Bill.com is surging in its first day of trading. We talked to its CEO and a big backer about the fintech unicorn's IPO and why it's good to be boring post-WeWork.
- Bill.com made its public market debut on the New York Stock Exchange on Thursday after raising $194 million in an IPO.
- Its stock was last up around 60% from its $22 IPO price in its first day trading on NYSE.
- The cloud billing software and payments company has not yet turned a profit, but investor Brian Jacobs told Business Insider that Bill.com could be profitable if it needed to be.
- Bill.com's listing comes at the end of a rocky year for fast-growing but unprofitable startups looking to go public. After WeWork's failed attempt at an IPO, others have been backing away from the public markets.
- "Bill.com has never been a high-drama company," said Jacobs.
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Bill.com made a splash in its public market debut on the New York Stock Exchange on Thursday after raising $194 million in an IPO.
Its shares surged more than 60% above their IPO price in their first day of trading. That marked a strong start for Bill.com even as IPOs have been closely watch in the wake of some high-profile public market disappointments.
The cloud-based software and payments company initially set a price range of $16 to $18, raised that to $19 to $21, then ultimately priced its IPO at $22. The offering was led by Goldman Sachs, with other underwriters including Bank of America, Jefferies, and KeyBank.
Bill.com's listing comes at the end of a rocky year for unprofitable startups looking to go public. In light of WeWork's failed IPO attempt and Uber's sinking stock price since its May listing, growth-focused, IPOs from unprofitable startups like Postmates and Lemonade that had been gearing up are now MIA.
"When a company gets to a certain size and scale, you know there are opportunities to do more and reach more customers, and part of that requires capital in the public markets," Rene Lacerte, chief executive of Bill.com, told Buisness Insider.
"It's an opportunity to increase the level of rigor and execution across the business. You do not go public without having your A-game on," Lacerte said.
Bill.com was founded in 2006, and provides bill payment software to businesses. It was started in an effort to eliminate businesses' reliance on costly and inefficient methods to pay and get paid.
"Ninety percent of businesses rely on paper checks as their primary form of payment," Lacerte noted.
The company raised more than $300 million in the private markets from investors like Temasek, Scale Venture Partners, JP Morgan, and Emergence Capital.
Bill.com was an early player in the cloud-based software space, said Brian Jacobs, founder and general partner at Emergence Capital, which prior to the IPO was Bill.com's fourth-largest investor with an 8% stake in the company, according to an S-1 filing.
Bill.com has not yet turned a profit, reporting growing revenues and relatively modest, but growing, losses. In the third quarter, it reported $35.2 million in revenue (up from $22 million year-over-year) and $5.7 million in losses (up from $905,000 year-over-year).
Jacobs told Business Insider that Bill.com could be profitable if it needed to be.
"We decided to increase spending because it's a massive opportunity," said Jacobs. "We think now is not the time to slow growth or to focus on profitability."
Bill.com has a "healthy cash balance" and modest losses under $10 million, so the company can focus on capturing more market share, Jacobs said.
"The reception and feedback we've had from investors was really around the market opportunity," said Lacert. "We are in the early innings, and that opportunity is real."
Bill.com has 81,000 business customers, but Lacert has his eyes set on the millions of small businesses in the US not yet using the platform.
Lacert said the IPO will help Bill.com attract more customers through product development, sales, and marketing.
Not another WeWork
The process of taking a private company public can take over a year, said Jacobs.
Private companies have to file with the SEC, pick investment banks to underwrite the listing, and file an S-1 (which is an exhaustive document that lays out, among other things, a summary of the business model, key risks and competitors, and what the company plans to do with the funds it raises,) and go on a roadshow to drum up investor interest.
"The market can change dramatically during that time period. So you could be wasting your time if the market ends up being unreceptive to any business," said Jacobs.
Lacert said that WeWork and other turbulance in the public markets didn't cause any hesitation at Bill.com.
"I would not say that we had any reluctance, but there's always concern about the overall market situation, which is outside of our contorl," said Lacert. "My philosophy is to focus on what I can control, and focus the company and the management team on what we can control."
"We had confidence in the company. I think it's been a very steady grower. It has a great margins," he said. "We did have confidence throughout the year that this was going to be a worthwhile effort."
To be sure, during Bill.com's year of planning its own IPO, it watched WeWork's rapid rise and fall.
"The markets did have some instabilities. Specifically some of the companies that tried to go public, like WeWork, had some really spectacular problems," Jacobs said. "But Bill.com has never been a high drama company."
Better to be boring
The space in and around business-to-business (B2B) payments is hot. Players like Payoneer and PayPal both announced strategic deals this year.
Square, which went public in 2015 at $9 per share, is trading around $65 per share after strong revenue growth and the launch of new products like Square Capital business lending. The buzzy payments fintech Stripe has a $35 billion valuation.
The B2B space tends not to garner the same hype of, say, the crypto craze or the drama around social media companies like Facebook. But startups are seeing plenty of promise in the not-so-glamorous business of moving money between companies and finally cutting out paper checks.
"We've been only focused on B2B for 15 years and there are times when we feel like we're the boring guys," Jacobs said.
Albeit boring, the B2B model is attractive to investors seeking predictable revenue.
"We like the idea that these are predictable businesses," Jacobs said. "When you sell to businesses, they are making a considered purchase. They don't just buy something on a whim."
Often, business software contracts renew annually, giving the software provider more customer stickiness.