**20VC + SaaStr: Analyzing the Figma IPO: $3B Unreachable, Flawed CEO Compensation, and the Public Market Advantage**
*Featuring insights from Brian Halligan (Co-Founder & Executive Chairman of HubSpot), Harry Stebbings, Rory O’Driscoll, and Jason Calacanis on IPO dynamics, CEO pay, and the present state of public markets.*
**Key Points**
**IPO Pricing Reality**
“The notion that Figma left $3 billion behind is flawed. The $98 peak price was due to the IPO kick-off at $38. If it had started at $80 anticipating a $100 launch, it wouldn’t have found buyers. That capital simply wasn’t achievable.” — Rory O’Driscoll
**Going Public vs. Staying Private**
“VCs are often more troublesome than public investors, and only slightly less so than active public investors.” — Brian Halligan
**CEO Compensation**
“Current CEO remuneration is broken, overly reliant on RSUs, unlike the options-centric system prior to 2006 regulatory shifts, fostering risk-averse CEOs.” — Brian Halligan
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Figma’s IPO, with a 250% opening surge, is seen as a tech market misstep. However, insights from those present reveal a more complex reality of IPO mechanics.
**The Final 24 Hours: Exhaustion Meets Crucial Decisions**
Brian Halligan, recalling HubSpot’s public debut in 2014, details the taxing journey leading up to the critical pricing discussions, illustrating the fatigue and decisions made when road-weary teams negotiate IPO terms.
**The Fidelity Negotiation: A Costly Dollar**
A crucial decision at HubSpot involved Fidelity’s $24 stock threshold, a typical pressure in IPOs, resulting in strategic pricing leading to a favorable first-day valuation.
**Deciphering Figma’s “Mispricing”**
O’Driscoll explains that Figma’s substantial price increase post-launch wasn’t a loss but reflective of buyer enthusiasm post-listing, unavailable during initial pricing discussions.
**Effects of Large IPO Gains**
Big IPO surges result in trading-centric shareholders rather than committed investors, challenging long-term company stability.
**CEO Pay Dilemma**
Halligan highlights issues with current CEO pay methods, transitioning from options to RSUs post-2006, inadvertently encouraging conservative leadership practices.
**Performance-Based Incentives: Solutions and Challenges**
Figma’s pre-IPO PSUs aimed at performance incentives met and exceeded expectations upon stock price triggers, suggesting a need for profit-focused metrics.
**The Public Market Advantage**
Halligan posits that public investors, despite quirks, pose fewer intrusions compared to venture capital pressures.
**Timing in IPOs**
The environment dictates IPO outcomes more than fundamentals, as evidenced by HubSpot’s strategic timing post-Zendesk.
**AI’s Path in SMBs**
B2B AI solutions for SMBs require turnkey, self-sufficient models, unlike enterprise-tailored systems.
**Meta’s AI Investment Strategy**
Meta illustrates sustainable AI investments backed by robust financial performance from existing business success.
**Takeaway Lessons:**
1. **IPO Timing**: Market and investor conditions outweigh perfect fundamentals.
2. **CEO Pay Structure**: Transition to operationally-anchored compensation.
3. **Public Market Ease**: Managed correctly, public investors may be less intrusive than VCs.
4. **SMB AI Approaches**: Emphasize pre-packaged solutions for SMB adoption.
5. **Optimal IPO Timing**: Favorable public market entry when not necessitated by cash flow needs.
6. **Valuation vs. Investor Quality**: Prefer steady long-term investors over volatile, high-gain sell-offs.
**Notable Quotes**
**On Exhaustion**
“You’re never as exhausted as when deciding IPO details, drained from intense travel and presentations.” — Brian Halligan
**On Current Market Conditions**
“Seize the open, favorable market conditions for optimal IPO timing.” — Rory O’Driscoll
**On Compensating Iconic CEOs**
“Elon Musk’s compensation would need to correlate with his net worth instead of standard peer metrics.” — Brian Halligan
**On AI for SMBs**
“Cracking rapid deployment for SMB hyper-customization in AI is the next big investment opportunity.” — Jason Lemkin