Squarespace Finally Went Public. But Why the Delay?
When you've been profitable for 4+ years, earn more than $500 million in revenue, and employee 1,200 people, people just expect an IPO to be on the horizon. But Squarespace held off for years. Find out why.
Founded in 2004 by Anthony Casalena (still the company’s CEO and Chairman), Squarespace offers users a one-stop shop for building beautiful, sleek websites that integrate ecommerce, analytics, marketing, and just about everything else you need to build and host a personal page or small business online.
Over the past half-decade, one question has persistently loomed over the Squarespace venture: When’s it going public? That question was answered in January 2021 when the company confidentially filed for a stock market listing.
Still, many have wondered why it didn’t happen sooner. After all, the company has been profitable since 2016. It employs more than 1,200 people and earned more than half a billion dollars in revenue in 2020. It’s been ripe for going public for some time. But just because a company can go public doesn’t mean it should.
Below, we dive into some of the strategic reasons why a successful private company like Squarespace might avoid the rush to go public. These include not needing capital, not wanting to take on the downsides of being public, and waiting on an experienced CFO hire.
No Need for Capital
The numbers substantiate the claims: Squarespace raised $38.5 million in 2010, $40 million in 2014, $200 million in 2017 at a $1.7 billion valuation, and $300 million in 2021 at a $10 billion valuation. The company has been profitable (a rarity among so-called unicorns) every year since 2016, and in 2020, it earned $621.1 million in revenue, up 28% year-over-year (YoY).
Casalena has more than once expressed an aversion to acquiring extra capital for capital’s sake. “I disagree with many VCs who encourage people to raise as much money for their business as they possibly can during each funding round,” Casalena told Entrepreneur, noting that this “mindset has forced us to be operationally efficient” and not throw “cash at a problem that requires time and people to fix.”
Casalena’s view of excess capital suggests that Squarespace probably didn’t go public to raise more of it. That view also likely influenced the company’s eventual decision to go public via direct listing (which generally doesn’t raise extra capital) rather than the more traditional initial public offering (IPO).
The Downsides of Being Public
Being a public company has some clear benefits (raising capital, publicity, creating liquidity for investors), but it also comes with downsides (annual costs, pleasing the shareholders) that likely contributed to Squarespace’s decision not to rush things.
For one, operating publicly adds expenses to a company’s cost structure. The exact costs aren’t clear, but a 2017 report from the U.S. Chamber of Commerce notes that “the SEC has estimated that annual compliance costs for public companies averages $1.5 million.” Earlier findings from Ernst & Young suggested: “being public adds about $2.5 million, on average, to a company’s cost structure,” further noting that $1.5 million of this money is “devoted to higher compensation” for CEOs, CFOs, and others in finance.
These numbers aren’t exactly astronomical, but it’s unlikely that a company as thrifty as Squarespace would be eager to part with such capital if there wasn’t a good reason to do so.
There are other prices associated with being public beyond the fiscal costs. One of the most significant is that after a company goes public, it comes under the intense scrutiny of public shareholders. As ReEcho wrote, this movement from private to public “risks a shift in focus to the short-term, away from a long-term product-first strategy to one dictated by volatile stock prices” and anxious public opinion. This can have a stifling influence on innovation and vision.
Neither Casalena nor Squarespace have issued statements about the impact of this kind of shareholder oversight on the decision to go public. Nonetheless, it’s a factor that any company that’s considering going public (including Squarespace) must weigh before doing so.
The Right CFO
A final key in Squarespace’s delay in going public may have had to do with the company’s desire to bring in a CFO who was seasoned in running a public company. While Nicole Anasenes, the company’s longtime CFO, had significant experience running financial organizations in both IBM’s Software Middleware Group and at Infor, she had never helmed finance for a public venture.
In March 2020, Anasenes stepped down, paving the way for Marcela Martin’s hire in November of that same year. Speaking to the Wall Street Journal about Martin, Casalena states that Squarespace had been searching “for an executive with several years of public-company experience to fill its CFO seat, as opposed to someone with IPO experience only.” Martin, who came fresh from a CFO stint at Booking.com and had held the same position at National Geographic and Fox International, certainly met the criteria for public-company experience.
Casalena went on to say that Martin was “upleveling the finance function, helping us look further into the future. We want to be acting like a public company, even if we’re private.” While Casalena didn’t delve into all the particulars of this “upleveled finance function,” some aspects of it include improving Squarespace’s reporting for closing the books and recognizing revenue as well as expanding forecasting to four or five years into the future rather than one.
With the right CFO in place, it took less than two months for Squarespace to bite the bullet and submit its S-1 filing to the SEC.
The Decision to Go Public Is a Delicate One—Plan Accordingly
Squarespace’s path to going public isn’t necessarily a model for other startups to follow. Not many companies could have an 8-month gap between one CFO leaving and the next one joining and still be able to file an S-1 just a couple of months later.
But one thing from Squarespace’s story that any finance team can relate to is a need for more mature reporting and forecasting both leading up to and beyond going public. As Casalena has said, “At the end of the day, the IPO is a single event, then we have to stay public.” Without a foundation for consistent financial reporting and analysis, that celebratory event will quickly fade.
Squarespace had two luxuries that provided more flexibility in when and how to go public—excess capital and profitability. If you don’t currently enjoy the same luxuries, your path could look more like:
- Dropbox’s methodical, efficient process of building the finance function and getting into the rhythm of public-company reporting.
- Tesla’s use of the IPO process as a funding strategy to fuel the company’s strategic initiatives (and keep it from going bankrupt).
In either case, establishing a strategic finance function early is key. The sooner finance can streamline reporting and elevate its role as a strategic business partner, the easier it will be to chart the right path to eventually going public.
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