While most of Silicon Valley has resigned itself to a future with three options—sell, acquire or fail—Lise Buyer has spent the last two years counseling companies on how to go public at her consultancy, Class V Group.
I just spoke with Buyer, who first made her name as an Internet analyst at Credit Suisse First Boston in the ‘90s and later helped architect Google’s IPO. Among other things, we discussed the IPO picture going forward, and how a severe recession might impact her own path.
Do you think it’s as bad as it looks out there?
Well, to paraphrase from an article in New York magazine in 1987, we’re pretty much dancing on the rim of a volcano right now, and either we’ll be okay, or we’re going to fall in and be blown to smithereens. Really, if the folks buying up all the debt — the ones with all the T-bills and the oil money — lose confidence in us, this economy is in for a shakeup the likes of which we haven’t seen in 79 years. It’s very, very concerning.
Is the IPO window closed for the rest of this year?
Unfortunately, I do think the IPO window is pretty much closed for the rest of the year, though stranger things have happened. A number of really high quality companies are waiting to go public. Until the market settles down, though, I just don’t know why any company would try it.
What does that mean for your business?
Well, I have two clients right now who are actively in the process, and I’m advising them to wait until potential buyers have their eye on the ball. Right now, [potential buyers] are worried about redemptions from their funds. Also, there are a lot of great stocks that are steeply discounted right now, and fund manager thinking is, why buy a generally small IPO and take a risk when you can buy something that’s much less apt to get you in trouble?
Does it make sense for companies to be actively in the process at this point? It seems a little like studying up now for a test that won’t be administered until who knows when.
If the economy is really about to enter a prolonged recession, first and foremost, a company needs to focus on running the day-to-day operations of its business in a world where credit isn’t available, and spending is weakened. But once that’s under control, is it time to think about an IPO? Sure, because the process between thinking about it to getting it done is about a year long, and I’m personally of the belief that within a year, the best companies will indeed be able to enter the market.
Who do you think will be taking them public once the dust settles?
I think a lot of positions around the table will have changed. It’s obviously a great opportunity for the small, specialized banks to step into the void, because they didn’t have exposure to the same credit issues as the big guys did. I genuinely think this bodes well, too, for what I’m doing because no issuer can count on business as usual. To use the cliché that I use in conversations, I’m an IPO caddie to some extent, and I think the value of what I do goes up when the landscape changes.
What’s the silver lining for the broader tech community?
I’m not convinced this will happen but I think there’s some chance that when we get out of this, the short term money will have shaken out of the market. As you and I have talked about in the past, a major problem for new issuers has been investors with a time horizon of 12 to 36 hours instead of 12 to 36 months. This crisis could put power back in the hands of the longer-term folks who can build a position large enough over time to make a difference to the portfolio.
What if the financial system actually implodes (if that’s truly possible)?
If you don’t mind my getting on my soapbox, even if the worst doesn’t happen, no one looks at this country as an economic powerhouse anymore. And the way to get back that status is through technological innovation and solving problems that others haven’t been able to solve. I’m biased because I live in the Valley, but I think this country and its workforce are more able to rise to that challenge than anyone, anywhere. I also think that technological innovation could again become much more than a way to get money into people’s bank accounts. I don’t mean to sound like a flag-waving moron but I think it’s true.
It’s curious, but as we’re talking about the end of the world as we know it, VCs still seem pretty sanguine about the impact, or lack thereof, of the credit crisis on their industry. Should they be more concerned, or are they right to feel somewhat buffered?
Well, no, capital calls could potentially be an issue, as could the frustration of limited partners who don’t want to pay steep fees when they haven’t seen any returns. Those are things that would concern me if I were in the business. I’m very glad I’m not, actually,
Can you share what you’ve been doing personally since this crisis began? Have you been buying or selling any stock?
Over the last week, I’ve been a net seller but I’ve been opportunistically investing in other companies. I’m legitimately very concerned about the state of the economy, but I haven’t been able to resist some bargains.
Have you been buying tech stocks?
No, though I’ve generally not been selling my tech stocks, either.
Have you been doing anything else to protect your assets?
I’ve certainly been brushing up on the rules around FDIC insurance!