A Q&A With Dave Goldberg On Why He Avoided An IPO For His Company, SurveyMonkey

sheryl sandbergSheryl Sandberg and Dave Goldberg

Photo: AP

Over a year ago, Dave Goldberg, the CEO of online survey company SurveyMonkey decided he wanted to raise fresh capital for his 13-year-old startup.He didn’t want to go public to raise capital. He wanted to stay private. At the same time, he wanted to let early employees and investors sell some of their stock in SurveyMonkey. His investors told him if he could figure out a way to stay private while giving everyone a chance to cash in on stock that appreciated in value, he had their blessing.

This week, SurveyMonkey announced the details of a plan that would do just that. It is getting a whopping $800 million in fresh capital. Of that, $444 million will come from new investors buying equity from old employees and investors. The new investment is being led by Goldberg himself, along with Tiger Global Management. Google is also investing through a new late-stage investment vehicle. The rest, $350 million, is coming from debt being led by JP Morgan. 

It’s an unusual move for a Silicon Valley company. But in light of the way tech companies like Zynga, Groupon, and Facebook have been treated on the public markets, it’s not surprising Goldberg wants to avoid an IPO.

There’s an interesting twist to this story. Goldberg is the husband of Sheryl Sandberg, the COO of Facebook. The biggest story in tech for 2012 was the Facebook IPO. The scrutiny of the stock’s drop, and the IPO process have been a source of endless fascination.

We spoke with Goldberg, and below is a lightly edited transcript of our conversation. He says he makes it a rule not to talk about Facebook, but still talked around the topic. He suggests the Facebook IPO had no impact on his decision. He’s taken companies public in the past. He knows what it’s like and he believes it’s the wrong choice for SurveyMonkey.

“Part of the reason we’re not going public is that we don’t want to measure our results on a quarterly basis,” says Goldberg, “And then having people say ‘They grew 30% this quarter so they should grow 30% this quarter’ and all that.” He wants to run his company on his terms, not the public market’s terms.

His company is very profitable. It generated $113 million in revenue with EBITDA of $61 million. He could probably avoid an IPO in the long run and pay down the debt from SurveyMonkey’s cash flow if he really wanted to stay private forever.

Here’s our conversation.

Business Insider: Explain the business model for SurveyMonkey.

Dave Goldberg: Our business model is that we have a free version of our survey tool, and then people upgrade to the paid version to get additional features. We have another business called SurveyMonkey audience, which is if you want to buy respondents to fill out your survey. It’s not how most people use us, but it’s a new addition in the last year and a half to fill a need some people have. We have disclosed 2012 revenue of $113 million and EBITDA $61 million.

BI: Why be so open about your financials?

DG: As part of the raising debt process, we got rated by Moody, and S&P, so that information was going to come out as part of those anyway, so it wasn’t going to stay secret.

BI: Why are companies so quiet about that?

DG: In general you don’t want competitors to understand your business, outside of telling people your revenue and profitability numbers.

Part of the reason we’re not going public is that we don’t want to measure our results on a quarterly basis. Part if that is you don’t want to release numbers on a quarterly basis and then having people say, “They grew 30% this quarter so they should grow 30% next quarter” and those kind of things. If you’re private, you’d rather just keep all that information for yourself. There’s not a whole lot of advantage for a company to be public.

BI: When did you start thinking about raising new money?

DG: We started working on it at the end of 2011. We had a conversation with my existing investors Spectrum and Bain. I said,”Here’s where we are, should we think about staying private if we can get liquidity for investors and employees at a good price?” They said look, “If you can figure out how to do this, we’ll support it.” Once I knew I had their sign off, I wanted to do it as soon as possible.

I talked to a lot of different people – wealth funds, hedge funds, strategic wealth funds. It all came together in the beginning of November after Tiger committed to being the lead. Google had expressed interest before I signed up Tiger, but they weren’t going to lead. Once I had Tiger, Google was in.

The weirdest thing for me, this is the most money I’ve ever raised and my biggest problem was I had way more demand than I could fill. My investors didn’t want to sell any more shares. I probably could have raised $900 million in equity. It’s a nice, but sort of strange, problem to have.

BI: You want investors focused on the long-term. SurveyMonkey will be private for a very long time, right?

DG: I’m not saying we’re never going public in the future, but we might stay private. I just wanted the option to not have to go public just because one of my investors needed liquidity. I want to go public because I have the right reason to go public — because the benefits outweigh the costs. If that happens in two years, four years, 10 years, or never — it won’t be just because of investor liquidity needs.

BI: How much does being close to Facebook and the whole hoopla that surrounded the IPO influence your thinking on this?

DG: I have a rule not to talk about Facebook, so I’m not going to specifically address Facebook. What I will say is we were not concerned about going public. We were concerned about being public and having to hit quarterly numbers and the impact that has on your investment decision making process of the company.

BI: But, seeing what happened to Zynga and Groupon when they hit the public markets, it had to influence your decision making, right?

DG: I took my first company public, I was at Yahoo for six years, I saw a lot of ups and downs, so I’m pretty familiar with what it’s like being involved in a public Internet company. It’s not like this glorious moment, but it’s a financing event. If you need the financing, it’s good, and if you don’t, you need to think about it very hard before you go do it.

A lot of companies can’t do what we do. We have a lot of cash flow that we don’t have the use for, so we can can pay down our debt. We’re a very stable predictable business. So this isn’t going to be an option for a lot of people, but if it is, then you have to ask yourself those hard questions about whether it makes sense to be public.

jeff bezos amazon kindle event

Photo: Amazon/Screenshot

BI: Why can’t a public company just ignore shareholders to a certain extent? Our CEO Henry Blodget likes to talk about Jeff Bezos and how he basically came out and said, “Wall Street, you can sit on the sidelines, we have a long term vision and plan. Do what you want with the stock, we have a long term plan.” Why can’t others do that?DG: In Amazon’s case, Jeff has built that credibility up over many, many, many, years and quarters. He didn’t start out that way.

In the beginning, you have to build a base of shareholders who actually believe in that long-term vision. Generally, when you’re going public, you’re transitioning from your existing private shareholder base to a new public shareholder base.

They have to get comfortable with that vision, so you can say all those things, and if your existing private shareholder base is looking at this to get out and you have to find a whole new base of public shareholder base, you can’t ignore what they want, or you’ll have a real problem. The stock will fall dramatically even if the business is doing fine. Because if you’re not communicating what’s happening to them in the business, if you’re not focused on making the quarterly numbers, they’re not going to have faith in you. And they’re not going to want to invest.

You’ll be left without a shareholder base. Your former shareholder base will be selling, and you wont have the new shareholders. What actually happens, it happens to a bunch of companies, is even if the business is doing well, and there isn’t that shareholder base, then the stock falls and it impacts the business. It impacts customer’s perception of the business, recruiting for new employees — so if you don’t focus on keeping the stock up and rising, it creates a negative feedback loop within the business.

BI: It sounds awful. Is sounds like a nightmare! Why does anyone do this?

DG: I think it makes a lot of sense for some companies. Look at LinkedIn. It helped grow their revenue streams, it was a huge boon for LinkedIn to go public. I think Jeff Weiner did a masterful job. It was a real catalyst for their business, it helped grow the business. I think Salesforce, going public very early on before they were profitable, it made a lot of sense for them because it got customers comfortable that these guys were going to have capital and be transparent about their business.

BI: The company that shall not be named [Facebook] had its hyper growth period before the public got a crack at the stock. Isn’t there a risk in IPOing once you’re mature?

DG: I don’t think that’s a problem for the company. What everyone is upset about is the problem for the public market investors. They’re missing out on a lot of the value creation in these companies because they’re staying in the private markets. What you see is people like Fidelity and Capital Research buying late stage private companies because they would have in the past been public already. 

The companies were going to get to that phase whether they were public or private. The valuation was going to reflect that. If it was going to slow down, it was going to slow down, whether you had gone public or not. The stock price will reflect the growth rate was at that time. Part of the reason people get upset about that stuff because they’re missing all this upside as investors.

It’s a lot of sour grapes from public market investors. If you don’t like the growth projection, then don’t buy it. 

sheryl sandberg

Business Insider

BI: Do you ever talk about your wife Sheryl in your interviews? She called you one of her best career decisions. What do you think of her?
DG: She asked that I not talk about her too much. She has a book coming out, and we’ll be talking more when that’s out. But, what I will says is that’s certainly the best decision I’ve made in my life, was getting married to her. We’re fortunate that we have a great life together. She’s my most trusted advisor. It’s just great to have someone who’s smart and thoughtful and knowledgeable about these type of businesses. She’s been incredibly helpful and encouraging to me through this whole process. From taking the job at SurveyMonkey, to going forward. A lot of my best ideas come from her.

BI: Do you share the housework 50/50? She says you guys split it, but you can be honest, are you doing 60% of the work? If you want to vent, you can do that, no one will know, just get it off your chest.

DG: I think we definitely aspire to that. At certain points in time I’m probably not at 50/50, especially in the last couple of weeks, but we try to be there. That’s the sort of partnership that we have.

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