The CEO of Amplitude is glad that his company went public in 2021, despite a sharp contraction in the value of tech shares since its IPO.
In a wide-ranging conversation on TechCrunch’s Equity Podcast, Spenser Skates, who also co-founded Amplitude, told me that going public was the “totally correct” move for the digital analytics company at the time.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
“If we were still private now we would be in a world of hurt,” he said. “There would be all this pressure to go public, but then there wouldn’t be an appetite for it. And so [it would] be harder to get out,” he added, going on to detail how delaying the IPO would have harmed Amplitude’s ability to operate, grow and acquire.
Skates’ clear answer is notable, because while Amplitude had an incredibly strong run when it was still privately owned, it has been forced to endure the same sharp correction in tech valuations that every public technology company has suffered. Moreover, the company was early to tell the market about its concerns around the macroeconomy, and swallowed a lot of the bitterness of that repricing in a single gulp.
To see the CEO staunchly in favor of running a public company at a time when the market is this volatile makes me suspect other unicorns’ decisions to not go public during 2021. In hindsight, you could argue that it was smart to hunker down and wait out the storm given how things have been since the bubble popped, but what was their logic when things were fine and dandy?
Let’s dig deeper into Skates’ decision to go public, and why he stands by it even now.
Why go public 101
Companies have a bunch of good reasons for doing a public offering. Besides the headlines and public image that doing an IPO gets you, usually, going public lets you show customers that you’re financially healthy (BigCommcere’s CEO has stressed this point several times to this column), capital is easier to raise, your market position is clearer to your customers and competitors, and you become part of a bigger cohort of large companies that are supposedly really good at what they do.
Here’s Skates on why going public was the right choice for Amplitude (tidied for clarity and flow):
TechCrunch: You went public back in September of 2021. And then you alerted your investors about the macro situation getting weaker, I think it was February of 2022. Do you regret the IPO timing? Or was that actually the right move for the company?
Skates: Absolutely not, absolutely not. [It was] totally correct for us to go out. If we were still private now, we would be in a world of hurt. There would be all this pressure to go public, but then there wouldn’t be an appetite for it. And so [it would] be harder to get out. All the people that could have gotten liquidity [wouldn’t have, and] we wouldn’t have had the advantages of being a public company for almost two years now. And so people wouldn’t be clear that we’re actually the market leader in our space. There’d be much more fear around us; we wouldn’t have the liquid currency to be able to do things like acquisitions, and [things] like cash to cover on the stock side. And we’d just be in so much worse shape.
Not that it’s been all sunshine and roses. No CEO likes to do an earnings call and then be told that their company’s stock is down sharply, which is exactly what happened to Amplitude after its Q4 2021 investor chat.
Skates addressed that in the rest of his answer to our question:
Skates: Now, look, don’t get me wrong, it’s painful to have an equity market that’s in contraction. That’s just part of the cycle, and we got to focus on the things that are in our control. We’re going to grow this business and win the category. And I will take every advantage I can get, and being public is no question one of those advantages. We’re seeing — like I talked to some of these companies that are still private at our stage — and it’s really tough for them. It’s really tough.
While I hesitate to let someone else make the point I wanted to, it’s hard to improve on those final few sentences.
So, what can we take away from Skates’ notes? Taking a startup public is a good thing to do, and isn’t as much of a burden as it’s made out to be. When I read about tech companies trying to decide when or if they should go public, it seems the conversation is about constraining the downside, waiting for public companies’ valuations to harmonize with prior private valuations or trying to time it precisely to avoid one issue or another.
It’s far less often that the discussion explores the advantages of being public. When we consider what could go wrong by changing things, we should also consider the downsides of not changing anything!
My chat with Skates had some other interesting bits that I might pull out for the weekend, especially some notes on how to price enterprise AI products. In the meantime, you can listen to the whole chat here.