We are so back (thanks, Figma)

0:04This week on Great Chat, with Figma's Blockbuster IPO last week, we couldn't help but wonder, are we so back? This week, we reflect on our shared IPO journeys, what it's really like to be on the floor of the New York Stock Exchange on the day of the big board debut. I'm Sally, and I'm joined by Angela, Ashley, and Helen. But first, this podcast is brought to you by Mercury, the fintech used by over 200 ,000 companies to simplify their finances. We're huge Mercury fans at Great Chat, and we use it to run this podcast. A few of us are also current customers of the funds, startups, not to mention dozens of founders we've backed as VCs, angels, and scouts that run their businesses on Mercury.

0:42If you're launching a startup or a fund, visit mercury.com to apply online in 10 minutes or less. The onboarding couldn't be more intuitive or delightful. Quick note, Mercury is a financial technology company, not a bank. For more details, check out the show notes. Hi, everyone. Hello. Hello. Can you guys believe that it's already August? Where did summer go? Denial. Did we ever get like a song of the summer? We did not get one this summer, right? Blackpink Jump. I thought that was the end. I don't even know. I've never heard that. Yeah. Ashley, have you heard of Blackpink Jump? I know. I know who Blackpink is.

1:24I feel like I've heard of what the song of the summer is in the fall of the year. Ladies. Yeah. I know Angela knows. Honestly, my summer has just been the Backstreet Boys. Like, that's just my social media feed is just nonstop videos of the Backstreet Boys. And I keep consuming that content. But speaking of, I was just in a group chat with a friend whose sister was on a flight back from L.A. from the concert. And AJ from the Backstreet Boys was sitting right next to her. And she was, like, furiously texting, like, do I say something? Do I tap him on the shoulder? Was he in coach? He was, we think it was like, yes.

2:06Economy Plus. Economy Plus. He's like a man of the people.

2:14You know, he really cares about the environment. Otherwise, he'd be flying private. I think the tour revenue just hasn't like kicked in yet. By the end of the tour, he'll be back in first or private. But he's ramping. Yeah, I don't know. What do you guys do? If you see a celebrity, are you like, I'm going to hound you for a selfie or do you play it cool? I play it awkward. I generally like to leave like famous people alone unless I feel like I have something like interesting to say to them. Otherwise, I'm just letting them be. Angela, I feel like you would want to say something. I just feel like, well, she was also saying that like, you know, everyone's a little like, you know, hungover from the weekend.

2:57and they were like, you know, the back of the plane was singing, like, I want it that way. And I was just, I was just like, he missed out on a viral moment. Like how, you know, how amazing would it be if he led the whole plane and like a sing along for... He should have done a selfie with the whole plane at the very least. I know. Just do it for the gram. Like that's all I was thinking. Has anyone seen the open AI movie being filmed around San Francisco? Like maybe Sally, like your neighborhood? no I think it's mostly in the mission I did see that they were filming at Dominique Crenn the other week so that's what made me think of you but like yeah oh because I'm so fancy yeah exactly you know all the time um okay yeah I thought the casting was interesting I don't really watch anything so I couldn't recognize anyone other than Andrew Garfield um and he'll just be forever cemented in social network but hey if Andrew Garfield and social network is still relevant then and so is my tech career so yeah I feel like this is maybe one of the few times where the actors that play the real people are younger it's like usually flipped or it's like you know a five-year-old playing a high schooler and now I think they're like you know like 30-year-olds playing it's a good point not 30-year-olds but is some of that because they're they're like going back in time like maybe they need people who can have some have some range who's playing Sam embankment freed in the new movie i don't know i feel like also that storyline like no one cares anymore i agree with you and then i saw the i saw the photo of andrew garfield in his sam sam altman costume and for a second i thought i was like oh is this the sbf movie and then i got all confused so that's why i was asking is the costume just a patagonian jacket yeah so we're on week two of of Figma IPO vibes.

4:51And the vibes are still good. I have not seen the takedown pieces yet. You look at all the coverage of Figma, everyone decided to go back to traditional news for IPO day. So I thought that was kind of interesting and notable. Yeah, I think traditional news still really like reigns supreme. Like, yeah, I mean, Sally, we should talk about what that's actually like on the at the stock exchange, because you've had that experience. I've had it on the PR side and it's very much like a traditional news bonanza. But it really felt like kind of a comeback for traditional media. I mean, TBPN was there and streaming live, but like the stuff that I saw was much more from Bloomberg and CNBC.

5:36But doesn't that make sense? If you're going public, right? Like you want everyday Americans to buy the stock. And so thinking about the channels that like people outside the bubble would listen to or watch. A hundred percent. Your audience is not on Twitter for that, right? Like that is, it's kind of a perfect reminder of what a bubble we're in, especially when we're talking about like going direct and a lot of the sort of media trends within tech. The funny thing to me about week two of the Figma story is, speaking of narratives, how quickly the narrative has shifted from like everything in BC is broken, the social contract is broken, nothing works anymore, to like things still work in BC, like look at Figma, everything is okay.

6:23So the vibes are vibing positively as we head into the end of summer. Totally. Also, it validates like multi-billion dollar fund sizes too, right? Like, you can believe how you can return funds that large when you have a, you know, Figma was, I forget what its ultimate market cap was on day one, but like as of yesterday, it was$56 billion. So the math, maths. Since all anyone in tech or finance can talk about is the Figma IPO these days, maybe we can take our conversation from last week and dig a little bit deeper. I mean, it's been a really long time since there have been any IPO. So everybody was really excited for Figma.

7:08And I mean, it would have done well in any market, but they literally couldn't have timed it better. I remember like in our group chat, I was saying like Meta just reported and like beat earnings like up 12 percent, which I mean, it's like, you know, a$4 trillion company or something. These companies don't move like that. And Microsoft was up. So literally like the mood was like risk on, accelerate. And then the next morning, Figma prices, like there's literally, it's out of a movie script. The company couldn't have asked for a better setup. And frankly, it's just like a clean VC story that everyone can get around.

7:43Like we had CoreWeave, which is more of an infrastructure AI play, but had a complicated capital structure. We had Chime, that was an unprofitable consumer fintech company. And then we had Circle, which was crypto. So, you know, we had like strong IPOs, but they had a little bit of hair on them. And this is the first one that people can really look to and talk about what it means for the rest of the portfolio that people have. So I think that's why it's been so exciting. Yeah, I mean, I think we've said this last week, but like the almost acquisition and the breakup fee was actually like, in my opinion, And like, I think that was a really important piece of like the financing being clean, them like really cleaning up their unit economics post, you know, post breakup fee that I just feel like when you compare the amount of money raised versus a lot of other sort of unicorn darlings that started around the time that they did and, you know, went through their like hyper growth period around the same time, like the numbers just look really good.

8:45And the narrative was so good, right? Like we were all rooting for Figma because there was this like very clear, you know, that the peak of the Adobe acquisition, which was so massive at the time, the trauma of that like falling apart and it's such a good like redemption story. And then to have that redemption arc coupled with like beautiful, beautiful metrics and to Angela's point, like great market timing. It really was sort of like the perfect, the perfect IPO. I think also just like Dylan Fields as a CEO, he's always been this like steady horse, a huge champion to his customers. I've met him a few times and I think like you guys have as well.

9:30And so there was not a single like bad thing people could say about him and it really resonated in the product. And I think there was someone pointed out that like someone was like sending like product feedback that and Dylan on IPO day was like responding to a product feedback while he was on the floor celebrating. And, you know, till the end, he was he's even during the busiest time and most exciting time, he was thinking about the product. Maybe this is also a good, good time for me to maybe just explain what happens behind the scenes on IPO day for on the media side because I feel like people kind of get like a very narrow lens into the day, but it's usually weeks in the making.

10:14And I mean it in terms of, you know, CNBC coverage, obviously TBPN was on the floor and it's a lot of like strategy game on the day of. So I've covered a bunch of IPOs, including Facebook, which Helen will talk a little bit more in depth about Uber, Lyft, Ferrari, pretty much like all the major consumer tech companies from 2016, 2017. We also covered Box. And I think some of the things that are kind of interesting is behind the scenes, there's a lot of coordination between media companies and the companies that are going public from, you know, for example, when Uber went public and when Alibaba went public, Like the CEOs and the executives spend a lot of time behind the scenes with the newsroom.

11:06So this is not just one reporter. This is editor-in-chief all the way down to the reporter, the producer, the editor, because everyone's going to be covering from various angles. So they want to be able to have this room and space to ask the conversations and for the companies to really portray the narrative that they want to portray on the day of. And then to develop a relationship and understand. And then maybe the day of or even like around pricing, if news comes out that there is a quick direct channel for people to coordinate. So I used to I used to cover IPOs from Squawk on the Street, which is from 9 a.m.

11:41to noon, which is in the heart of IPO window. So as you guys know, 930 is when the bell rings. So that's like the exciting celebratory moment. Actually, I'm going to put up a photo of you on the balcony for the box IPO. the way that it used to happen was they would ring the bell, there's all the celebration, and then we wait for the stock to open. And then when it opens, it's again that moment, and then they go on CNBC, and then they go on Bloomberg and other platforms to do an interview to talk about the stock reaction. That actually, an interesting point, has changed because some stocks don't open at the price point or the exciting pop that they anticipate.

12:23So there's all this risk about, you know, do you want to wait until the IPO opens for them to interview? Or is it a safer bet to do it before the stock? So all this stuff is all just kind of like strategy, which, you know, just watching the Figma IPO just was bringing me back to those exciting days, which again, like both New York Stock Exchange and NASDAQ, really exciting time. Helen, I'm curious, I think you were at Facebook campus during the IPO. I was at the NASDAQ that time. That was one of the crazier, probably the craziest, my memory of IPO days. Wait, were you on the Facebook campus too?

13:02I was at the NASDAQ where the bell... I know, but NASDAQ came to Facebook for the IPO, which I think is part of why everything was so messy. Yeah. And we were inside the NASDAQ as the satellite of the IPO. And for those who don't... Helen, why didn't you tell the story of... Yeah. so Facebook filed their S1 in like February I think 2012 and then went public in May and to experience everything as like your first IPO and not be somebody who like studied IPO or ever worked in finance you're just like oh I guess this is normal so like Nasdaq actually like came to Facebook's campus and the whole like opening sort of thing like Ashley the picture of you on the podium we all got to like do that which is funny but actually you know to Zuck's credit not to like go down memory lane too much, he gave like a roaring speech about how this is just the start and that this is not, you know, signifying the end of anything.

14:00And so he, we had a hackathon the night before, meaning like everybody was at the office, you know, like creating new projects and working on, on, um, cool stuff at hackathons or how a lot of products were born. And, um, you know, so we were there at five o 'clock in the morning or whatever, when, um, all of the, the, stuff started to come together and no one had slept and it was super exciting. But like the Facebook IPO, I think for most people is something that is memorable because like it kind of flopped. Like there were these tech issues, there were comms issues, and I believe it opened at 38.

14:35Like that number is burned into memory forever. But then like it fell, you know, it did not, it did not do what Figma is doing right now. And I think it was the largest tech IPO to date at the time. And so for it to not, you know, go really smoothly, I think was sort of like a widespread panic. I would say I think people forget because, you know, you go on your Fidelity or Robinhood and you put in a trade like you think that there's like infinite supply and you can just buy whatever. But there are a finite number of shares and it's literally like you have to take all of the orders for people that want to buy and all the orders for people that want to sell and you have to match sudden.

15:14And that's what Sally and Helen mean when they say like they're waiting for the stock to open because like you have to actually balance the book. And if things are too imbalanced or things happen, like that process takes a long time. So, you know, people are like, oh, what do you pay bankers for? What are they doing? They're literally on the phone with these two sides, like calling, trying to figure it out. Like very old school. Very old school. And so I think it's, You know, like you're literally taking orders. And I think it can go either way. Like you said, for Facebook, it went one way and for Figma, it's going another way.

15:47But I think it's important to remember that I think the cohort of IPOs from like 2020, 2021, they're down like 40 to 50 percent from where they priced. And so for all these institutional long term investors, they have a lot of scar tissue for IPO pricing. And so if you're in this newer cohort and you want the Fidelities and you want the TROs and you want the long-term shareholders, you have to price it attractively so that there is a return for them committing their capital in the IPO, which I think is just like interesting context as there's, you know, tweets and articles about whether the banks fumbled it.

16:23And I'm not saying they did or they didn't, but that's like certainly a consideration. And I think the other just aspect that people may not think about is in the IPO, there's only like a small percentage of the company that's actually going, you know, the shares are actually being made available to the public. I think for Figma, it was like 10 % or something like that. And so the supply is very constrained. And when everyone's cheering for Figma and everyone wants to buy Figma, there's like unlimited demand on this side. And so it creates like all of these interesting like reactions in the stock price, which it's hard to read into initially.

16:58So that's why you saw the stock go up 200 percent and then like fall 30 percent. It's just a lot of that short term retail action, which is, again, why the company doesn't want to price it so perfectly, because when you expose yourself to all that retail investing, your stock becomes a lot more volatile and you want that stable base of investors. Well, Angela, I actually have a question. There was the sort of, you know, I think there's a normal chatter. Every time there's a big jump, there's the Bill Gurley line of like, this is why, you know, pricing IPOs is so inefficient. But then I felt like there was a sort of comeback from that narrative where Dylan was really looking for long term investors.

17:32And that's why like the delta made sense. Can you unpack that a little bit? Like, what does he mean by like specifically looking for long term investors so that the value would hold? Yeah. As you guys talked about, there's sort of two steps to the sequencing, right? And actually, all three of you, like, I mean, Ashley, you experienced this box as well. But before you sort of like list on the stock exchange, you actually get your anchor investors in and sort of all of that allocation is decided upon and priced. And so those investors are taking a risk because they don't know where it's going to open.

18:07And so you want to give them an attractive enough price to like commit their capital up front. And as I was saying, there was like all this scar tissue from IPOs just being so hyped and priced too high that all of these mutual funds and long-only investors got really burned by that pricing. And so what they mean is if you're a Fidelity or a Capital or a Wellington, you're not trading the stock day to day. You're sort of in the stock for a long period of time, sometimes decades. And that creates a lot of stability because there's not a lot of activity in your shareholder base versus like your average retail investor in Robinhood that's trading the stock like multiple times a day.

18:49And it creates all this like chaos. And so there's probably like some middle ground between where it priced and where it opened. But you really want to balance those dynamics out. Ashley, what was the decision process for Box? And I don't know if you know the answer or not, choosing the NASDAQ versus the New York Stock Exchange. Because I think that's also, there's a fierce competition between the two exchanges. And one is a really iconic old school Wall Street. And then NASDAQ is this technology center in the heart of Times Square. I think there was a question after the net the facebook ipo where people were like is nasdaq gonna survive yeah the brand took a hit for sure yeah for sure yes the box was actually new york stock exchange um and uh and i think what you don't see is both of these exchanges are competing behind the scenes to like win customers and so as soon as you are in that like pre-ipo bucket they are throwing like incentives at you to pick them.

19:54And so I wasn't directly involved in choosing the New York Stock Exchange, but the marketing team at Box was. And I think it was just like some combination of co-marketing budget and like, you know, we'll give you this billboard. We'll do these things for you. And I have a, you know, obviously personal affinity for New York Stock Exchange. I like loved the old building. And it's really cool when you when you do an IPO there, there's this like beautiful room where you get to like have a breakfast. So it's like the employees who are there, the bankers who are there, the early investors who are there.

20:33It's really like a special thing to do an IPO and to be on site for that. I'm sure everyone saw for Figma, like, Like, you know, Sequoia was there, like all their investors were there. A bunch of early employees were there. A select few get to go up to that little stage. I think the New York Stock Exchange stage is also kind of like a nicer vibe than NASDAQ. I'm showing my bias here. But it really is kind of like a party, but a party where everyone's so nervous because you don't know how it's going to turn out. And it's funny too, Sally, to your point around like the lag between ringing the bell and then actually like the the stock beginning to trade like you think of that bell ringing as like the the celebratory moment but after that then you're just like waiting and I remember um I was very lucky to get to go up onto the little stage um which was like kind of a surreal um like career highlight moment um and and having so much excitement around that but then afterwards you're you're just kind of like frozen you're all down there you're like trying to gauge like how like what the sentiment is.

21:43In Box's case, I think we had priced pretty low. And so there was like a nice like pop of where the stock started trading after, you know, those calls had been made and the price had been figured out and then a pop from there. So nothing like Figma, but we did have that nice like IPO day trajectory where like everything was up, although not so much that Bill Gurley got mad and tweeted. And then Sally, to your earlier point, we did it the old fashioned way where Aaron went on TV after the stock had priced. But I think the thing I will say is the thing that a lot of comms people would also say, we had the same messaging, regardless of which way the stock went, whether it had gone down or in our case it went up.

22:29It's all very much like future focused, like we're building a company for the long haul, this is our mission, et cetera. So fortunately, we had the backdrop of a stock that was doing well. But it's the same story regardless. And so and it's a good it's a good moment in time to start to like to think that way and to plant those seeds, because the second you're a public company, you have a daily scorecard that does not always make sense based on the value of the business. And so you just have to get used to like living with that sort of volatility and maintaining a long term view. Well, I remember the Box IPO vividly as well as a Dropbox watching extremely closely what might be in our future.

23:14And, you know, like just just super quick on the Dropbox IPO, because, again, like when you go through your first IPO, you think, oh, this is just the way it always is. Right. And the Dropbox IPO could not have been more different than the Facebook IPO. But, you know, I think, you know, in terms of like pop, right, like for a while I joined Dropbox Series D. So it was the$10 billion valuation. And, you know, I don't think Dropbox really ever got to that market cap, even after they went public. Like maybe it popped for a day. But, you know, sometimes that's the path of a company. And I think Dropbox is doing extremely well right now.

23:52Like I think that, you know, over the past five or six years, like they really clean up their unit economics. and I think they have a really strong business. But for a while, especially if your expectations are, oh yeah, everything's going to be just like Facebook and you join Dropbox at the sort of like height of Dropbox, right? And they have an IPO and it just goes very, very differently. So I don't know. I just, I remember like salivating over the box IPO. Well, Helen, I don't know why you were salivating because the box IPO was like an absolute roller coaster. I mean, the day of the IPO was great.

24:24Like couldn't have planned it better. the path there was yes traumatic like it was a 10 every path every path is traumatic no no but like uniquely so we were on file to go public for 10 months so so actually it's funny because oh yes yes i do remember this part yeah that we have like personally touched are like interconnected because i think the facebook ipo actually had a bit of a chilling effect on on the ipo market Everyone expected Facebook to be this amazing IPO, and then it took a while for Facebook to sort of rebuild its story in the public markets. And so when Box originally filed to go public in March 2014, it had been a bit of a drought.

25:08Just like up until this year, there had been a pretty significant IPO drought, which meant there was extra attention and excitement on our IPO, even though we were a relatively small company. I mean, we were valued at like$2 billion in the private markets. We were doing a little over$100 million in revenue, if I'm remembering correctly, and like growing really quickly, but also like very high losses. And so there was like a ton of attention. And then a couple days after we filed to go public, and this is back to Angela's point, like Figma was like a great, obvious IPO and great timing. we were like a small, less obvious, maybe I'm not going to say not great, less obvious company.

25:52And market timing really, really matters when you're smaller, right? Because like the vibes, the IPO markets, you're either riding them up or you're riding them down. You get swayed. Totally. And so a couple of days after we filed, like the market, like the bottom fell out for high growth, high loss SaaS stocks. Like, and we became, because we were on, like, Like there was so much attention on Box. We became the poster company for that market correction. And it was wild for me because Box, you know, enterprise software company, not as buzzy as like, you know, a lot of the consumer contemporaries.

26:29Like our narrative had really been up and to the right. And so when we became the poster company for like the end of like growth at all costs and it was it was pretty brutal. And just like I think tech right now is celebrating Figma, not just for Figma, but for Figma, like reopening the IPO window, like in a, you know, like Chime was like a toe dip and now Figma is like a full on we're back, baby. I think like people resented box for not being a successful IPO story because that has implications for the broader market. And and it was so volatile for our category that like we like we could not kick off our roadshow.

27:13Like we kept delaying it and punting it. And then the other thing that happened was Alibaba. Like there were whispers that Alibaba was going to go public and they ultimately did in September of 2014. And when you're, again, if you're a small company and there's a big IPO coming, you don't want to try to go out ahead of that because everyone's saving their ammunition for this like much bigger market moment. And so we had to keep like punting on the box IPO. We actually did like a mini earnings where we like released our quarterly numbers while we were on file to go public, which was like, I think like a pretty bold move.

27:50And it ended up being really important because when we filed to go public, you literally couldn't see how Box's trajectory would change to becoming like profitable down the line. And like our story got better as the year went on. But yeah, it was wild. It was wild to have to sort of like rebuild trust and rebuild our narrative while in a quiet period. And with this like constantly like sort of constantly kicking the can in terms of when we would when we would go public. And we finally did in January of 2020 or sorry, January of 2015. So almost a full year later. So Box's IPO was very, very hard one.

28:28But it was funny. I do remember like on IPO day, feeling so grateful for that and feeling so ready to be public because we had been put through the ringer. And and it was just a good reminder that like this is just actually I saw Kirsten Green did an interview where she called an IPO like your series A of being a public company. It's like your sort of first big milestone. And really, being a public company is actually way harder than going public in a lot of ways. And so maybe the upside or the silver lining of a tough IPO is you're more ready for that scrutiny and your whole company is more ready for that scrutiny because it can be kind of a tough adjustment.