WEBVTT - Yext CFO on IPOs, SPACs, and New Book

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser on Bloomberg Radio.

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<v Speaker 1>You are listening to Bloomberg Business Week. I'm Carol Masser

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<v Speaker 1>and our Bloomberg Interactive Broker Studio story on the Bloomberg

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<v Speaker 1>Today about how animal spirits are famously running wild across

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<v Speaker 1>Wall Street. Uh, we crunch the numbers. First day return

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<v Speaker 1>for I p O s averaging forty percent this year

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<v Speaker 1>of the highest ever other than according to one s

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<v Speaker 1>trip At. On top of that, SPACs, the special purpose

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<v Speaker 1>to Acquisition vehicles. Uh, those blank champ companies, they have

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<v Speaker 1>raised over sixty billion dollars this year. If that's more

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<v Speaker 1>than the previous decade combined. So let's look at both

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<v Speaker 1>of those markets and see what that tells us. Excuse me?

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<v Speaker 1>Joining us is Steve excuse me, Steve cake Bread. He's

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<v Speaker 1>CFO of the publicly held digital media technology company Yest.

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<v Speaker 1>He's former CFO of Pandora, former president in chief Strategy

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<v Speaker 1>off At, the chief strategy at Salesforce. Excuse me. Also

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<v Speaker 1>author of the IPL playbook and Insider's Guide and Taking

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<v Speaker 1>your Company Public and how to do it right? And Steve,

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<v Speaker 1>that's what I get for stuffing my mouth with a

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<v Speaker 1>cookie just before we go on air. So my apologies. Um.

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<v Speaker 1>Steve joins us out on the phone from Wyoming. Nice

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<v Speaker 1>to have you here with us. Steve. It has been

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<v Speaker 1>a crazy year when you look at the markets, and

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<v Speaker 1>we talked about great year for the market's not so

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<v Speaker 1>great for humans earlier on air. What do you make

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<v Speaker 1>the IPO market? Let's start there. Yeah, Carol, thank you

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<v Speaker 1>very much for having me on today. Yet I PEO market,

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<v Speaker 1>as you said, starts to return to early days where

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<v Speaker 1>I pos are important, and I think it's exciting because

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<v Speaker 1>it's a big part of how wealth is created in

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<v Speaker 1>this country, and particularly for individuals, but also for institutions.

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<v Speaker 1>So I'm excited to see the market come back, and

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<v Speaker 1>hopefully we'll get others and I know is long enough

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<v Speaker 1>to be strong as well. Yeah. Did it like surprise

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<v Speaker 1>you though? In a year that was just you know,

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<v Speaker 1>off the charts on so many levels, and you know,

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<v Speaker 1>the personal impact, the health impact of course of COVID,

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<v Speaker 1>the economic impact, but yet to see such a strong

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<v Speaker 1>I p O market. Yeah, that's a great observation. You

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<v Speaker 1>would have thought with macroeconomics and all the issues that

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<v Speaker 1>we had, we had elections, too, But I also think

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<v Speaker 1>it talks to the strength of the capital markets and

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<v Speaker 1>where companies that are growing and aspiring to get bigger

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<v Speaker 1>and continue to grow, the access to capital in the

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<v Speaker 1>public markets is the easiest and most efficient way to

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<v Speaker 1>get there. And you also have different ways to get

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<v Speaker 1>capital through debt operings, convertible operings, and the I p

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<v Speaker 1>o s and SPACs and direct listing as you mentioned.

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<v Speaker 1>So I think what businesses started to see is it's

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<v Speaker 1>time to get into the market and get access to

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<v Speaker 1>the capital because it's always there despite the heavy lift

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<v Speaker 1>or load on pandemics and macro economics. Well what do

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<v Speaker 1>you make the Yeah, God, I have so many questions

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<v Speaker 1>for you. Um, is it at all akin to the

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<v Speaker 1>I p O market that we saw back in two

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<v Speaker 1>thousand to me, having you know, covered business news in

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<v Speaker 1>the markets at that point, I think it's very different

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<v Speaker 1>in terms of the companies that we're seeing come to

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<v Speaker 1>market versus today. I also feel like we have a

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<v Speaker 1>market that kind of smacks you down pretty quickly if

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<v Speaker 1>you're not legit. Are there's problems? Yeah? No, I agree

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<v Speaker 1>with that. I don't think this is the thousand entries

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<v Speaker 1>here where companies were coming to market a little too early,

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<v Speaker 1>or people didn't understand the business model. I think one

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<v Speaker 1>of the big things about this market is you're right,

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<v Speaker 1>people are bringing real businesses. People do understand business models,

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<v Speaker 1>and the investors can look into those and look beyond

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<v Speaker 1>just what the macroeconomics are of a company, as long

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<v Speaker 1>as they understand the long term business model. So yeah,

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<v Speaker 1>I feel this is very different. I think the market

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<v Speaker 1>is also looking for growth opportunities, as you guys discussed

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<v Speaker 1>on your show numerous times, and there is a change

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<v Speaker 1>in innovation going on, so that's how new businesses get

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<v Speaker 1>into the market with I d O s. Well, what

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<v Speaker 1>do you make of door dash and Airbnb this year?

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<v Speaker 1>And we've had a lot of analysis about who ultimately

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<v Speaker 1>is the longer play here. Something gets door Dash because

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<v Speaker 1>they're so established in the marketplace when it comes to

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<v Speaker 1>all the online ordering. Airbnb will see whether people cantinue

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<v Speaker 1>to use it once life gets back to normal. How

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<v Speaker 1>do you see it? Yeah, that's a great question. I

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<v Speaker 1>think some of the larger I p o s like

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<v Speaker 1>geor Dash and Airbnb one is they probably should have

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<v Speaker 1>gone out earlier because people didn't get to participate in

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<v Speaker 1>some of their growth. But now that they're out, people

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<v Speaker 1>are saying, hey, I use these every day, I want

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<v Speaker 1>to invest in them. I think there's a little bit

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<v Speaker 1>of prop than the retail or individual investor side, as

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<v Speaker 1>people are learning, particularly individuals that haven't been in the

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<v Speaker 1>market for all that long. Remember they exhbit for a

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<v Speaker 1>while it was mostly institutional, So I think you're seeing

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<v Speaker 1>a lot of individual investors learning how to invest in companies.

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<v Speaker 1>And clearly one of the ways to do that is

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<v Speaker 1>invest in the company that you use. And certainly all

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<v Speaker 1>of us have used some type of food delivery service,

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<v Speaker 1>and a lot of people were using Airbnb and the

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<v Speaker 1>similar companies or companies to get out of the city.

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<v Speaker 1>So I think it's investors investing in what they do

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<v Speaker 1>and use. I'm a big stand of Starbucks, so I

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<v Speaker 1>invest in Starbucks right right, It's like the old Peter

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<v Speaker 1>Lynch model going way back when, right, just you know,

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<v Speaker 1>invest in things you really really understand or that you use.

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<v Speaker 1>It's why you know, it's interesting And maybe I'm going

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<v Speaker 1>in a little bit of a different direction. But all

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<v Speaker 1>of the fan stocks and we constantly have conversations about overvaluation,

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<v Speaker 1>and I'm not trying to pump them up anymore than

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<v Speaker 1>they have. But I use Amazon a lot, and when

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<v Speaker 1>I go to buy something, it's usually the first place

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<v Speaker 1>I look. Yeah, exactly. I think you you know, one

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<v Speaker 1>of the investment strategies is to go where you go,

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<v Speaker 1>and like you said, you use Amazon, you investor if

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<v Speaker 1>you use some other service, you go there because you're

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<v Speaker 1>supporting the company. You know what the company is doing.

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<v Speaker 1>You also know what how good or how bad their

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<v Speaker 1>service might be. So I think that's individual investors. I

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<v Speaker 1>think that's really important to invest in where you spend

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<v Speaker 1>your money day to day. Well, And in terms of transparency,

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<v Speaker 1>I do think like we Work was a bit of

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<v Speaker 1>a lesson, right and as much as there was so

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<v Speaker 1>much excitement over it and so much talk about it,

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<v Speaker 1>and ultimately, you know, the emperor has no clothes on,

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<v Speaker 1>like we we got to see kind of what was

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<v Speaker 1>really going on. And there is something about I feel

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<v Speaker 1>like in this marketplace that there is a certain level

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<v Speaker 1>of transparency that comes to light fairly quickly, quickly with

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<v Speaker 1>quotations marks on it because because we know a lot

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<v Speaker 1>of money when in do we Work before it all

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<v Speaker 1>came out right, well, I think That's one of the

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<v Speaker 1>reasons why. And you know I talk a lot about

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<v Speaker 1>to venture capital and entrepreneurs, get your company out public

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<v Speaker 1>earlier because that discipline, that governance, the transparencies that come

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<v Speaker 1>for being public also help your company to be more

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<v Speaker 1>operationally efficient inside. And I think race is the value

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<v Speaker 1>line of the company inside, so people understand what they

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<v Speaker 1>have to do in that transparency does so large degree

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<v Speaker 1>show up earlier if you go public earlier. Well that's interesting, Steve,

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<v Speaker 1>that you say that because there's so much money out there,

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<v Speaker 1>and we do see whether it's an Airbnb or Jordish,

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<v Speaker 1>they are able to stay private for a lot longer

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<v Speaker 1>because they are able to do multiple funding rounds. Um

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<v Speaker 1>is that a good or bad thing? Got about thirty seconds,

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<v Speaker 1>and then we'll take a break and we'll come back

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<v Speaker 1>and talk some more. Well, it's a good thing that

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<v Speaker 1>I also think it's a bad thing because I think

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<v Speaker 1>you leave individual investors behind because the prices that go

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<v Speaker 1>out are too high. Stop think getting in. I do

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<v Speaker 1>wonder is there a point when it comes to SPACs

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<v Speaker 1>that we're all of a sudden saying, Okay, we've hit

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<v Speaker 1>a peak here. How do you see it's Steve. Yeah,

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<v Speaker 1>well that's a good question, Carol. You know what old

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<v Speaker 1>is new, right, because you've been around one time. Yeah,

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<v Speaker 1>And there's been a ton of money raised into SPACs

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<v Speaker 1>and the blank check companies this past year, so and

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<v Speaker 1>you know, it really gets down to how you want

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<v Speaker 1>to take or what you need in your company to

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<v Speaker 1>get a public because at the end of the day, SPACs,

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<v Speaker 1>correct luciens and other things do end up being public.

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<v Speaker 1>I do think that one has to be careful because

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<v Speaker 1>there's a lot of different people that lead these spacts

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<v Speaker 1>and you have to make sure their investment uh, if

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<v Speaker 1>you will, standards are high enough to meet your investor needs.

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<v Speaker 1>And then also it's really question are there really enough

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<v Speaker 1>companies out there to be bought with that type of

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<v Speaker 1>money at this point. So we'll see how that plays out.

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<v Speaker 1>Everybody has a two year window and the clock's chicken

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<v Speaker 1>when you go raise that money, so we'll see what happened. Well,

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<v Speaker 1>this is what I wonder, Steve. I mean, there is

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<v Speaker 1>so much money out there. And we talked about this

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<v Speaker 1>a little bit more, you know earlier about these I

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<v Speaker 1>p O company companies that ultimately I p O They've

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<v Speaker 1>been around for a few years, so we've gotten used

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<v Speaker 1>to them, we've heard about them, we've gotten to see

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<v Speaker 1>kind of them grow their business and and understand their

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<v Speaker 1>financials better. But I do wonder when there's so much

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<v Speaker 1>money chasing, maybe when they're you know, too few deals,

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<v Speaker 1>you know, ultimately what kind of instability or you know,

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<v Speaker 1>a skewed equation that we ultimately get in the marketplace. Yeah, no,

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<v Speaker 1>that's a great question. We've seen the run ups in

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<v Speaker 1>the companies we talked about, you know, do Arab, NB

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<v Speaker 1>and others, and I think that's where investors have to

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<v Speaker 1>be a little bit cautious. You can pay too much

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<v Speaker 1>for something and you can wait for the vision because

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<v Speaker 1>you're investing in the longer term vision. So the question

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<v Speaker 1>is how much you're paying today for that longer to

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<v Speaker 1>vision and how long is it going to take to

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<v Speaker 1>achieve that result. So, yeah, there's a lot of money

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<v Speaker 1>chasing this, and I think individual investors just need to

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<v Speaker 1>be cautious about what they're doing with their money they

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<v Speaker 1>invest in these I mean, why does someone like soft

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<v Speaker 1>Bank that has a lot of money do a spack

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<v Speaker 1>And I should point out that the head of the

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<v Speaker 1>Vision Fund originally revealed plans for the spack uh in

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<v Speaker 1>an interview they did with Bloomberg News at the Milken

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<v Speaker 1>Institute Virtual Conference back in October. So we knew this

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<v Speaker 1>was coming. But why do they need to do this?

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<v Speaker 1>I mean, same thing with hedge fund investor. I mean,

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<v Speaker 1>is it just because it's a great vehicle to make

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<v Speaker 1>some fast money. I don't know. Well, it's a great

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<v Speaker 1>vehicle to make money potentially, but I do think it's

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<v Speaker 1>because there's an open market or open window here for

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<v Speaker 1>boats like soft Bank and other hedge funds to go

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<v Speaker 1>raise money. Because remember raising money as job one here

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<v Speaker 1>and right now, it's easy to raise money, low interest rates,

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<v Speaker 1>a lot of confusion in the marketplace. So I view

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<v Speaker 1>the SPACs and the hedge funds and STP Bank doing

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<v Speaker 1>this is just another vehicle for them to raise money

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<v Speaker 1>as opposed to go out and look for limited partners

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<v Speaker 1>or other individual investors to get into their funds. Hey,

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<v Speaker 1>one thing I want to ask you a big picture.

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<v Speaker 1>You were get a lot of different well known companies

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<v Speaker 1>look at this market of seeing the ups and downs

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<v Speaker 1>in terms of cycles. You know, I mentioned at the

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<v Speaker 1>kick at the beginning of our interview about a story

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<v Speaker 1>that's running on Bloomberg about the animal spirits running, you know,

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<v Speaker 1>wild across the streets. So we've got great market for

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<v Speaker 1>financial markets, but it's not been a great year for humans.

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<v Speaker 1>I mean, we have just incredible inequities and just the gaps.

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<v Speaker 1>What will potentially be the consequences of all of that. Yeah,

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<v Speaker 1>you know, that's a great question. And when I talk

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<v Speaker 1>to people and in institution and investors, I think there's

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<v Speaker 1>a disconnect between what the markets doing and quite frankly,

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<v Speaker 1>what our neighbors are suffering through here. And you know,

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<v Speaker 1>my families in a in a business that depends on

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<v Speaker 1>the restaurant business, and boy, when you don't have that

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<v Speaker 1>type of markets, it's tough to run these businesses. You say, So,

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<v Speaker 1>I think we need to be cautious because although there's

0:10:53.840 --> 0:10:56.920
<v Speaker 1>euphoria around the vaccine, there's a lot of unknowns coming

0:10:56.960 --> 0:10:59.280
<v Speaker 1>from that. And I think I kind of look at

0:10:59.320 --> 0:11:01.120
<v Speaker 1>this as it's gonna be a tough market for the

0:11:01.160 --> 0:11:04.200
<v Speaker 1>next couple of years, simply because there's so many people

0:11:04.240 --> 0:11:06.360
<v Speaker 1>out of work and we need to get those people

0:11:06.440 --> 0:11:08.720
<v Speaker 1>back to jobs and back to work to have a

0:11:08.760 --> 0:11:11.920
<v Speaker 1>really robust economy. Yeah, exactly, And there needs to be

0:11:11.960 --> 0:11:14.839
<v Speaker 1>you know, more of that wealth distribution that we've talked about.

0:11:15.160 --> 0:11:17.320
<v Speaker 1>All right, last note, a little bit of a lighter note,

0:11:17.400 --> 0:11:19.400
<v Speaker 1>but I hope it's lighter because I don't know how

0:11:19.440 --> 0:11:21.720
<v Speaker 1>it's been going. But you are also the co owner

0:11:21.760 --> 0:11:25.280
<v Speaker 1>and founder of Cake Bread Sellers in Napa Valley. How

0:11:25.320 --> 0:11:27.880
<v Speaker 1>has that been going? Well? I'm going to give my

0:11:27.920 --> 0:11:30.040
<v Speaker 1>credit to my parents. They sounded it. I just got

0:11:30.040 --> 0:11:33.040
<v Speaker 1>to work there and enjoy the experience and obviously taste

0:11:33.080 --> 0:11:36.520
<v Speaker 1>of wine. But um, yeah, the wineries, you know, like

0:11:36.559 --> 0:11:39.160
<v Speaker 1>I said, in Napa Valley with the openings and closings

0:11:39.200 --> 0:11:41.560
<v Speaker 1>that the state has put on them. Most of usselves

0:11:41.600 --> 0:11:45.040
<v Speaker 1>of restaurants, and the restaurant business obviously is in difficult

0:11:45.040 --> 0:11:47.679
<v Speaker 1>shape right now. But I think everybody is trying to

0:11:47.760 --> 0:11:51.080
<v Speaker 1>keep their workforce employed because that's job one, and you

0:11:51.160 --> 0:11:53.120
<v Speaker 1>change how you do business. We do a lot more

0:11:53.160 --> 0:11:56.959
<v Speaker 1>internet sales. I will say that. You know, online purchases

0:11:57.120 --> 0:12:00.400
<v Speaker 1>of wines of all ilk are probably doing pretty well

0:12:00.440 --> 0:12:02.439
<v Speaker 1>these days. I know I'm always online trying to buy

0:12:02.480 --> 0:12:05.920
<v Speaker 1>more wine. Yeah, you know, just to get you through

0:12:05.960 --> 0:12:07.959
<v Speaker 1>the day. But you know it's a struggle. I mean,

0:12:08.000 --> 0:12:11.080
<v Speaker 1>if you have a family business, a small business, something

0:12:11.120 --> 0:12:14.280
<v Speaker 1>that depends on walking people. It's really tough right now.

0:12:14.320 --> 0:12:17.000
<v Speaker 1>We're very cognisant of that, and like I said, our

0:12:17.080 --> 0:12:20.480
<v Speaker 1>number one goal is to keep our workforce employed because

0:12:20.640 --> 0:12:22.520
<v Speaker 1>we know that when things come back, it's going to

0:12:22.640 --> 0:12:25.880
<v Speaker 1>be really hard to hire good people back. Yeah, exactly. Well,

0:12:25.920 --> 0:12:29.319
<v Speaker 1>I wish you well with your team and certainly personally

0:12:29.400 --> 0:12:31.920
<v Speaker 1>throughout the holiday. Steve, Thank you so much. Really enjoyed

0:12:31.920 --> 0:12:35.920
<v Speaker 1>this conversation. Steve kate Bred he's a CEO of y X,

0:12:36.440 --> 0:12:38.960
<v Speaker 1>joining us on the phone from Wyoming. As I mentioned,

0:12:38.960 --> 0:12:41.600
<v Speaker 1>he's also the author of the IPO Playbook and Insider's

0:12:41.600 --> 0:12:43.440
<v Speaker 1>Guide on taking your company public and how to do

0:12:43.480 --> 0:12:45.960
<v Speaker 1>it right. Uh. He knows how to do it because

0:12:46.160 --> 0:12:50.079
<v Speaker 1>he was with these companies, whether it's Pandora, also Salesforce,

0:12:50.120 --> 0:12:52.320
<v Speaker 1>a bunch of these companies where he was with them

0:12:52.360 --> 0:12:55.560
<v Speaker 1>before they went public. So really knows all of this firsthand.

0:12:55.600 --> 0:12:57.360
<v Speaker 1>So great to talk about the IPO market, to talk

0:12:57.360 --> 0:12:58.040
<v Speaker 1>about SPACs,