As several senior IR professionals have taken roles at private companies, Ben Ashwell explores what the appeal is and what private company IR looks like
During the last few years, a number of award-winning and industry-leading IR professionals have made the move from public to private companies. John Cummings left Salesforce for Celonis. Dennis Walsh left Zillow Group for Postmates. Anil Gupta left Facebook for Coinbase. And Isabelle Adjahi joined Lion Electric, shortly after leaving her position at WSP.
For some, joining a pre-IPO company represents the opportunity to establish a brand new IR function in their own image and embed its value early with senior management. For others, it’s the more immediate appeal of working on an IPO, listing or other large transaction that may serve as a career highlight. There’s risk associated, too: some pre-IPO companies can transition to listed status seamlessly, while others are exposed when confronted with the scrutiny of the public markets. For many of these IR professionals, however, the risk outweighs the reward.
For Cummings, who joined Celonis as its senior vice president of investor relations and corporate development in September 2020, the move to a private company had been on the cards for some time. After nine award-winning years at Salesforce – during his tenure, the company won five IR Magazine Awards, while Cummings personally won the best large-cap IRO award in 2018 – he was excited by the prospect of helping to build something from an earlier stage.
‘There are a number of different challenges that come up at a late-stage private company,’ he explains. ‘For me, part of the calculus was the ability to learn new things. During my time with Salesforce, I really helped the company grow, not just in IR but also as a member of the CFO’s executive team. I spent a lot of time working with the board on ESG disclosures. But now there’s a desire to be part of building the processes and systems of the firm and bringing a lot of my skills to that.’
Celonis’ CFO Guido Torrini is on the record as saying that the company may pursue an IPO in future, having closed a $250 mn Series C round of funding in 2019. Cummings says going public would require work before the company was ready – by shifting the calendar of its annual reporting, for instance. But regardless, his role at Celonis today bears more resemblance to the role of a public company IRO than many may think.
Building the investor story ‘The expectation is to help build the investor story for the company, help to define it and tell it,’ Cummings says. ‘There are a lot of interesting investors, including mutual funds like Fidelity, Wellington and T Rowe Price, that are investing in late-stage private firms now. These are names that were top of the roster at Salesforce and they are interesting potential Series D investors.’
Celonis has also participated in a number of banking conferences since Cummings joined, including Wells Fargo and Barclays events. ‘You’re seeing private company tracks emerge at all those conferences because the markets are looking to invest in late-stage private,’ Cummings adds.
This is important to him because the Celonis story is quite a complicated one – ‘not as complicated as Palantir, but not too far off,’ he says. Cummings believes an artificial intelligence-enhanced process-mining software company like Celonis could play an influential role in the future of the technology sector – but it’s peerless in the public markets. By spending time up front to ensure the story is understood, Cummings believes it will help the company if it does enter the public markets in the future.
And while his contacts book and expertise are clearly reaping benefits, he says the conversations he has with investors now differ from those he had when he was at Salesforce. ‘It’s not as if people are watching my stock trade and that’s why the phone is ringing,’ he explains. ‘They don’t need to know what’s happening with Celonis right now. The conversations are much more thematic, much more strategic and a little more open-ended.’
Doing your research Joining a private company does entail risk, as Cummings was acutely aware. He says he has had the opportunity to join other pre-public companies and he had to assess how soon they wanted to go public, what their intentions were for wanting to go public and what needed to happen for them to be a well-regarded public company.
‘Obviously, you’re making a bet,’ Cummings says. ‘Going from private to public can be messy in terms of how you think about governance and ESG. It’s not just a question of whether you have a message, but whether you’re doing things in a way that will be received well by the markets.
'In my conversations with the CEOs when I was interviewing, they were very much focused on the long-term vision. If Celonis does become a public company, it will be less about an exit and more about a stage of development to accelerate growth.’
Of course, vetting a private company as a candidate for a job can be more challenging than vetting a public company. Right off the bat there’s less transparency into the balance sheet, and also less likelihood of mutual contacts. In some cases, it’s even difficult to obtain a list of a private company’s board directors. Further, interviewing for a new role is more complicated during Covid-19, when candidates are trying to gauge the trustworthiness of a management team based on a couple of video meetings.
This is something that has been top of mind for Walsh during the last few years – first in vetting a private company ahead of his 2019 move to Postmates as its senior director and head of investor relations, and then more recently while interviewing to become Wish’s first vice president of IR, a role he started in early February (Wish listed in December 2020).
For his research, Walsh started out by looking at news coverage of companies, often finding articles on PitchBook, Crunchbase and in various publications. Next, he looked at company announcements of funding rounds, either through news releases or blog posts. These releases are inconsistent, he says, but can sometimes contain information about a company’s financials, board directors and key investors.
After that, Walsh used AlphaSense to search for mentions of companies – either because they made appearances or gave presentations at banking conferences or because they were included in a recent analyst note.
His two final stages of research were to call up sell-side analysts to ask for their view on a company – ‘I didn’t find any analysts who refused me and, if they have a good relationship, they may even put you in touch with the CFO’ – and to look for companies’ inclusion in league tables, such as the 'best places to work' rankings. Sometimes those league tables will share revenue ranges or give information about whether the firm has experienced growth in revenue.
Dennis Walsh, Wish
Mock earnings calls and building an IR function When Walsh joined Postmates, it was shortly before the firm's planned IPO, though it ultimately pursued a different exit, and was acquired by Uber in December 2020. During his 18 months with the company, Walsh occupied an IR role at a private company but recognized the need to prepare Postmates for life as a public company, in case it listed in the future.
‘The biggest event for a company after an IPO is the first earnings call and I had extra time to prepare for that,’ he says. ‘I came in and operated as if Postmates was a public company. We ran earnings calls, where I would draft a script, the executive team would read the long remarks and then we’d rehearse the Q&A. I run earnings like a war room – the walls are covered in whiteboards and all the answers to potential questions are on the wall. By doing these practice calls, management gets to orient itself with where the answers are.’
Walsh says Postmates’ investors at the time were very supportive of the company and wanted to see it succeed, whereas investors and sell-side analysts in the public markets can be more abrupt and even rude. For that reason, Walsh says the mock earnings calls were useful in preparing management for analyst questions. ‘These analysts aren’t going to ask you one question and wait for you to respond before asking another one; they’ll bundle three into one,’ he says. ‘If you don’t scribble them down, you won’t remember question one.’
Beyond this, Walsh was also keen to establish IR as a strategic function. When he was at Zillow Group, he regularly used AlphaSense to conduct peer analysis (this effort was recognized at the IR Magazine Awards – US 2018, where Zillow Group won for best financial reporting). He continued this work at Postmates.
‘I provided reports that informed the executive team about what our peers shared in their earnings calls, what types of questions they got and what the analyst response was,’ Walsh says. ‘The report was valued across multiple functions at the company because it gave a good understanding of what’s going on in our sector. As IR professionals, we have such a unique view of the industry – whether it’s from an analyst note or a presentation at a conference – and to be able to share that information can be incredibly valuable in a lot of ways.’
Isabelle Adjahi, Lion Electric
Going public through a Spac For Adjahi, the context of joining a private company was very different. In late 2020 she was approached by a banker who was working on the merger between Lion Electric and Northern Genesis Acquisition Corp, a ‘blank check’ or special purpose acquisition company (Spac). Two weeks later, Adjahi was unveiled as Lion Electric’s vice president of investor relations and sustainable development.
Spacs have exploded in popularity almost as much as GameStop stock. In 2020 more money was raised in the US through Spacs ($79 bn) than through traditional IPOs ($67 bn, according to Business Insider). Most Spacs have two years to conclude an acquisition, and that places a tremendous time pressure on the IRO or IR agency that is brought in to work on the transaction.
When Adjahi joined, she started talking to analysts immediately –‘I want them to start writing about us on day one’ – lining up conference appearances (she confirmed 10 in her first two weeks) and preparing the company’s disclosures to be compliant with public company regulations. And she did all this while selecting vendors for routine IR tasks, trying to design and launch an IR website and monitoring the investor activity in Northern Genesis Acquisition Corp, which has already started responding to news about Lion Electric.
This last point has posed challenges for Lion Electric. As an electric vehicle company, it’s a trendy pick for retail investors, which has created a lot of noise, interest and inbound inquiries.
‘Retail investors reach out to the CEO directly and want to give input on what we need to do in the short term,’ Adjahi says. ‘At some point management needs to stop looking at the market, so that IR can build credibility. That’s why you have to hire people with experience. I’m ready to receive the pushback and the nasty messages from investors.’
By working at a company that is mid-way through acquisition by a Spac, Adjahi is experiencing a severely truncated timeframe. But it’s an opportunity she relishes, and her perspective is consistent with that of many other senior IROs after joining a pre-public company.
‘I’ve spent 25 years doing investor relations and probably could have gone to a large firm where everything is in place already and you just slot in,’ Adjahi says. ‘In this case, I really like it because I have the opportunity to influence and implement everything – and I really mean everything.’
