Former Yelp CFO Says IPO Market Is Open

Former Yelp CFO says IPO market is open

Despite the early struggles of a few newly public technology companies such as Snap Inc. and Blue Apron Holdings, former Yelp CFO Rob Krolik is bullish on the market for initial public offerings and hopes a long list of prospects will soon take the plunge.

“I think the market is open for IPOs, and there is a huge backlog of companies that have filed confidentially under the Jobs Act. They are waiting to go. I don’t know exactly what they are waiting for. You get to a point where you just need to go,” he said.

Krolik was one of a handful of Silicon Valley entrepreneurs and investors who came to Cleveland last month to share their insider perspective on starting and growing a business as part of JumpStart Inc.’s Aug. 15 Startup Scaleup event. Startup Scaleup drew 1,400 participants to Gordon Square for more than 35 workshops, networking sessions and pitch competitions.

While CFO of Yelp, Krolik helped take the online consumer reviews giant public in 2012, and also drove the turnaround that led to exit for Move.com. Crain Content Studio-Cleveland caught up with Krolik shortly before he headlined “The Art of the Exit” session.

HOW DID YOU DETERMINE YELP WAS READY FOR ITS IPO?

Yelp had been operating for seven years. It had gotten to over $100 million, which is a bit of a benchmark for whether companies can do an IPO. Once we hit that benchmark, there are a lot of benefits to an IPO. Obviously, you create liquidity for investors that have been in the company, but also for longtime employees. It also benefits the company from a marketing standpoint. You get a lot of press coverage. That actually brought us a ton of additional customers we were not even expecting. Finally, you get capital and with that capital you can do M&A, you can do marketing, you can invest in international expansion, etc.

WHAT ARE THE DISADVANTAGES OF GOING THE IPO ROUTE?

Much more scrutiny. You can’t do anything without something ending up in the paper. So you have to be much more careful about what you say. … The scrutiny, especially with Twitter and all the social media, it can be brutal. Any person can be a blogger, and they can rip you apart left and right – that gets in the news and into your Yahoo! feed and other feeds. It can be tough.

WHAT IS YOUR MARKET READ FOR EXITS?

There is some chill on the IPO market right now because of Snap and Blue Apron. Companies are concerned about whether they have the right business model, which I think should have been evaluated long before they got to this point.

The M&A market is still pretty strong. Companies are flush with cash. I’d love for the current administration to roll back the tax so companies could bring back money from overseas and really invest here at home. I think that would be fantastic, but regardless, companies are flush with cash and the M&A market will continue to be strong.

WHAT ARE THE KEYS TO A SUCCESSFUL EXIT?

First, having a great team in place is critical. You have to have key leadership positions filled to guide the company on its path. Second, you have to make sure the economics work. My advice to most of the entrepreneurs I talk to is to make sure your business can be profitable at some point. It does not have to be today, but at some point the unique economics have to say you will have a margin. If you can never get there, I am not sure why you are in business.