some of that, we had a six-month runway, and the exact same thing's going on with Bill.com. They've been great, wildly successful, and they blown through all the benefits of the emerging growth.
Steve Cakebread:
So, two things: use it to get started, but if you really believe your company's going to be successful, get started on accelerated filer, because it does take a while, and it takes a different kind of person to put the proper governance into a company, but I love the startup point, I just wish that they let it run a little bit, so that the bar was a little bit higher, to give you, as a startup company, a little bit of chance to get some breathing room in, and then get going on accelerated filer status.
Josh King:
After the break, Steve Cakebread and I will do a deeper dive into The IPO Playbook, and the steps that you need to take to become a successful publicly traded company. We'll be right back right after this.
Steve Cakebread:
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Josh King:
Welcome back. Before the break, Steve Cakebread and I were discussing his tenure as the CFO who brought Salesforce, Pandora, and Yext, to the public markets. Steve, you've been involved with three IPOs on the NYSE as an executive, and two more as a board member, do you have any favorite moment at the exchange from those five events?
Steve Cakebread:
Every minute I walk in there is a favorite moment, and as you mentioned, when I first started going and talking to Richard Grasso, that'll date me a little bit, but he was president there, to go and talk to the team about taking Salesforce public. The coolest thing was, the security teams, as you come through all the security checks, would ask how my mother and father were doing, because they got to be part of that wine tasting, and it's still the most memorable thing, both myself and my parents take away from that. But, there's a couple of things, just the elevator ride up to the floor where the ground room is, and all the history is there, I appreciate and enjoy the history of the New York Stock Exchange, just bar none, including the fact, and one part of history that's gone, was the barbershop for the traders. And I believe they probably filmed some of the Inside Man there in the barbershop before it went away or recreated it. So, I love going there. It was also when I brought my wife, and she went and asked for the lady's room on that floor, and I said, "Oh no, it's downstairs or upstairs that.
Steve Cakebread:
So, just the history of the building is incredible, and knowing what's passed through there, and you get an opportunity to just be standing there and participating that, is really a great moment. I can go on about ringing the bell and all those, but just going into the ground room and looking through the building itself is pretty crazy enjoyable.
Josh King:
There's a lot of debate, Steve, about the cost of going public. Some founders believe that it's easier to keep the company private, rather than deal with a cost of going public, does this theory hold water in your book?
Steve Cakebread:
Yeah, not so much, and I'll tell you why. I mean, as I describe in my book, even the regulation for a wine business is extensive and excessive. To get your business public, take some amount of incremental money to be sure, but if you're running a really good business, then it's important that you get to disciplines in, anyway. And those are not that expensive, and you would do that anyhow. So, I would argue that, whether you want to take your company public or not, if you want to run a successful business, you will do everything that you'll have to do to take the company public. The winery has an outside board of directors, for example. Why wouldn't you? They give you input and help you steer the ship at tough times. There's processes and filings that you have to do, whether you're a small business or a large business. Those all cost money. So, in my mind, getting the governance right, and getting the discipline of running your business is actually more beneficial, and far exceeds the cost of going public.
Josh King:
In your book, The IPO Playbook, you make the argument, Steve, that an IPO really is the best long term strategy for most companies. So, given that, why does some startups choose to pursue being acquired by larger companies instead of preparing to take their own path toward the public markets, at least first, to test the public appetite for their businesses?
Steve Cakebread:
Yeah, that's a good question. I think some of it is the founder's motivation. It's hard. I mean, as you described, Yext has been at it for 13 years. It's not an easy thing to do. It may be that your vision is so narrow, there's really not that expansive opportunity, because it was described that Salesforce, and Yext, and Pandora, you have to continue to reinvent that vision to have a longer term play, and maybe that wasn't in the cards. Some of it is, everybody convinces you take money now, because it's harder to make money in the future. I don't honestly believe that. I worked at a lot of tech companies, they've been very, very successful over decades, and I think you give up that incremental opportunity for near term cash. And, I won't go into some of the names, but I bet some of those companies that sold to Facebook and others, really wished they were public now on their own, because their valuation would've been higher.
Josh King:
Their valuation would've been higher, and the opportunity for millions of retail and investors would've been greater, and you have talked to Stacey Cunningham a lot about this. Stacey talks about it publicly, I think you've talked about it publicly. Let's say that none of these companies take your advice, and they either stay private with their VC capital, or choose to sell themselves, rather than build themselves into powerful enduring enterprises in the public markets, what is the economy look like without this many public companies?
Steve Cakebread:
Yeah, that's a good question. I started looking into that, I was writing the book, and as you well know, I mean, a decade or so ago, there was over 7,000 companies listed on exchanges, and now, today, they're less than 3000 or near that mid-3000 mark. So, the number of listed companies has gone down dramatically. I maintain, and if you look at Salesforce as a great example, yes, we had a good pop on the first day, but our listing price started at 11, $12 a share that day, in 2004. We're in 2000, 16 years ago, and now, if you had that one share at $11, it's worth over a thousand dollars today after shareholder splits, et cetera. I think people that want to participate, and individuals, we call them retail investors, individual investors, obviously are going to want to buy into the stock market when they see a company go public at 85, 95, a hundred, $200 a share, it gets difficult for them to conceive getting invested, where 11, $12 a share, they can participate in that type of growth.
Steve Cakebread:
Pandora, Yext, Salesforce, all went out in the double teen dollars a share, and I think all the investors, if they joined us, would've been fairly successful, but it's that individual wealth creation that's one segment that's missing in the United States these days, where small individual investors can participate in these growth stocks and have their appreciation go. That's not happening when you take a large company like Facebook or Uber out at a couple hundred dollars a share. It's very difficult for middle market investors to do that.
Josh King:
We saw this animal return to the landscape earlier this year that we hadn't seen for a while, the stock split. That was evident with the splits at Apple, and also Tesla, should there be more stock splits? Used to be a common practice.
Steve Cakebread:
I'm a big advocate for it. The money people will say no change in value, but in fact, if you looked at Salesforce, they split four for one, and that value's gone up ever since the time that they did the stock split. I think that there's... Again, you want to be able to have a broad ownership of your company, I believe, no matter what you're doing, automobiles, CRM, et cetera. And I think that those stock splits help make the share price more affordable for individuals to get in. It doesn't change the market cap, we all know that, but it makes it more affordable and brings more investors into the market space, and I think allows for a much more liquid market.
Josh King:
I don't know if you have the Robinhood app installed in your iPhone, and use that at all, but what has Robinhood done to the investing landscape over the last couple of years?
Steve Cakebread:
Well, it depends on who you listen to. I think, one, it's clearly brought more people into the market, and gives them access to the market. Whether it's informed access to the market, is a little bit questionable at this point in time, but I think it's a new take on bringing individual investors in a technology area, and we use millennials over rock, but they look at technology differently. And they are, I think, starting discover that there can be wealth creation in the marketplaces through some of these things. I think they'll also discover that it's not free money, you have to be informed about those investments, and what we've seen in all of these, there's goes up and goes down, they normalize, but I'm anxious to see that things like Robinhood bring more individual investors into the marketplace.
Josh King:
Steve, chapter 10 in your book deals with another animal that may become extinct, at least in its traditional form, in the COVID world, and even the post-COVID world, and that is the road show. Should we mourn the extinction of this beast?
Steve Cakebread:
Well, I believe not. I think, at the end of the day, we are all designed to meet and interact with people, and as you can imagine, having done three IPOs and three IPO road shows, when I go to London on a road show, and I walk in and I see the same people I saw at Salesforce, one is, it's fun. We have a history, a connection there. Yeah, the wear and tear is a little bit much, and Zoom makes it a lot easier, but there's Zoom fatigue as well. So, I'm a big advocate for taking on that roadshow, getting to meet and know who's going to invest in your company, giving the investor an opportunity to hear from you what your longer term vision is. And I will say that, over the past three to five years, roadshows going outside the US have gone away as well. And, at Yext, we made a point to go to Canada, and to London, and we never got such great reception from those potential investors, because they've been locked out as well in this new institutional investing, and they still do want to invest in IPOs. And they have a much different and longer term investment thesis, than most of the money managers in the US.
Steve Cakebread:
So, yes, it was a slug, but we enjoyed the flight over, we enjoyed different foods. I remember getting out of the plane and there's four cars lined up, because there was a lot of us going on this. We got to the hotel, we had our tea and scones before we were off to our first meeting, and literally, we were in London for 24 hours after 12 hours in Toronto, but those are some of the best investor meetings that we ever had, because they wanted to know what was going on, and we wanted to make sure that they had a chance to invest in our company. The roadshow was hard, there's no question, but it's also a lot of fun.
Josh King:
Does it come back after a vaccine?
Steve Cakebread:
I hope so, because I think, if you don't start to see and understand the person that you're investing in, I actually think it moves to numbers and spreadsheets. And, I have said all the time, when I'm looking for banking teams and research people to work with me, I want them to understand the story, not the spreadsheet, because it's a story that makes a difference and will add value over time, not an Excel spreadsheet.
Josh King:
Speaking about numbers and spreadsheets, you've got a section in that chapter, chapter 10, on storytelling, and whether you're doing it in person or via Zoom call, one of the chores you assign to prospective management teams is to go online and watch Ted talks. Why is that?
Steve Cakebread:
Well, because none of us are built... Not none of us, I wasn't ever built to do presentations like this. And I think what you start to do is understand, as you go through and watch people who came, not with an agenda, but ended up doing a Ted talk to learn how they present, how they make their points, how comfortable they can feel on a stage, or an audience, or a podcast, that's not something that's built into any of us. And in fact, just a couple of days ago, I'm getting more media training. Now, I've been doing this for a long time, but it takes a different set of skills and opportunities within yourself to convey your message to people, and I think that's something that all of us can benefit from.
Josh King:
Then what's your answer to your investors in Boston, Chicago, and London who say, "Steve, where's my 150-page PowerPoint deck."
Steve Cakebread:
Oh, well. I love doing PowerPoints. We can ship them off to you anytime time you want, but... And you do do that. I mean, one of the things, oddly enough, PowerPoints are the bane of everybody's existence, but they help you collect your thoughts and make sure you present your ideas succinctly, so that people, when they're done talking to you, take it away and have something that reminds them what the conversation was about.
Josh King:
So you talked about your Yext road show that was in New York, Toronto, and London, with Salesforce, it was Milan, Geneva and London, as grueling as these are, and you talked about meeting the investors you like, what's the importance of finding chemistry with them? What gives you the confidence that sometimes you can even turn your nose up at money that's put on the table right in front of you?
Steve Cakebread:
Sure. Well, you know what? Life's too short. You got to work with the people you're going to have fun with and enjoy, and they have to believe that you believe in what you're saying. Milan was particularly interesting. I tell on my book where Marc went off and wanted to go shopping in the morning, and he left me with this great Deutsche Bank private wealth manager. We had the best conversation. He learned about Salesforce and cloud computing, and I learned about what an investor thinks of in looking at a business, and how it really ends up, at the end of the day, about people to people. So, those opportunities are few and far between, and you can rush a road show and dance around and say, "Gee, I was in 17 cities in 12 hours," but you really got to make sure that you connect with your investor, because there's days, this... As you know, Josh, this is a business, it's organic. It's never up until the right, there's ups and downs. And I need to have investors that have looked me in the eye, and I have been able to talk to them, and say, "Look, we're going to get through this. Just trust me, we're going to get through it, and we'll do everything we can to make both of us successful over time."
Josh King:
The IPO Playbook, Steve, highlights six big reasons to go public, walk us through some of those arguments.
Steve Cakebread:
There are six. I focus on three in particular. One is being able to bring your vision and your business to awareness. That Salesforce was all marketing. All marketing. CRM, customer marketing. The largest lead gen day the company had for five years was the day we went public, and I got all the credit for all those leads. So, building that awareness and building that brand is really, really important. I think the second part of this is really to enhance your company's governance, and now, that sounds like a bureaucratic word, but the reality of it is, it makes you more efficient as an operation. It makes decisions faster, and it makes sure everybody's accountable for what goes on. So governance is a big part of it. The third part of it is really about attracting people. And this is interesting, because as I said, the IPO helps those who've got you there, get some liquidity, but it's also true, people work on different risk profiles. So you need to keep hiring better and better people, as the company grows with different skill sets.
Steve Cakebread:
And, being public allows you to attract those type of individuals that may not have been risk takers the day before the IPO, but now they think they have a credible company, and are willing to join a week, a month, or two years after the IPO, and your company's going to need that talent as it grows. So, I think those are the three for me that are big. There's others, of course, that I talked about in the book, you should read, but those, to me, are the essence of what goes on in getting the company public.
Josh King:
Steve, what's the most difficult issue one would face when making the decision about whether to go public or not?
Steve Cakebread:
Oh. It's a lot of work. I mean, there's a lot of... You look my book, and I talk about the 18 to 24 months of prep to get to the day that we could actually go ring the bell, with all of you at the New York Stock Exchange. So you have to be disciplined in project management, but probably the most difficult, is hiring the right people to get you through the right steps and process. And, it's not always just that they have the skills, but they have to have the ability to take the risk with you. The gentleman that I hired into Yext right out of the public accounting firm, always wanted to do an IPO, has never been any place else, but he took that risk, both because he was going to learn, but also to take the opportunity to take a business public and grow that business. I mean, you started with a analogy to wine. I mean, starting a business, and growing a business, and getting to public, is very much like bringing in a fine wine and planning it 10 years out, knowing people are going to drink Chardonnay or Cabernet in 10 years, because that's how long it takes to make, blending the vineyards that you come with, because you get wines from different soils or different flavors, and then bringing it to the table, so people can taste and enjoy it.
Steve Cakebread:
And, it's a lot of work, but it's a journey that's fun, and has to be put in the space of, if you're not enjoying it, you shouldn't be doing it there. You should go someplace else. And I've been fortunate to work with a lot of great people and enjoy doing these more than once. And I really do like bringing the teams and the people, and changing industries. We've changed industries with each of these businesses.
Josh King:
So you talked about that two-year process, after all the hard work to prepare for life as a public company, after all these years, you are now approaching the finish line on IPO day. Steve, you're right about the pricing committee doing their work and agreeing on the share price with the bankers that night before, then opening the bottle of Cakebread Chardonnay to savor the moment, explain the feeling of waking up that day. What's going through your mind, you're about to get in the car to come down to 11 Wall Street?
Steve Cakebread:
Yeah. I'm looking for my brown Buick. That was great. I love my wife for that, and I'll never forget it. We laugh every time, but you know what? There's this sense of accomplishment, because it is a big day, and you need to celebrate. And I've talked to a number of CEOs when they call and said, "We're getting ready, how many people should we invite to the New York Stock Exchange or NASDAQ, and how many people should we stay home?" It's like, this is a celebration for all those people, blood, sweat, and tears that got you there, but it's also the day where you have to put closure on that, and you have to open another door, and the start of another, which is really where this huge amount of opportunity and wealth can get created for everybody, where you become known as the type of company you want to be and where you're going to go. So, I always viewed those days as celebrating the finality of crossing the finish line, but also ringing the bell and getting going, because the journey is just getting started, and you've got to get yourself and your employees, and all the people around you understanding, it's the next day after the IPO day, that's the most important day from there on out.
Josh King:
The next day after the IPO day, Steve, you write that once you are a public company, you have to remain focused. That involves running the business, forecasting results, managing cash, hiring, hiring, hiring, finding new shareholders, and that's always a process of finding the next people to believe in your vision, and dealing with the SEC. I thought all the hard work was done at 9:30 when the bell rings.
Steve Cakebread:
Yeah. Don't you wish, but you know what? It's never stops. Even if you don't take your company public, what you got to do? You got to find customers, you got to find employees that see your vision, you got to overcome the dilemmas. I mean, even Napa Valley this year, I mean, there's a lot of great business people up there on their second or third careers, but when your vineyard burns down, you've got to start all over. So, you've got to want to enjoy to take on the challenge, and have fun with that challenge, whether you're public or not. And that's why I'd argue, for all the right circumstances, you should really consider taking your company public. Now, that doesn't mean all circumstances, but that's why I don't think it's any harder, private or public, it's just that it's different in terms of who and how you have to deal with people and some of the rules, but if you're not following those rules, you're probably struggling in a private business as well.
Josh King:
We're very familiar with the angel investors, the VC firms that are there in the early rounds of a company's life, you write about having to work once you're public with five types of investors, what advice do you have for dealing with all these investors?
Steve Cakebread:
Yeah, it's an interesting group of people, to be sure, but I think that's where we talked about the roadshow; making sure you spend time to get to know the various investors and what they're interested in, and making sure that as you do your earnings call, or you do your shareholders meeting, or you simply answer their questions, you understand what their issues and motivations are, and how they're being measured. I think, oftentimes, companies can get caught up in themselves, but forget investors also have expectations placed upon them, deliverables placed upon them, and outcomes placed upon them. Part of your job is to help them understand where you're at today, and where those outcomes are going to be in the future. So, it is a mutual working relationship here. That's why I make a part of my job to go get to know them, because I'd rather have those discussions with enjoyable investors, rather than ones that are not so enjoyable. And, some aren't, some are, but I've really enjoyed the relationships I've had with some of the investors.
Steve Cakebread:
At Fidelity, there's one long term portfolio manager. The first couple of years, he asked me how the company was doing, the next couple of years, he asked me, what vintage he should be buying from Cakebread Cellars. And those relationships, I would never get out, and they make, I think, our business life much more accommodating and easy to do going forward when things are tough.
Josh King:
Well, we've got Thanksgiving and the holidays coming up, Steve, we can finish on a question of what vintages should we pair with our Turkey this week?
Steve Cakebread:
Well, you know what? That's always the trick question as to which child do you love them most? So, I will just tell you that my father is enjoying Chardonnay with his Turkey, my wife and I are going to enjoy Sauvignon Blanc and some [inaudible 00:46:00] afterwards for dessert, and one of my brothers, because he loves to barbecue his, we'll probably use a Pinot noire or Cabernet. So, I got it covered. You can drink anything you want as long as it's Cakebread, and it works out just great.
Josh King:
Takes 10 years to bring a bottle of wine to fruition, after 20 years of experience with IPOs, what have you learned about these different vintages?
Steve Cakebread:
Yeah, that's a great question. Clearly, rules around disclosure, and timeliness of information and transparency keep changing, and I think everyone needs to stay abreast of that. When we brought Salesforce public SOX was just coming out, the Sarbanes-Oxley requirements. I used to have, in our computer room, we kept failing the process, so I actually hired Brinks' guards to stand in front of the door, and I bought them plastic guns. It freaked everybody out, but you had to get into the psyche of people understanding control is control and it's important that we do it the right way. And so, it's keeping up with those times and understanding the changes that are going on. But, at the end of the day, it's still running a solid firm business process, and doing it right. If you do it right, all the rest of these rules really don't... They're not a big deal. More disclosure, it's probably good. Right disclosure is probably better, but as a CFO, I can make those choices as to giving the right disclosures out despite the rules.
Josh King:
Well, Steve, it's been a great journey from our first little reminiscence back to 1993, Silicon Graphics, up through your three IPOs, and the publication of your book, long awaited, much needed, The IPO Playbook: An Insider's Perspective on Taking Your Company Public, and How To Do IT Right. Thanks so much for joining us inside the ICE House.
Steve Cakebread:
Josh, thank you so much.
Josh King:
And that's our conversation for this week. Our guest was Steve Cakebread, author of The IPO Playbook, and CFO who brought Salesforce, Pandora, and Yext to the public markets. If you like what you heard, please rate us on iTunes, so other folks know where to find us, and if you've got a question or a comment, you'd like one of our experts to tackle on a future show, email us at [email protected], or tweet at us @ICEHousePodcast. Our show was produced by Kearney Ferguson with production assistance from Ken Abel and Steve Nomencher. I'm Josh king, your host signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, or a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of mental clarity.