On May 15, 2014—seven years after we started sketching out Zendesk in my apartment in Copenhagen—the company went public on the New York Stock Exchange. Overnight, on paper, we reached “unicorn” status: we were officially worth more than $1 billion. At one time no one had heard of us; now we were considered the harbinger of what was to come for cloud companies and a new generation of enterprise software players.
Of course, none of this had happened overnight. And the IPO was no exception. It had been an all-consuming process for a very long time.
The IPO process is distracting. It lasts for so many months and takes up so much mental capacity you end up almost incapable of thinking about anything else. Everybody's involved, and there are so many new people to coordinate: bankers, lawyers, auditors. Although the process also matures and strengthens the company in many different ways, the process is also a big diversion from running your business.
For us, there was an extra jittery element to the whole process. Since we first filed for the IPO in early 2014, the whole climate of the high-growth technology and SaaS market had changed—the sector had gotten pummeled. We had all of these advisors sharing their doubts about the market and the timing of our offering. The online storage service Box—called one of the best SaaS companies of all time—which had filed their paperwork before us, had subsequently decided to delay their process. Without explicitly advising us to postpone, people were being brutally honest about the state of the market. I felt like the whole foundation of what we were doing was being questioned. And I realized that it would come down to me making a decision. No pressure!
I had to listen to all of the noise and uncertainty and at same time show confidence to our employees. It was a lot harder with everything seeming wobbly. I slept only three hours the night before the all-hands meeting where I addressed the entire company, talking about the upcoming IPO and preparing the employees for what that would mean for them and for the company. That meeting followed an especially tough day in the markets, and both of our bankers, our CFO, and everybody else started to look increasingly pale. The subject of postponing was never mentioned, but behind every conversation and every observation lay the unspoken question: Should we postpone?
I couldn't. Postponing would just keep us in this limbo state. I wanted to get the IPO done and move on. I was determined to go ahead. Not doing it would make it more complicated. You know you have a life beyond the IPO, but you can't start it until after the IPO. There's a saying: “A great company can always go public.” I thought we had a great company. We would not postpone.
The road show—the two weeks leading up to the IPO—is like nothing you can prepare for. It's two weeks of your life that you live in a separate reality.
We flew out of San Francisco on a Sunday evening. The bankers had made a private jet available to us for the entire road show. They wanted us to have a good working session as we flew from the West Coast to the East Coast that Sunday evening. I couldn't do it; I didn't want to sit trapped in a small airplane for six hours with a bunch of people “preparing” me. I needed time on my own, time to get into the zone. I said I would fly commercial and that I would meet them in New York. Giving up the private jet was a luxury! Time on my own is the scarcest resource I have. There are always people waiting to speak with me or four kids who need to be with me. I welcomed the alone time on the commercial flight. And yes, I fully appreciate the irony that what used to be a dreadful, tense experience for me was now my only opportunity to truly relax. Of course, nowadays I also buy much more expensive tickets and have a much more comfortable seat and amenities.
The road show consisted of Alan Black, our new CFO, and me pitching to institutional investors—over and over again. You start out easy by pitching the salespeople of the bankers. The first session was at Goldman Sachs in its headquarters in Manhattan. And it went terribly. I wasn't convincing. I went on too long. I stuttered. I flopped. I'm never very good on a Monday, but this was awful. Yet that's the idea: you test your pitch in front of a friendly audience. And you know that if Goldman Sachs salespeople are considered “friendly” you're in for a treat.
I received a lot of helpful advice: Keep this piece shorter; elaborate on this; make this point better because it's not clear. Overlay this vision with that. At this point the teamwork and the many hours spent with your bankers really pay off. At this point the whole team is aligned, and it's all about sculpting the pitch into its final shape. Also, sometimes you are not good enough and you have to take it up a notch and improve your performance. Luckily, I'd have plenty of opportunity to hone the pitch.
Before I left for the road show I had caught a giant cold from my baby daughter, who was in a big kissing phase. And this happened despite the jumbo pack of Emergen-C that our newest board member, Caryn Marooney, had shipped to me. The corporate jets (which I took after the initial flight east) fly way higher than normal jets, which exacerbated the issues with my ears and sinuses. I was popping cocktails of cold medicines and the team was pampering me, treating me like a pop singer with a sore throat before a concert.
I quickly got into the rhythm of the road show and meeting with investors at pension funds, hedge funds, and other financial institutions. We crisscrossed the country: East Coast, West Coast, Baltimore, Milwaukee, Kansas. It was my first time in many of these American cities, though I didn't see much of anything. We went from the jet to a car to a meeting, and the car was waiting after the meeting to take us directly to the tarmac. There was no wasted time, and I can't precisely remember what happened where.
One thing I did realize everywhere, though, is that investors are just people. We had a good company and we had the right vision and good clean metrics. But even the most hard-core investors want to talk about more than the model. They want to get a sense for the passion and the people behind the business. They want to believe in the company for more than just its financials. They want to believe that the stuff they invest in makes a difference.
After the first five days of pitches we ended up in New York. At our last meeting of the day, the investor served us wine and appetizers, and I very much got the feeling that although this is also about money, and yes the market is tough, we're still in this together, and having good companies in the public market is a win for everybody.
I stayed another day in New York for media training and flew back to San Francisco Saturday night. I wanted to catch up on work, but I slept for almost the entire flight. I can't remember what happened on Sunday, but it probably wasn't my finest moment with the family. And on Monday morning the road show started all over again.
We ended up in Chicago on Wednesday evening, the night before the offering. We holed up in a tiny gray conference room at the airport doing the pricing call—with the pricing committee and all of our bankers, we determined the opening price for the stock. The price range we were using throughout the road show, $8–10 a share, was much lower than where the market would have positioned us just a few months earlier.
Every dollar meant something like $10 million more or less to the company. So it's not a decision you just skate over. We tried to make the call brief, but the truth was, we had arguments and opinions that pointed in every direction. There was no real consensus. It reminded me very much of the early days with Alex and Morten, sitting in the kitchen discussing the terms of the Series A investment by CRV. For me the details were less important. The series A was just the first step, albeit an important one, in our journey to build our startup in California. The IPO was just the first step in our journey to becoming a next-generation enterprise software company. Where we priced on opening day was unimportant in the grand scheme of things. And it was nothing anybody would remember by the end of the day.
Just as it is with customers, the details and formalities of a relationship matter less than how you actually treat each other. The best pricing and contract in the world will never survive a bad experience. The public market investors were our customers in this case. We had told them $8–10, so why would we risk that relationship by edging or challenging that range? We stuck to the middle of the road and settled on $9.
That price valued the company at something like $700 million, which made us a relatively cheap stock compared to our peers. Some commented it was being offered at a “substantial valuation discount.” Maybe, but when you take a step back, Jesus Christ, it's still a lot of money! And because we all believed in more upside to the stock over time, we felt that $9 would give the new investors a good upside too.
After the pricing call, we flew to New York and prepared for the theater of going public. All of the real work had all happened already. I had been on the road for two weeks. Now it was time to put on the performance. I would talk to the press—after months of being in a quiet period. And though on the day of the IPO the quiet period would temporarily come to a close, there were still so many things I couldn't directly talk about on that day.
I had to train for that. After eight days of wall-to-wall pitching, I had to get my head around a different reality. In my hotel suite on Wall Street (it sounds fancy, but it wasn't), I sat down with Alex Gurevich, my right-hand man, and Matt Hicks, who heads our PR. We ordered room service, and for two hours Matt pounded me with questions. He asked the same things over and over until I nailed the type of answers we wanted me to give. It didn't matter what the questions were. All that mattered was the answers. Every question was an opportunity to give the kind of answer we wanted. It was important to get the story, the journey we were on, and what we believed was in front of us. Anything about the current stock market, why we priced the way we did, whether we considered delaying the IPO—all of the obvious questions—were things we couldn't and shouldn't answer.
We stopped prepping sometime after midnight, and I took a sleeping pill and was knocked out for a good five hours. I woke up focused and ready for the performance. At this point it was just a circus—a good appearance leads to good press.
Matt Hicks not only spent the evening prepping me for the press circus, but he also did me a big personal favor. In the months leading up to the IPO I had developed a rash on the right side of my face. The rash was exaggerated on camera, and I didn't want everybody's first impression of me to be, “what's that red thing on his cheek?” Before meeting me at the hotel, Matt had gone out shopping in downtown Manhattan for cosmetics for me—more specifically, a face powder, brush, sponges, the whole shebang. The day of the IPO, applying a little make-up was part of my morning routine. (Thanks Matt! I promise I will never have you shop for makeup for me again.)
We had flown in forty employees from our offices all around the world for the event. We walked together as a group to the stock exchange and saw this iconic building wrapped with our bright green banner and the Mentor bigger than I have ever seen him. Morten, Alex, and I took a selfie in front of the building and tweeted it.
It was a legendary moment. We were now part of a different story. But it was sort of an in-between moment. The hard work was done and there would be new hard work ahead. At the moment we just had to press a button.
We invited our early employees to join us, and we squeezed them into the balcony on the floor of the NYSE. We pressed a button, and with that simple action we became a publicly traded company. We snapped another selfie (one of the guys, Royston out of our newly acquired Singapore Zopim office, introduced the Exchange to the selfie stick, and that photo is now legendary.)
Morten and Alex had family there. Alex's parents came from Denmark, and Morten's mother, brother, and niece flew in. I didn't invite my family. Even with all the excitement, I couldn't forget it was just work. And they would never let me anyway.
We closed on our first day on the NYSE at $13.43, up 49 percent from the opening. That night we flew back on the private jet. We had a bunch of cocktails. Morten passed out. I took a nap. We arrived back to San Francisco very late. No one was up at my house. I went to bed. The next day I drove the kids to school. Some things stay the same.
The same morning, we were back in the same office, where we organized our largest community services event ever, and almost two hundred employees of just the San Francisco office took to the streets to clean up and improve our neighborhood—something we'd been committed to since we moved in and something that we're enjoying amplifying.
In a similar vein, I knew it would be important for me to run the company the same way I always have. But there are things that are different too. Being a public company has an impact on our employees, who own 25 percent of the company. They think about the stock price and how that affects their ability to buy a house or start a family. I have a responsibility to them and can never neglect that part of it.
The IPO, the end of this story, was a fantastic event. And it was a success. The stock price later went up more than 100 percent—but that wasn't the best part. The best part was what we did along the way to reach that point—taking nothing and building something. It was a lot of hard work, but a very unique opportunity, and an enormous privilege.
After the IPO, Peter Fenton sent me a very expensive bottle of champagne. I have yet to drink it. It has an associated value that makes it hard for me to want to consume it. After I drink it, the value will be gone. I'm not ready for that yet. I'm not ready for any of it to be over.