- Affirm, a buy-now, pay-later fintech firm, went public on the Nasdaq in January 2021.
- Max Levchin, Affirm’s CEO and a PayPal alum, shares recommendation for founders contemplating going public.
- This text is a part of “Street to IPO,” a collection exploring the public-offering course of from prelaunch to postlaunch.
Max Levchin, the founder and CEO of Affirm, at all times knew he would take his buy-now, pay-later fintech public. What he did not know was the pandemic, some of the economically unsure occasions in historical past, would set Affirm’s preliminary public providing into movement.
“We undoubtedly skilled an actual second the place we’re not but worthwhile. We would wish to boost cash if we needed to outlive via what could possibly be a drought in fairness capital markets,” Levchin stated, referring to the primary a number of months of the pandemic.
As a buffer, Affirm raised personal capital in mid-2020, a course of Levchin stated was “an enormous ache” with “a ton of uncertainty.”
It would seem to be curious timing to take your organization public throughout a pandemic, however that is precisely what Max Levchin did.
As a buy-now, pay-later firm, Affirm’s enterprise mannequin was constructed on the promise of compensation because it enabled shoppers to finance their on-line purchases. The pandemic grew to become a boon for Affirm as Individuals acquired stimulus checks and e-commerce boomed. Levchin, desirous to trip that wave, wanted extra capital to develop the corporate. The sustained unpredictability within the personal markets triggered talks of going public, however Levchin needed to guarantee that doing so was a step within the journey and never an finish level.
He had his doubts. “Can we head from the IPO into, ‘Go quicker and tougher and make investments much more aggressively into attention-grabbing concepts,’ or would we simply instantly stall and change into a slow-moving, publicly traded form of paralyzed big?” Levchin stated. Affirm shares had been listed on January 13, 2021.
Because the pipeline of IPOs begins to construct up once more, together with the anticipated debut of Affirm’s buy-now, pay-later rival Klarna, Enterprise Insider spoke with Levchin about Affirm’s IPO. He mirrored on the decision-making course of main as much as the providing, how he’d dealt with the peaks and valleys of Affirm’s share worth, and a few items of recommendation for founders considering going public.
From late nights on Zoom to Nasdaq debut
As a cofounder of the fee juggernaut PayPal, Levchin skilled firsthand the advantages of taking a fintech public.
The method was nonetheless “considerably extra work than I assumed it might be,” Levchin stated. It wasn’t unusual for Levchin to be on Zoom along with his CFO and chief authorized officer at 10 p.m. with half-finished glasses of wine, jokingly asking why they did this to themselves, he stated.
Within the second half of 2020, lengthy days and late nights had been spent auditing and cleansing Affirm’s books, getting numbers and paperwork so as. Affirm’s small IPO process pressure additionally wanted to assemble important paperwork, together with the corporate’s S-1 and a founders’ letter. In the meantime, its chief authorized and finance officers wanted to vet an extended record of bankers who jockeyed to characterize Affirm throughout the frothy, low-interest-rate market on the time.
Affirm landed on three banks because the lead underwriters for the providing. Past having long-standing relationships with the businesses pre-IPO, Levchin needed companions who may “communicate to our enterprise a minimum of in addition to we may,” he stated.
The laborious work appeared to repay. When Affirm debuted on the Nasdaq, its share worth surged as a lot as 110% above its opening worth of $49. Affirm shares climbed to as excessive as $164.23 in late 2021 however suffered the identical inventory rout that battered tech firms all through 2022 and 2023.
A serious adjustment to being a public firm, Levchin stated, isn’t falling right into a “quarterly way of life” the place milestones, product street maps, and key metrics are divided into four-month sprints.
“It’s a must to have this duality of thoughts, the place being public is in regards to the quarter, however it could’t be simply in regards to the quarter,” Levchin stated, referring to the ups and downs of operating a public firm. If 1 / 4 leads to a quantity you are not pleased with, “you’ll be able to’t simply hammer your self over the pinnacle with it,” Levchin added.
“It’ll worsen if this quarter is not fairly, however you already know you are doing the fitting factor, and you may see in numbers that it’ll be OK. Do not stress it, and it will work itself out,” he stated.
Phrases of recommendation
For founders contemplating going public, Levchin supplied some recommendation.
It isn’t unusual to see startups hiring executives akin to a president or CFO in anticipation of going public. However that might really be an indication that you simply’re not prepared, Levchin stated.
Chemistry is important to making sure the IPO crew is on the identical web page concerning what’s proper and improper for the enterprise. That is not one thing that may be “fashioned and seasoned over the course of an IPO prep,” Levchin stated.
Levchin additionally warned towards letting the method “devour the corporate.” He stored the crew engaged on Affirm’s plans very small as a result of he needed the day-to-day engine to proceed buzzing alongside throughout the intense interval.
Since Affirm’s CFO and chief authorized officer largely spearheaded the IPO course of, Levchin stated he was left to deal with the corporate’s short- and long-term plans for the capital.
“In the event you do not intentionally plan for that, you could run the chance of simply freezing in place,” he stated.
