Semrush's Eugene Levin on crafting your IPO Story
An Introduction to Eugene Levin
“If your dreams do not scare you, they are not big enough.” That was Ellen Johnson Sirleaf, at Harvard Commencement 2011. She was the first elected female head of state in Africa and if you’re going to be first at something, it’s going to be a little scary. Big dreams are scary. They require tedious work, dedication, and most of all, vulnerability.
As a SaaS operator, I’m sure you have personal, team, and company goals. If done properly, each of these aspirations serves one another eventually leading to prosperous outcomes for all. When everyone’s aligned this can often be when your company is ready for an exit like going public. And while you won’t be the first to go public, it’s a pretty exclusive club.
Today’s guest, Eugene Levin, president of SEMrush. As a gold medalist in capitalism, Eugene has valuable insight into what it takes to get to the top of the podium. He gave us an inside look at the nitty gritty process, as well as advice that you don’t typically get to hear. Listen on and hopefully by the end of this you might feel more comfortable with those big, scary dreams.
Initial Public Offering (IPO)
An initial public offering, or "going public," refers to a private company making its shares available to the public for the first time. And by offering shares through the primary market, it gives companies the opportunity to gain capital.
What to do today:
- Follow Eugene Levin.
- Schedule a time to meet with your leadership team to discuss whether an IPO is right for your company.
What to do next:
If you've determined that going public is the right path for your company, you now need to develop your IPO strategy and begin the complex preparation process to ensure that you meet the stringent criteria in accordance with the Securities and Exchange Commission (SEC).
Furthermore, aside from the preparation for the technicalities associated with the requirements and regulations of going public, part of this process should include preparing your leadership team (and all of those directly involved), both mentally and physically, for the demands this process will include.
The road to IPO is time consuming and expensive, so companies embarking on this journey should have a high level of confidence that it will happen. Our guest, Eugene Levin, knows firsthand what it takes to get there, and he explains the three biggest steps in the preparation process, which we share below.
Step 1: Craft your company story
Many underestimate the importance and power of your company story. But the sooner you can solidify it, the better — for many reasons. However, shaping your story is not as easy as it sounds, and it's likely that you'll need a bigger team involved. Make sure that by the time you start talking to investors, your story makes sense and that there's evidence that the story is happening. Based on how investors understand your story is how they'll base their questions and conclusions.
- Work internally but also get advisors, including bankers, as they can help shape your story in a way investors will understand.
- If your macro thesis is sound, move on to numbers.
- Every company is unique, but keep in mind that most investors do focus on numbers and the long-term outcome.
- Answer the tough questions thoroughly and honestly.
- Ensure that there are no holes in your story.
Step 2: Ensure all company systems/processes are in order
The next big step is to ensure your company is operating properly and is compliant across the board. Be sure to check all departments for efficient and productive processes.
Conduct a company audit
Ensure all systems are in place
- Though you don't need to be fully compliant at the date of the IPO, you'll need to be soon after. Because this is such a time-consuming process, it's in your best interest to start as soon as possible.
Step 3: New composition of your team (as a public company)
As Eugene explains, "The level of accuracy that is tolerable for a private company is not tolerable for a public company." The stakes are higher, so the investments you make in new systems, new roles, and people you hire are more crucial than ever.
- New roles
- Hire top-notch talent
One thing to take away is that whether or not you think you might want to take the road to IPO one day, following these steps from the get-go is simply smart and good for business.
What to do within the next year:
As mentioned, the process to IPO is intricate and long. So the sooner you get started on these three steps the better. As with anything, you'll want to review and iterate to ensure there are no holes left before moving on through the process.
These three initial steps that Eugene explains are only part of the process of preparing to go public. As he mentioned, depending on your company and how much from these steps you may already have in place, the time to IPO may be more or less than the average two years.
Who should own this?
Your leadership team/s.
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00;00;00;00 - 00;00;10;12
Ellen Johnson Sirleaf
The size of your dreams must always exceed your current capacity to achieve them. If your dreams do not scare you, they are not big enough.
00;00;10;24 - 00;00;32;02
That was Ellen Johnson Sirleaf at Harvard Commencement 2011. She was the first elected female head of state in Africa. And if you're going to be the first at something, it's going to be a little bit scary. Big dreams require tedious work, dedication, and most of all, vulnerability. As a SaaS operator, I'm sure you have personal team and company goals.
00;00;32;16 - 00;00;49;12
If done properly, each of these aspirations can serve one another eventually leading to prosperous outcomes for all. When everyone's aligned, this can often be when your company is ready for an exit, like going public. And while you might not be the first to go public, it's a pretty exclusive club.
00;00;49;27 - 00;00;58;24
I did some math. Number of executives who have been on a balcony is smaller. The number of people who won Olympic medals.
00;00;59;11 - 00;01;16;22
Those today's guest, Eugene Levin, president of SEM Rush, as a gold medalist in capitalism. Don't worry, it'll make sense when you listen to the episode. Eugene has valuable insight into what it takes to get to the top of the SaaS podium. He gives us an inside look at the nitty gritty process as well as advice you don't typically get to hear.
00;01;16;29 - 00;01;39;24
Listen on and hopefully by the end of this you might feel more comfortable with those big scary dreams. From Paddle, it's Protect the Hustle or we explore the truth behind the strategy and tactics of B2B SaaS growth to make you an outstanding operator. On today's episode Patterns yourself, Patrick Campbell interviews Eugene LeBon of Semrush about the IPO process.
00;01;40;05 - 00;02;01;10
We talk about what makes an IPO a good idea maintaining control of the process, crafting your IPO story and what's the IPO actually worth it? Timestamps to each section are listed in the show notes. If you want to skip around and after you finish the episode, check out the in-depth field guide. That'll help you go public. Just like Semrush.
00;02;06;17 - 00;02;09;00
We'll start with the basics. Who are you? What do you guys do?
00;02;09;01 - 00;02;13;14
My name is Eugen Levin. I am president and company Gold Rush.
00;02;13;20 - 00;02;14;23
Cool. Was smart idea.
00;02;15;08 - 00;02;40;11
So Semrush is an online visibility management platform. We help businesses to improve their visibility, get more traffic, rank for keywords, attract audience and social media, run ads and so on. And it's all a software product. So we don manage budgets. We just give people tools and, you know, we sort of teach them how to fish, but then they have to fish themselves.
00;02;40;15 - 00;02;59;16
So let's talk about the IPO, man. So I think that what I love to do is kind of walk through before, during, after. Right. And in kind of the thing, because I think that not a lot of people talk about the IPO because when they are able to talk or they're not able to talk about it, what's going on, you know, because of the silent periods and stuff like that.
00;02;59;16 - 00;03;16;20
But I guess maybe let's start at the beginning. The assumption is Semrush is obviously growing. Things are moving like you're considering an IPO. So I guess why an IPO in it might just be as obvious as we need liquidity, right? But why an IPO? And then why did you choose to do the IPO when when you did.
00;03;17;03 - 00;03;51;03
That was sort of a the first one, which was why why the IPO? Right. I think from a liquidity point of view, you know, just to run the business, we didn't need that. And if we just needed money, we would be able to get money through the roads much easier. You know, IPO is is a multi-year project. And for me, raising capital from, let's say VC firm like late stage VCs is a is a probably one month project.
00;03;51;03 - 00;04;25;19
So in an if as a fundraising is probably just me and for an IPO is like the whole company has to work a lot and change things and not all those changes are very good for business like a lot of things are designed to slow you down like a lot of processes. They're, they're good for situations. When company is governed by, you know, let's say, executives who are not necessarily big shareholders.
00;04;25;19 - 00;04;49;20
So shareholders need certain tools to get protection from, you know, managers. And, you know, those tools are implemented in the form of policies and processes. But for a company like Semrush, majority shareholders are too founders, right? So you don't really need that much protection from from management because management and majority of shareholders are the same sort of people.
00;04;49;27 - 00;05;08;14
So there are always going to act in the best interest of shareholders anyway. But you know, nobody takes special cases, right? As if you have a certain rules. So you just follow the rules. And like I said, for it, for a fast growing company, a lot of those rules, they could be detrimental, they could slow things down and very hard to implement as well.
00;05;08;20 - 00;05;14;21
But getting back to why, right, especially now when we establish there are a lot of negatives in this whole.
00;05;14;26 - 00;05;21;23
Process, I'm wondering, you're like it's taking too long and there's a lot of restrictions. Okay, then why it why do we do it right?
00;05;21;24 - 00;05;50;15
Why do we do that? I think there are there are several several points. Our first one, you are in, again, in control of your future because you know, especially when you take money from investors sooner or later there are going to be conversations about the exit. And what I've seen being on a VC side, that sometimes companies starting to get pushed into know what should we do?
00;05;50;15 - 00;06;10;15
So we are attractive for a certain type of buyer. We should from from my point of view, as as you know, an executive, that's nonsense and should never be a part of a conversation. You know, you build your own business to serve your customers and grow. You shouldn't be thinking what should I be doing to fit into someone else's roadmap?
00;06;11;02 - 00;06;33;27
But, you know, it's better just not to have this conversations with investors at all. So for me, and that's just one side, but I think, you know, being in control of, you know, your own future and taking care of your investors, because when you take someone's money, you sort of take an obligation to take care of them, at least to some extent, even if it's not legally binding obligation or anything.
00;06;33;27 - 00;06;55;01
But you need to you need to make the money. I mean, otherwise you cannot look in the mirror and say, oh, I'm a successful businessman, but my investors made nothing. It's it's also not not the right approach combining those two. So being in control of your own destiny and providing good outcome for investors means that IPO is usually is the best route.
00;06;55;12 - 00;07;17;00
Now, sometimes people sell part of the business or the whole business to private equity. We we thought it could be interested in path much easier. Of course but a we you know we saw tons and tons of upside in our business so why would we sell it or at least, you know, why would we sell the, the big portion of it?
00;07;17;14 - 00;07;40;26
And then the second part is that we felt that multiples in private equity are always going to be I mean, not always, but I would say in the long run going to be lower than what you can get if you're a public company. And I felt that, you know, private equity could be a good source of exit strategy for a company that is kind of lower scale.
00;07;41;03 - 00;07;59;13
You know, it's a good business, but you don't feel confident that it will be hundreds of millions of dollars in revenue. And, you know, to go public, you need hundreds of millions of dollars in revenue or at least some very clear path towards that and not every company has it. So for them, I think PS is a good alternative.
00;08;00;08 - 00;08;10;14
But we felt, you know, we can, we can go big and we've been working for, I would say almost two years very methodically on executing this project.
00;08;10;18 - 00;08;30;27
Oh no, that was great. So to kind of summarize before you get to the second question, because this second question is why then, Right. Like why that time? Right. But so to summarize obligations to investors, you have a couple of co-founders and the team, I would argue some of them maybe had taken secondary earlier, but you know, like there's a lot of equity that's still built up there.
00;08;31;03 - 00;08;47;10
And it also sounds like it was a path to get more liquidity for the business, like some primary capital for the business, but not just the only path, but all of those other obligations just kind of made sense to make the decision. And I guess then so why then?
00;08;47;16 - 00;09;11;22
Yeah, one more thing that I would add. We and we didn't use it that much, but also one of the advantages of being public companies that you can are by other companies for stock, because stock is liquid and is it's a a transaction when you're a private company and you're trying to buy someone for stock, you need to have a lot of negotiation around negotiations around who's valued at what multiple, which can be very challenging.
00;09;11;29 - 00;09;17;03
When you're a public company, it's your your shares are as good as cash, maybe better.
00;09;17;08 - 00;09;37;24
So I just went through that selling prep work because it was like, you know, private company sale to private company and it's like, well, the value of the stock is x, you know, blah, blah, blah, blah. It's like, is it really X as it y, you know, that type of things. I get that. But y y at the moment when you did it, it was definitely, for my understanding, a pretty frothy market when you guys went public.
00;09;38;04 - 00;09;48;24
And so was that part of the reason or I guess you were doing it two years before planning? So I guess why did you start to do the planning? And then ultimately y y when you did go public, did you go public?
00;09;49;01 - 00;10;20;08
When we started the project, we just you picked an arbitrary date in the future. We just sat together with, you know, leadership team first and then the board said, Yeah, we want to do that. Now, if if it's a multiyear project, you need to put some kind of deadline, otherwise it's going to last forever. So we just picked a deadline, which was I think somewhere around March of last year, and then we just started executing towards it.
00;10;20;14 - 00;10;22;24
So you were planning this before COVID?
00;10;23;23 - 00;10;25;08
Before COVID? Yeah, COVID.
00;10;25;08 - 00;10;35;01
Happened like in the middle of your planning, basically. So that probably always we don't know if it's three years now or a year now or what does it look like. So that's that's a really interesting data point.
00;10;35;20 - 00;10;56;22
Yeah. And then when COVID pandemic started, we looked at our metrics. We looked at, you know, everything we said. Now, so far, we're not going to change any plans. We don't know if market is going to be open or not. But if market it because, you know, during during pandemic, for a period of time, market was closed. Right?
00;10;56;22 - 00;11;24;21
So there was there were no IPOs, there was panic, but then it reopened very quickly. So and became one of the hottest markets ever. So we decided not to cancel any plans. We kept, you know, marching forward. And I would say we ended up in a in a market that was very open but very hot, probably too hot.
00;11;25;12 - 00;11;47;06
So if we could accelerated a little bit, right. If, for example, we could say, okay, instead of March, we going to do this a little bit earlier, we probably would have done this. I think the best time to sort of go public was around fall like after pandemic, around fall, like there have been companies that already did IPOs and did them well, but the market was not overheated.
00;11;47;16 - 00;11;47;29
And it's no.
00;11;47;29 - 00;12;06;26
Reason that that's a problem. Is it? Because it's like you get this hype train when you're at a really high and then you end up going down because everyone's going down, but they kind of blame you for it, like the street blames you because you didn't keep up with that expectation. Is that why you wanted to go in as a little bit of a weaker market?
00;12;07;08 - 00;12;41;02
No, I'm talking right now from pure kind of project execution point of view. Oh, okay. So so when you go in a market that is very hot, right? Like think about it this way. There is a pipeline of companies that go public. There is a finite number of analysts and finite number of investors. So if you go in out in the market where, let's say other two companies and you're somewhere in the middle, so you're not the biggest one or the smallest one, you get, let's say, you know, average share of attention.
00;12;41;02 - 00;13;13;07
Plus there are not that many companies. So investors take meetings when you go in the market with ten other companies and you were a let's see, size wise company number seven, then people will prioritize your account accordingly. And that that works on all levels. You know, bankers, they will give you their number seven team, so to speak. And then investors they will send send you not their main portfolio manager for this vertical, but they're, you know, more of an associate or kind of second second layer employee.
00;13;13;19 - 00;13;31;00
So a lot of people who you're going to meet, they're not going to be a decision maker who can even make the transaction, right? They will. They say, Oh, I'll tell all this things that I've learned to my boss and we will get back to you. So you see a lot of this kind of behavior when market is overheated.
00;13;31;06 - 00;13;54;21
And like I said, if you're number one in this batch, like you're the biggest company, the hottest story, and you're raising not a huge amount of capital, you know, versus your valuation. Like if you are tens of billions in market cap and you raise 1 billion, you're probably fine if you are. You know, like I said, number seven, you raise very little.
00;13;54;21 - 00;14;08;28
So a lot of people will not take meetings because it's too small for them. And a lot of people will send you there. They're sort of second, second line.
00;14;08;28 - 00;14;19;05
Do you have any control over this? Like could you have said, let's wait three months or let's wait six months? Or is it it's kind of once you cast a die, you're on a clock kind of a thing.
00;14;19;09 - 00;14;40;16
Yeah. You mean you can you can delay pretty much any point. You can you can say you want to wait a couple of weeks and, you know, until until you actually, you know, have a have a meeting with your bankers and you say we're you know, we're starting starting to execute roadshow starting from the day, let's say X before that.
00;14;40;16 - 00;15;00;06
Yeah, you can you can try to move things around especially, you know, if if you need to delay couple of weeks you probably can doing things faster is usually more of a challenge because you depend on let's say a review process like, you know you file your S-1, you need to wait until they get back with comments and you fix the comments and then reply again.
00;15;00;06 - 00;15;29;13
So there are several durations. So doing faster is usually not very feasible because it depends on specific milestones. But doing slower is pretty much always an option. The challenges, you know, when Windows is closing. So we did an IPO right in March last year and I wouldn't say that window closed right after that, but but market didn't, you know, started to cool off come down.
00;15;29;20 - 00;15;37;04
Yeah yeah. Relatively fast so we could you know two weeks wouldn't change anything. But if we said let's wait half a year, it could have been the problem. We could.
00;15;37;04 - 00;15;37;25
Have then you could ask a.
00;15;38;11 - 00;15;39;07
00;15;39;07 - 00;15;57;07
You're risking it being a year then because of the, the markets was so unpredictable during the past couple of years. So you said it was a two year process. Like if you were trying to teach me, like I was like, Hey, Gene, we're going to go public or we know we're going to go public. Like, I got to kick off my two year process.
00;15;57;21 - 00;16;05;04
Like, teach me that process. Like, where does it start? What are the things you have to do? Who the people you have to get involved, All that kind of fun stuff.
00;16;05;08 - 00;16;43;04
Yeah. So I think there are there are several parts here. So there are, you know, like business requirements. There are certain, you know, benchmarks that you need to get in a range and it's better to start doing them upfront. I think there are a lot of things around strategy and positioning that needs to be done upfront because if you have some sort of vision for the future of the business, but you're not there, you're probably not going to be very successful explaining investors why they should understand this, this bigger story compared to where you are today.
00;16;43;13 - 00;17;06;14
You know, if there are some parts in the page, like, you know, in the future, this is going to look like that. It's better have some evidence that this is happening. So, for example, for us, you know, when we went public, platform vision was there, but we didn't have a lot of traction yet. We were just expecting to launch this after IPO.
00;17;07;04 - 00;17;34;23
So we didn't try to over salary or anything, but there have been a lot of parts around our cross-sell fees. We already had several extra products that we upsell to existing user base and we have really good traction with that. So we've been talking about that. And when platform was was there, when we launched our App center, we just started talking like remember we were doing this add ons and they were pretty successful.
00;17;34;23 - 00;18;03;27
So now we have more add ons. And by the way, those add ons can be billed by other companies as well. But it's a continuation of the familiar story. And I think, you know, working on your story is very important. And you can do this, you know, sooner or later. But if you do, the sooner you can make adjustments to your roadmaps to make sure that by the time you start talking to investors, story makes sense and there is evidence that this is happening.
00;18;04;05 - 00;18;29;13
So that's probably, you know, one side. The second side is purely technical. For example, you need to be audited company. You need to have certain systems in place like accounting systems. You need to be eventually SOX compliant. So so you need by the time you go public, you at least need to be sure that you can finish this implementation in time.
00;18;29;28 - 00;18;52;29
You don't necessarily have to be fully compliant at the date of the IPO, but you need to get there pretty soon. And that, you know, Sox compliance depends on the company. But you know, this this kind of thing can takes years to implement. And of course the third side is the composition of the team. As a public company, you just need to have certain roles like, you know, composition of finance to changes dramatically.
00;18;53;12 - 00;19;17;23
You need control over the public markets experience. You need to be in a not just one person, probably the whole FBA team. And I think, you know, the level, the level of accuracy that is tolerable for a private company is not tolerable for a public company. You need you need to be very, very close to the guidance. So, so your RFP and they need to be top notch.
00;19;17;23 - 00;19;45;23
So investing in systems, investing in, in teams, you need general counsel. This is this is very expensive role to have and you cannot be public company and sort of not have anyone, you know, who is who is a senior, you know, senior very, very qualified lawyer. You know, who's who's helping the company. So all all of those things are very important and they take a lot of time like hiring right person can take half a year easily.
00;19;45;23 - 00;20;08;09
So that's why it's better to start kind of in advance. I think some companies might be able to do this faster. I've heard stories when people, you know, try to accelerate the timeline and get things done maybe in a year or 18 months. But from what I've seen, usually those are companies that they sort of knew long time ago.
00;20;08;14 - 00;20;36;27
That IPO is an option they should be exploring and they've been building a lot of systems and already had a lot of executives with public company experience and then they just needed to execute the project, like they needed to hire bankers, Right. You know, Right. S-1, But they had a lot of work done upfront. So when we started our project, we didn't know like before that day that, you know, there is a certainty that we want to do an IPO.
00;20;37;08 - 00;20;44;03
So we were not doing a lot of preparations like two years in advance and we started only like two years before IPO roughly.
00;20;44;03 - 00;21;11;27
Yeah. So it sounds like you need your fundamental numbers in place, like growth just in general. And I think one thing that you touched on really briefly that I think a lot of people don't always realize is there's a certain rubric that a mid-stage investor looks for that is very different than a public investor or a public, you know, roadshow investor looks for.
00;21;12;12 - 00;21;33;21
And I think in the world of SaaS, it's platforming, it's number of SKUs. How is your cross-sell going? Because they're kind of comparing you to a different rubric. And that rubric is getting closer to what venture looks at, but it's still not there. Like cash flows. People care a little bit more about all those types of things. And so your number is you have to be in the right direction in terms of growth, cross-sell, etc..
00;21;33;21 - 00;21;53;12
Right? Then there's a story which I want to talk about in a second, and then there's kind of like your team and checkboxes. It sounds like, you know, you need the right audited financials, the right accuracy, the right FPGA, the right general counsel, etc. suck to you ISO if you're a certain type of company. My question on the story is, is who are you getting help from?
00;21;53;12 - 00;22;08;23
Is it all internal that you're coming up with it? Is it you're crafting a story that you think the street's going to like and it connects to where you were already going? Like, how does that work? Is it you go to the bankers and the bankers tell you like you really need a story that goes in this direction.
00;22;08;23 - 00;22;17;08
It's not big enough what you guys are talking about. Like, how does that work? Because it's a little more amorphous. I get growth and I get checkboxes. The story is a little more amorphous for me.
00;22;17;12 - 00;22;40;24
I think there are there are several ways to get to the story, and I think there are a companies like Tesla where, you know, one guy already did all the work and there is a story and nobody else have to do anything on top of that. And I think for most of companies, no matter how visionary the founder is, they're going to be a bigger team involved in shaping the story.
00;22;40;24 - 00;23;10;15
So in our case, for example, we of course worked internally, but we also had advisors who do just that. So so they they work with pre-IPO companies and help them with story, help them with banker relationships and help to sort of polish the pitch. I don't know if I can name people we work with, so I probably, but I would be happy to give them more business and promote them.
00;23;10;15 - 00;23;42;23
By the way, phenomenal, phenomenal people. And they taught us a lot. But also as we were working on the story with them, they would ask very tough questions like, you know, questions that no business owner want to hear or answer. And I think because they've been tough with us and they've been asking all those complex questions, we got to the point where, you know, it was very, very hard to poke a hole in the story or find something in the story where we didn't have any proof that it can work.
00;23;43;12 - 00;24;02;25
I think a lot of companies, when I read their S-1, I'm like, this is this is true. This is wishful thinking. So they're presenting it like it's real, but it's not. They're not doing that. And I see this in many stories of many companies. And when I talk to investors, a lot of them see that as well. And they sort of see through this.
00;24;03;11 - 00;24;30;02
So we we did a lot of work where, you know, we would make sure that there is no in the story, pardon my language, and they would ask a lot of very uncomfortable questions to me because, you know, for, you know, founder for executive to hear some bad, bad things or, you know, you know, questions like why why your kid is so, so skinny or not so strong, you're like, come on.
00;24;30;02 - 00;24;31;09
And it's you know.
00;24;31;18 - 00;24;34;22
Why are we talking about it? Yeah, yeah, yeah, yeah, yeah, yeah.
00;24;34;22 - 00;24;48;20
But for business, everyone is like, why this metric is this way? Why that metric does it mean this? Does it mean that? How do you explain? So we spent a lot of time, you know, trying to poke holes in the story. And I think, you know, at some point we got it to the point where we ran out of ideas.
00;24;48;20 - 00;25;12;21
We would ask all the tough questions. We would have good answers for all of the tough questions. And that's when we started approaching bankers and bankers give you the second iteration, so they help you to polish a lot of things less from substance point of view. They're not they're usually not going to ask those type of questions that you don't like to hear sound to me.
00;25;12;21 - 00;25;38;05
But but usually, you know, left bankers less, but they're going to tell you how to shape this story in a way that investors could understand that because a lot of people, you know, they they work in in in the specific business environment and they know their space really well and they think everyone knows their space well. And investors, especially public market investors, they're not like this.
00;25;38;05 - 00;26;02;12
They're not specialized like let's say their investors say I invest mostly in SaaS. Well, that's great. There is a huge difference between what we are doing or what Salesforce is doing or what Slack is doing and, you know, figuring out how to speak the same language but don't sound like you're you're oversimplifying things is a very delicate balance.
00;26;02;12 - 00;26;11;16
And I think bankers help really well with that because they know that they have a ceiling where investors are going to get that and what parts need to be clarified.
00;26;12;14 - 00;26;24;04
Yeah, that makes sense. Do you think the loudest thunder clap I have heard in a long time just happened outside my window here. So sorry if you heard that, but.
00;26;24;04 - 00;26;25;23
I've heard that I was surprised.
00;26;25;24 - 00;26;43;16
Yeah, yeah, yeah. I was like, What is happening? Sounds like a bomb went off. Unfortunately. That's interesting, because I think we only hear about the ridiculous ones, right? Unless you're like a nerd. And look at their S-1 is right. Like, you hear about the we work on right where it's you know the it would just was all story and no substance.
00;26;43;16 - 00;27;08;28
Right. And it's interesting to hear that you went out of your way to make sure that if the story was told, substance was there to back it up or at least there is a connection to substance. There's a world where that actually hurt you a little bit, Right, Because it didn't allow some doubt or not some doubt, but some wishful thinking on the side of an investor to say, well, if they just figure this out, it could be ten bucks or something, Or is that not what these types of investors really think?
00;27;09;03 - 00;27;18;04
Because that's like a story maybe for a seed investor or series a investor versus a this company is about to IPO and the balance sheet actually matters. Investor Is that is that right?
00;27;18;04 - 00;27;48;05
I think they're a very there are a lot of different types of investors, right. I don't want to generalize. All public market investors are the same because they're they're different in many many different ways. I would actually say that for example, I would say traditional US based VC investor for, let's say growth rounds or seed rounds, they will have a lot in common, more in common than, for example, average public market investor going to have in common.
00;27;48;23 - 00;28;16;07
And I mean institutional investors, of course, and I think some of them are definitely interested in those, you know, stories that are not there yet but have a potential. I like I keep talking about Tesla because for me that's that's an example like you're you're looking at this thing and you're saying why? I mean, I don't know if it's now the case, but at some point it was valued above like top three other automakers combined or something, and they were making less but a lot less.
00;28;16;08 - 00;28;55;02
Other people would say, well, there is a phenomenal founder, there is a phenomenal product, is definitely a space that going to achieve higher adoption is definitely a space that is going to achieve a lot of free media. And let's try to not to think how many units they deliver last year. Let's try to think about what what happens with this business in the world where 50% of passenger vehicles are electric vehicles, and then they would say, okay, so what happens in the world where 50% of passenger vehicles are automated?
00;28;55;11 - 00;29;29;04
Oh, sorry, are electric and use autonomous driving? What happens in the world where 50% of vehicles are electric? There is autonomous driving and you can energize this through solar rules. And then the look at Tesla through that prism and they say, well, in this imaginary wall world, in the future, if things go right, this can be not just, you know, personal vehicle company can be transportation company, energy company, all in one sort of bundle.
00;29;29;04 - 00;30;08;28
How valuable would that be? And they come up with some numbers that justify the valuation. So I think it really depends. But most of investors did not like that. So from my experience, so so most of black market investors, they're usually very focused on numbers and even story is important for them only as a proxy towards numbers. For example, our story is very important to understand if TAM, that you see in S1 is real or not real, because like like you said, with with, for example, companies like we work, there are a lot of interesting things in S1, but they're probably not real, not visible.
00;30;09;04 - 00;30;29;23
And through the way you ask questions, through a way you understand the story, you make your conclusion like, is it a real thing? Or it's like I said, well, like you said, wishful thinking. But I think most some investors are more, you know, very diligent. They think about the long term outcome. So they think about like, is it a hot market?
00;30;29;23 - 00;31;01;22
So for example, Sam Raj, they would be asking question, you know, is there a going to be an Internet in in 20 years? You know, do do we think that people will search for stuff in 20 years? Do we think that attention will be harder or easier to get? And if they answer, well, they're probably going to be Internet people, probably going to search for stuff or discover stuff online and attention is probably going to be harder to figure out because more content and less people, I mean, not necessarily less people, less.
00;31;02;13 - 00;31;21;14
There's growth in number of people, at least in affluent countries and in some countries, maybe no growth at all. Right. So if they answer all this, they're like, okay, I'm good with my macro thesis. Why? It's a good long term thing. Now let's look at numbers and and try to understand what drives the valuation and unit economics of this.
00;31;21;23 - 00;31;42;12
I mean, they don't necessarily get all the unit economics numbers, but they try to reverse engineer that from, you know, filings that you provide or extra metrics that you provide. And they're very diligence and do a lot of a lot of work. I think our best investors, they call customers, they monitor all your feature updates, they track everything that happens in the space.
00;31;42;25 - 00;31;53;09
Sometimes. Sometimes they would send an email and ask, Have you seen this? And yeah, I just finished. RE Yes, I've seen that. But you were very close.
00;31;53;09 - 00;32;14;28
And so it's interesting, it's very different. And I guess the last couple of questions is, is you went public, was was it fun like to actually ring the bell or to to hang out? Was it was that a fun experience or was it you know, because there's a lot of people who like that. So they dream about like that moment, even though it's two years and all this other stuff.
00;32;14;28 - 00;32;17;28
But was that a fun day or was it just hectic and frustrating?
00;32;18;08 - 00;32;38;15
For me personally, it was very rewarding experience because, you know, it's a long roadshow. Even though we did online roadshows through Zoom was still very exhausting. If it was like, you know, old school Roadshow, I don't know how we would do that because I was end of the day, I was dead. I couldn't do anything. I had to drive home.
00;32;38;15 - 00;33;01;02
I was concerned that I'm, you know, I might be not in a condition to drive. So. So this is physically exhausting. Like all those meetings, you have to be at 100% of your, like, mental capacity. You have to be perfect with all the answers. And it's is more than a week of this sort of work. And in the middle you think you can take a rest.
00;33;01;02 - 00;33;27;05
But but no, once you're done with investors, you go back and talk to bankers to get a recap, to understand the dynamics of the book. Like, you know, do we all get enough orders? No. And so on the briefing for the next day, they give you feedback about your answers today. So it is very, very exhausting process. And then in the end of this process, there is very stressful, you know, part of when you build a book and then, you know, you finish building the book.
00;33;27;05 - 00;33;40;21
And the same night we went to New York from Boston, So it's a four hour drive. We arrived sometime at midnight and then in the morning you have to be, you know, all dressed up in your stuff.
00;33;40;21 - 00;33;41;19
To change things.
00;33;41;20 - 00;34;01;10
About we didn't do twice. So that was a positive thing. We did hoodies and stuff. But once I got to the New York Stock Exchange, I felt very, very relieved. Very. And I was like, Yeah, that was totally worth it. Because you walk there like, how many people ever have done this? Not a lot of people have done this right.
00;34;01;10 - 00;34;28;03
I did some math, actually. Number of executives who have been on the balcony for rings, the bell ceremony is smaller. The number of people who won Olympic medals, all kind of medals, both winter and Summer Olympics. But still, it's a more exclusive club, so to speak. And just the feeling that you have, you know, in your stock exchanged was like, you know.
00;34;28;03 - 00;34;32;08
I'm a big fan of capitalism and this is like a charge of capitalism.
00;34;32;20 - 00;34;36;13
If you you got a gold medal in capitalism, that's what you did. That's great.
00;34;36;13 - 00;34;40;20
So one yeah. So yeah, they even give you a medal. So for me it was very.
00;34;40;20 - 00;35;05;02
Well, that's great. You got one. That's good. That's awesome. Being a public company, though, you hear a lot of people gripe about it because obviously you have different expectations. You literally have a stock ticker every single day, you know, and hopefully you're not looking at that every single day. But different reporting requirements. Is it as bad as people say or is it is just as bad or it's not bad at all?
00;35;05;02 - 00;35;05;29
Like, how do you look at it?
00;35;06;05 - 00;35;31;10
I think for many people, people in accounting, for example, it's very bad right there that their life becomes run by, you know, more challenging in many, many ways. Right. You have you know, you have, you know, different tolerance for errors. And especially when when you know, you're close to filing, everyone gets stressed out like a lot of people, you know, don't sleep like we are lucky.
00;35;31;10 - 00;36;03;21
We have great team. But I know some companies struggle with that. So for some people it is definitely very, very challenging. Even, you know, let's say people in departments that that shouldn't be that related like PR. So now to do a press release, you have to review everything like, you know, every number that you give, you know, you need to scan for any kind of forward looking statements when you are communicate your future, develop product development plans that you need to make sure that you're not really committing to anything.
00;36;03;21 - 00;36;31;09
And if you are committing, then it's going to be done in time. There is a legal review, so their work changed from, you know, being able to write press release in the more and publish it in the evening to, you know, having several different stakeholders that need to sign off before they can publish something. And that's something that is pretty far from like, you know, Securities Exchange Commission and legal and finance.
00;36;31;29 - 00;36;57;24
But ideally, I think if you have a great team that for leadership, it's not that different. So there are there are certain changes in your how you how you plan how you operate. There are certain additional sections during the board meeting. You need to add certain board members. But otherwise for me it was not that much different. Now I have meetings with different types of investor and before that I would talk to private market investors.
00;36;57;24 - 00;37;28;05
Now I talk public market investors somewhat different. Not that much different, definitely. I wouldn't say more stressful or anything. And for our product teams, I think there are you know, we definitely implemented several new workflows around security checks and open source scans and so on that that are required. But beyond that, I don't think their life changed materially except the fact that those who have stock options now can sell reach.
00;37;28;14 - 00;37;48;06
So that's great is it sounds like it's it's like operationally you know all benefits have some trade offs. Right. And I think that the tradeoff is you have to be much more buttoned up than than, you know, you might even if you were a well-functioning private company. So I know we're coming up on time here, so I got to get you out of here.
00;37;48;06 - 00;38;08;04
But this is amazing. I learned so much just around, you know, because there's there's always this fantasy, what that's like, Right? And you see some stuff in the movies, but you always see a little sliver. So it's really helpful to kind of go through, you know, the beginning like y when and then obviously all the fun stuff and those pieces and then ultimately hear a little bit of that.
00;38;08;04 - 00;38;20;06
It's it's, you know, it is bad in certain places. I wouldn't say bad, but it is taxing in certain places. And then in others it's know life doesn't change that much. So, yeah. Any final thoughts? And of course, where can people find you or anything you want to plug?
00;38;20;13 - 00;38;45;16
Yeah, I mean, people can always reach out to me on LinkedIn and I'll use other social networks that much. But on LinkedIn I'm, I'm pretty open and usually reply, but otherwise, if you want to learn more about how to do marketing online, some Rush has a lot of educational content in our academy and our blog, and I think we're one of the best places to start learning more about marketing.
00;38;45;26 - 00;39;09;25
Have our freemium version of the product. We have three trials, so it doesn't take you money to start figuring out something for you, something you'd write down or not. Plus, you know, of course, one thing that we didn't charge, but, you know, we got initially connected right through profit. Well, obviously, and I think a lot of people, they underestimate importance of pricing and package.
00;39;10;10 - 00;39;39;09
And for me, I thought where I could squeeze it into the the narrative, but conversation didn't lead there. But for me, the reason we value this relationship that I'm always responsive when you know, team reaches out is because pricing packaging is super important. A lot of businesses undervalue that and they think, okay, I'll just make the right product or I just need more traffic and it all doesn't work if you don't have right packaging, right pricing that sort of fits buyer persona.
00;39;39;19 - 00;39;55;22
And we've learned I wouldn't say we've learned the hard way, but we learned this route through a lot of experiments and mistakes and fixes of those mistakes. Like I said, one of the final thoughts is that for some reason, a lot of entrepreneurs undervalue that part of their business and don't spend enough time there.
00;39;55;27 - 00;40;15;21
I think it's the fear. There's always something more tangible, more concrete, not easy, but easier. And it's you get all these smart people and it's it's just there's always a fear uncomfortableness with it, which is tough. But thanks for the plug I owe you lunch for that one. So I appreciate that. Yeah, but I'll be in Boston.
00;40;15;21 - 00;40;18;10
Actually, you guys made us a lot of money. So.
00;40;18;10 - 00;40;36;23
So here we go. That's clip it. That's going to be the intro right there. Yeah. Yeah. No, it's awesome. Yeah, I think it's funny how yeah. How important pricing and packaging is and hopefully you realize like it's a lot of trial error but also like, it's not hard. It's like everything else, it's like product development, customer development, sales development.
00;40;36;23 - 00;40;46;28
It's like you just got to follow a process and follow the data and stuff. So Eugene, my friend, good hanging out. I'll eat you up. I'll be in Boston in a couple of weeks for business to software and Yeah, well.
00;40;46;28 - 00;40;50;09
Tang Yeah, absolutely. When you when you're in town, just, just give me a call.
00;40;50;15 - 00;40;52;06
Awesome, brother. We'll see you, man. Thank you.
00;40;52;26 - 00;40;56;13
00;40;56;13 - 00;41;19;27
A huge shout out to Eugene Lavin for doing the podcast. Now you have an inside look at what it takes to go public. Today, we talked about what makes an IPO a good idea, maintaining control of the process, crafting your IPO story. And was the IPO actually worth it? If you want to support Padel and the show, we'd really appreciate it if you have a five star review of this podcast or the equivalent rating wherever you listen or watch.
00;41;19;29 - 00;41;28;00
Thanks so much for listening Make sure you subscribe to and tell your friends about Protect the Hustle, A podcast from Battle.