ETL with GEOFF DONAKER, COO OF YELP

Geoff Donaker, COO of Yelp and one of our very own Stanford graduates, was the perfect speaker for the final, launch-themed week of our campaign. Donaker actually offered us an inside look into the steps that his company took to become public—a view that speakers rarely share to such an extent with their audiences.

He first began by discussing the fact that Yelp was close to selling twice, but did not for several reasons. One reason was that although selling Yelp would have been beneficial to the founders and early investors, it may not have been better for the rest of the employee base and product itself. The founding team, investors, and board of directors had a vision that the company would be worth more in the future, and they wanted to keep Yelp alive; acquisition is often the end of a company, whereas IPO is the beginning. Needless to say, they thought that the company was best served by maintaining it’s independence and keeping some room to grow.

He then elaborated on what influenced the company to go public. Donaker said that the founders had always thought that when the company was at 100 million dollars in revenue and had positive cash flow, it would likely be ready to go public. In the spring of 2011, the CFO resigned for family reasons. This change led the founders to question the possibility of going public. Thus, when hiring a new CFO, they looked for someone who had previously worked for a public Internet company as CFO and preferably taken that company public themselves.

Donaker went into generous detail about the six months between their decision to go public and actually ringing the bell at the stock exchange. The founders began by announcing to a number of large banks that they were going public. After giving everyone an hour to pitch one Friday, they ultimately chose Goldman Sachs to lead the process. The company then spent the next two months writing the S1—the filing document that a company makes available on a website for every investor to read. After filing the S1, they began the “road show, “ a two to three week marketing period where the management team flew around the country. They met with groups of investors, saying the exact same things in every meeting.

He then focused on the night before they went to the stock exchange. The management team was stuck on one essential question: Did they have enough demand? Luckily, it seemed that their investors wanted to buy 180 million shares, as opposed to the seven that Yelp had offered. Now that they knew they had a high enough demand, they had to figure out what price to sell the shares at. They needed to find a sweet spot for the price—their investors needed the chance to make money and feel good, but the management team also wanted to raise a significant amount of money for the company. They were worried that if their price was too high, it would collapse the next day and result in a broken deal. After some consideration and advice from their bankers, picked a price of 15 dollars. The next morning, they were able to “ring the bell,” which was actually a button, at exactly nine thirty.  They walked down to the floor, and watched market open.

After sharing the story, Donaker spoke about his work. He said that there is not too much of a difference between a private and public company, and that Yelp’s move to become public allowed it to continue to thrive.  Donaker even discussed a typical day at work, using today as an example—we walked in his shoes and experienced everything from his meetings with investors to the sandwich he ate during a fire drill this afternoon.

Donaker’s extensive descriptions and genuine enthusiasm offered us an exclusive look into processes and challenges that tech companies go through today. Everyone left the seminar with new knowledge and vocabulary regarding entrepreneurship, and hopefully some information that will prompt them to start some launches of their own.

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