Why Bill.com didn’t pursue a direct listing

Bill.com went public today after pricing its shares higher than it initially expected. The B2B payments company sold nearly 10 million shares at $22 apiece, raising around $216 million in its IPO. Public investors felt that the company’s price was a deal, sending the value of its equity to $35.51 per share as of the time of writing.

That’s a gain of over 61%.

On the heels of its successful pricing run and raucous first day’s trading, TechCrunch caught up with Bill.com CEO René Lacerte to dig into his company’s debut. We wanted to know how pricing went, and whether the company (which possibly could have valued itself more richly during its IPO pricing, given its first-day pop) had considered a direct listing.

Lacerte detailed what resonated with investors while pricing Bill.com’s shares, and also did a good job outlining his perspective on what matters for companies that are going public. As a spoiler, he wasn’t super focused on the company’s first-day return.

For more on the Bill.com IPO’s nuts and bolts, head here. Let’s get into the interview.

René Lacerte

The following interview has been edited for length and clarity. Questions have been condensed.

TechCrunch: How did your IPO pricing feel, and what did you learn from the process?

Lacerte: I think the whole experience has been an incredible learning experience from a capitalism perspective; that’s probably a broader conversation. But you know, it really came down to how our story resonated with investors, and so there’s three components that we kind of really talked to folks about.

One is how big is the opportunity. Two was the platform we built, how unique it is designed for SMBs from the ground up. And the third was the style and way that we manage the company. We took the time to really make sure that those points were understood. And that folks had a chance to ask questions around, obviously, everything they have questions on, but you know, we really wanted to make sure they understand that.

I think that the response really was around those things. And it was great to me to be authentic about how I think about leadership and to have people you know, identify with it.

TechCrunch: Your shares are up over 60%; I’m curious if you expected this sort of reaction to the debut?

Lacerte: It is definitely exciting. When I started the company, my focus was helping the millions of businesses that need help. We have 81,000 customers and 6 million employers across the country that could need help. So we have 81,000 and a much bigger market to go after.

What’s exciting for me was that the story, the the size of the opportunity, the capabilities of the platform, and the capabilities of the management team, that that resonated with investors. And so I don’t really focus on any one day I focus on what is the outcome I’m trying to engineer and do well. And what I’m trying to do is help SMBs get back to doing business and not doing the back office.

TechCrunch: It sounds like your real focus during this IPO is less on the amount of money that you raised, or exactly where your shares wind up, but more that’s a step in the journey of your firm. Is that a fair summary?

Lacerte: That is an excellent summary. And the way I think about it is, you know, we just finished a marathon and started one the same day. We’re on a totally different path of opportunity for growth. You know, permanent capital from the public markets, it changes companies; the expectations, requirements, the rigor, that actually cascades into how I manage and develop the management team and the teams below across the company.

And so that focus, I think, is critical. And I think that ability to go after that massive market in front of us requires permanent capital, and, really, the thoughtfulness that permanent capital puts behind the investments they make over a long time.

TechCrunch: Were investors more interested in your SaaS revenue, or your interest income?

Lacerte: When I talked about the platform actually resonating with investors, it’s the fact that we have married software and payments into one platform.

And so there are companies that are software companies that at some point decide to do payments. There are companies that are payments companies that at some point decide to try to do software to drive more payments. From day one, when I started the company in 2006, I knew we were doing both, and we built software and payments together.

It’s kind of like the Reese’s Peanut Butter Cup, you know, it’s the perfect marriage of two things together.

And so that’s what resonated for folks, the opportunity for us to be able to deliver payments. And if you asked like, why is it that businesses, 90% of them rely on paper checks, it always goes back to the process. If you talk to customers [they] say, “oh, I’ve got a filing cabinet. I got sticky notes, I leave, I walk around, I have checks, I don’t need something different until you can automate all of that, I’m not going to actually go get rid of the checks.”

Our ability to marry the software processes that businesses have with the payment capabilities that we’re able to develop, as well as partner with different financial institutions, that makes a huge difference in making a difference for customers.

TechCrunch: What changed at the company as you prepared to go public?

Lacerte: When we started talking about it, we started thinking about the things that we knew would need to be different to operate in a public environment. You can just think about kind of the reporting cadence, right? That has had to be at a different level than what we’re doing before.

But across the business, how we drive growth and how we build the company, it had to be focused on the long-term growth drivers and how we [were] going to return the capital for investors. And so I think, you know, I don’t think anything’s definitely changed. But it [creates] an element of execution, that really is like a forcing function, if you will.

We’re just at a different spot, and it’s really good. So I wouldn’t say anything changed, other than everything changed, right? And a weird way to say it, but we’re doing everything we did before. We’re just doing it better because we need to.

TechCrunch: Did you consider a direct listing instead of an IPO?

Lacerte: We did not consider a direct listing. I’ve been fortunate over, you know, two companies and now close to actually 20 years where I’ve raised capital from investors, and what I’ve learned is — that statement I made about patience and impatience — it’s good to have capital that really understands what you’re about, who you are as a person, and what your strategy is and what your market opportunity is.

And I am excited to have retail investors, and we will get better and better at helping them understand those three things I just said. But to make the transition to permanent capital, to have the the opportunity to sit across the table from people that do manage money for a living, and be able to look them in the eye and have them look me in the eye and understand those to be competitive differentiators. I knew that if I could talk to them, and they were comfortable and to receptive the story, then I knew that it was the right time.

In a direct listing, people don’t get to know you. And over time, people won’t know me. But at this point, when you make that transition [to being public], I thought that was really important to have that opportunity.

One more quote

Wrapping up, IPO days are a big deal for investors as well, especially those who cut early checks to the now large portfolio companies that are going public. Bill.com’s IPO is no different.

One backer of the company, Emergence Capital’s Brian Jacobs, who led the former startup’s Series B, had this to say:

I actually met Rene at his wedding, he married a college friend of mine. And that day kicked-off what would become a very important relationship. While Emergence was not able to invest in his first company PayCycle, I was able to get a good look at how he operates a business and, quickly learned he had big visions for helping small businesses mitigate the challenges of paper checks by bringing payments to the cloud. It seems like a no-brainer now, but 13+ years ago it was huge innovation, and since Bill.com has continued to grow and evolve under Rene’s leadership.

Today, is a huge milestone and I’ve been honored to be a part of the team.

And that’s another unicorn IPO in the bag. Will we see another in 2019?

NYSE image via the company.