(funky music)
- Hi everyone, I'm Blake
Oliver with FloQast,
and I'm joined today by Alan
Tekerlek of JMP Securities.
He's a managing director
within the Investment Banking Group.
We're here at the Devil's
Canyon Brewery in San Carlos
in advance of our
IPO Readiness Forum for
Controllers and CFOs,
and Alan has generously agreed
to give us a bit of his time
ahead of the panel
discussion to talk about
what controllers and CFOs need to know
about getting ready for an IPO,
so Alan, first, thanks so
much for joining me today.
- You're very welcome,
pleasure to be here.
- I was wondering, if, before
we get into the details,
you wouldn't telling us a
little bit about JMP Securities
and what you do there.
- Sure, JMP Securities is
a full-service investment banking firm.
We are publicly traded.
We are a boutique firm
focused on high growth,
high-quality companies, and that takes,
we're involved in terms of
taking companies public,
in terms of raising
capital for them, again,
either in the public markets
or in the private markets,
as well as doing MNA advisory,
or Merger and Acquisition
advisory services.
- So when you are advising businesses
on going through an IPO.
- Correct.
- I imagine that the CFO role
is one of the most important ones,
what do you feel makes
for an exceptional CFO
if I'm looking to hire?
- Well, in the context of a
company that's going public,
probably, as you know,
Blake, the most important,
next to the CEO, the CFO is
probably the most important
person within a management
team, and why is that?
Because the CFO represents really
from the perspective of investors
that are gonna ultimately
be buying in the IPO, that CFO represents
the individual that's gonna
be really telling all,
as it relates to the company,
to investors as it relates to
the financials of a business,
which are obviously very important.
What's important in terms of a CFO
in a public company context?
It's really a CFO who has
public company experience,
you know, it sounds kind of odd how
a CFO needs to have
public company experience
to be an effective CFO.
It's, having that experience
gives investors comfort.
They wanna know that this
is an individual who's
taken a company public,
knows what the issues of
being a public company are,
and the ability to, in a
very transparent manner,
convey the financial
operations of a company
to the investor base on a quarterly basis.
- So, what do you look for
in a CFO and a FPNA team
for a company that's going public
given how important that role is?
- From an investment banker's perspective,
you're looking for a CFO and FPNA team,
that one, obviously has
experience, has done it before,
a CFO that has the ability
to convey themselves
and the financials of a
company very transparently.
An issue that's come up
over the last several years
is making sure that
investors feel comfortable
that a company and their finance team
and their management are being transparent
in terms of really what's
going on within a company.
And, a CFO who can
convey that transparency
and that level of trust is very valuable.
I would say, as I always say,
the CFO within an organization
is probably one of the most
difficult positions to fill and find.
- [Blake] So, unemployment
is very low right now,
I imagine experienced
CFOs are highly in demand,
especially ones who
have gone public before.
Where do you find this endangered species?
- Great question, interestingly enough,
it is probably, as you
indicated, a CFO's probably one,
a seasoned public company CFO
is probably one of the most
difficult positions to fill,
particularly within the technology space.
And, where do you find them?
Interestingly enough, where a
lot of these positions come,
become available is once
a company gets acquired.
Interestingly enough,
within the software space,
which is an area that I focus within,
over the last three years,
there's probably been close
to 30 billion dollars,
and that's with a B, billion
dollars in acquisitions
in terms of companies being acquired
and as you would expect,
when two companies,
when one company acquires
another and they merge,
the CFO position of the acquired company
is probably one that won't last.
So, that creates an opportunity,
so that person is available
to be placed somewhere else.
So, a lot of the MNA
activity creates new CFOs
in terms of becoming available
for the next CFO position.
- Got it.
So, given your position the IPO world,
I imagine that you've got
your finger on the pulse of
what's going on in the market.
I was wondering, if you
wouldn't mind sharing
the trends that you're seeing
as it relates to the IPO?
- Right, you know, interestingly enough
within the technology's base,
probably one of the biggest
trends that we've been seeing,
you know everyone hears
about the phrase unicorns,
where those companies that
have been valued at north
of one billion dollars,
at this point, there's
probably close to 250
of those unicorns that are out there.
And I would say of those 250,
I would say a small handful of them
have ultimately gone public
in the last few years.
There's been a handful
that have been acquired,
but there still is a huge
body of unicorns, if you will,
that are still privately held,
and so what we're seeing is that
ultimately equates into
companies going public,
a lot of time in the case
of technology companies,
a lot of these private company
have stayed private longer,
so there's been a very active
private company funding market out there.
So, companies before used to use the IPO
as the mechanism to raise more capital,
but because there's so much
capital available in the private markets,
this enables private companies,
who are doing well, to
remain private longer.
So, the byproduct of that is
companies that do go public
tend to be more mature, have more scale,
than what we've seen in the past.
And, that's probably one
of the biggest trends
that we're seeing today.
- So, in other words,
if I have this right,
we're gonna see fewer, but
bigger IPOs in the future?
- I think it's a combination of both.
I think you're gonna see as
companies get more mature,
you know, the fact that
there are 250 or so unicorns
still sitting out there, at some point,
they do have to access the
public markets, or be acquired.
The investors who've made
investments in these companies,
they're not in the business
of holding, you know,
keeping their investments
out in companies forever.
So, at some point,
these companies are gonna
have to make the decision
whether to go public or be acquired,
and what we're seeing today, in 2018,
is we're seeing more
companies going public
than we've seen in the past.
So, if you were to ask me
what's gonna happen in terms of
the public markets, I would expect
more companies to be going public
than we've seen in the last few years,
and I would expect to see larger IPOs,
as many of these unicorns
decide to go public.
- So, given these trends,
if I'm, say, a start-up founder
and I'm looking to go public,
is there a certain target
revenue I should be looking for?
- Yeah, that's a great question.
You know, interestingly enough,
I get that question asked of me
all the time from private companies
looking to access the public markets.
There is no hard, fast number,
there is a kind of rule
of thumb at this point,
where people wanna see
approximately 100 million dollars in
recurring annual revenues
as kind of the benchmark
or the gage for going public.
That tends to be more of
a guideline than a rule,
interestingly enough, what we're seeing
is companies that do go public
tend to be much larger than that,
for many of the reasons
that I just explained a few minutes ago.
- But get to 100 million,
you'll probably be okay?
- You're probably doing okay.
At that point, you have enough scale
to be able to access the public markets.
- Well, Alan, thank you
so much for your insights.
I'm really looking forward to
the panel discussion later.
Hope you have a great time.
- Blake, thank you very much.
