CEO’s advice once you go public: Forget about it
Jun 7, 2018, 9:00pm CDT
When Mark McClain sat down for an interview at about 2:20 p.m. on May 30, he didn’t know the share value of the company he runs.
Which is the point.
Acknowledging he borrowed the line, the cofounder and CEO of Austin cybersecurity company SailPoint Technologies Holdings Inc. said he tells colleagues, “Every time you’re looking at the stock price, you’re not helping the stock price.”
McClain said focus on execution is what’s enabled SailPoint’s stock to perform so well since its initial public offering on Nov. 17.
The company’s share value (NYSE: SAIL) has more than doubled its $13 opening, and was trading at $26.37 at the start of June. Go here to track it yourself.
“We’ve had a very solid performance in the public markets. We’re pleased with that,” but it’s distracting, McClain said. “We joke about people following the stock every day on the computer, ‘Can we banish Yahoo Finance?’”
The company’s expertise in the increasingly important realm of identity protection and treating their employees the right way are among the reasons McClain cites for SailPoint reporting strong results in its first two quarters on the New York Stock Exchange. The company’s clients include accounting giant PWC, health care titan Humana and financial heavyweight Western Union.
Was taking SailPoint public always the goal, or is that simply how it played out?
More the latter. At the end of the day, we came in, Kevin [Cunningham] and Jackie [Gilbert], our original co-founders, with the idea of when you do the right thing, the right things happen. So let’s go find a great market, let’s go build a great product, hire a great team to drive that value to the market.
When we started, I was OK with either option. I didn’t particularly want to avoid doing a public offering. At one point, I thought we’d end up selling the company away, and, instead, this is the path we went: from venture-backed, to private-equity backed, to public.
What have you found are the pros and cons of doing an IPO?
It’s very early. On the one hand, we’ve only had to deliver two sets of results. We went public in November, so we had to report Q4 of last year and now Q1 just a couple weeks ago.
We’ve reported two good sets of results, so I haven’t had to go through, ‘Oh, no, the numbers aren’t good, yuck, what’s going to happen?’
I think we’re realistic enough to know that maybe somewhere along our journey, we’ll stumble there. I hope we never do. But that’s something you generally deal with at least once. So our mission is: Control what we can and hope that we don’t have some macroeconomic condition that causes our numbers to not be where they should.
On your macroeconomic point, many economists say the next recession will occur sometime in the next few years. Is that something you can prepare for?
One of the great things about being a profitable company is you have shock absorption. But can we prepare ultimately? No. Are worried about forecasting exactly when that happens? No.
One of the great things about being a global business is, sometimes these things are global, but often they’re not. Sometimes when the U.S. is down, Europe or Asia is up. The more global we become, the more we build in shock absorption.
What do you see as the reasons fewer companies are using the IPO route?
Private equity has emerged as a very large new class in, really, the last decade. As part of companies’ growth journey, it’s a new phenomenon.
In many cases, what you’ve seen is companies that might have gone public a decade ago instead went and got late-stage venture rounds, leading to the famous unicorns. Or some [that] realized they couldn’t do unicorn-like things were sold to private equity, and now may stay there for a while and go public later like we did — or may get sold, which often happens. I think we’re going to see more people taking various paths.
There was a time… Tivoli went public on something like $25M on its way to something like $70M. A company that never would go public in today’s market could go public back then on a much smaller scale.
Tell us what SailPoint does in the cybersecurity arena that other companies don’t.
Our sub-category is called identity. It’s been around as a discipline for a couple of decades but it’s really emerged as a very important pillar of security relatively recently.
Why is that? Well, if you think about the macro things that have been happening in tech, we’ve gone to mobile, we’ve gone to the cloud. The days when a company thought of its security as, ‘I will build a moat around my castle and I will keep all the bad guys out and everybody inside safe and secure’ — that’s over.
Half your identities you care about in business aren’t your employees. They’re contractors. They’re partners. They’re using their own devices to access your technology, your applications. Because a lot of people hadn’t been paying attention to this, we don’t have very many competitors. There aren’t 10 other startups trying to compete with what SailPoint does because what we do is very messy and very hard.
We have to manage all this complex identity information inside all these different applications. They might be mainframe applications. They might be 10-year-old web applications. They might be 2-month-old SaaS applications. To manage that all cohesively is very complex technology. That’s what we do.
Our competitors are companies like IBM and Oracle and Computer Associates. That’s a good competitive set. They don’t innovate quickly and challenge startups very often.
Tell us how SailPoint’s tech works in layperson terms?
Everybody today interacts with things that have an account and a password. When you think about a corporation business enterprise, they’re housing a lot of critical information in their applications. They want to ensure that the right people have access to the right information.
What we focus on is the accounts and passwords… what allow people access to all this data. We make sure the right identities, which are generally people — I won’t confuse things by getting into that, nowadays, identities can be non-people — can access what they’re supposed to access to do what they’re supposed to do. Nothing more and nothing less.
Turns out keeping that straight is really hard. If you have 10,000 employees and you have 5,000 applications and you have 10,000 contractors and all those people are constantly moving around and changing, just imagine the volume of change that organization has to manage. That’s what we do.
You’ve taken SailPoint from inception to IPO, a rare feat. Many say only a handful have that skill set. How does the CEO job change as a company morphs from startup to mid-size to public?
At the end of the day, I have a very healthy selfawareness in life of what I’m good at and what I’m not. From the outset, I had cofounders Kevin and Jackie who were awesome. We brought in an early-stage leadership team who was awesome.
In a sense, it’s a willingness to let go. At various points along the way, I would have frank conversations with our investors and say, ‘Hey, I don’t want to get in the way of us succeeding. If I’m not the right guy to be doing this, please, just tell me and I’ll step aside and let somebody else do it.’ And I think their view was, ‘Well, it’s not screwed up yet. OK, let’s keep going.’
There’s a good level of humility built into our culture. We think we’re really smart guys, but we’re not the only smart guys on the planet.
We built the company, Waveset [Technologies Inc.], from nothing to about 100 people and about $20 million in revenue. So I’ve gone through that part of the cycle once.
I like to say, I will always make mistakes, I just try to not make the same ones over and over again.
There were things we learned going from ground zero to early-stage like, how do you define a market well? How do you define your first product? How do you extend and grow that product? How do you ensure you’ve built some successful customers? Because if you don’t build successful reference customers in the enterprise market, you will not make it.
This experience has taken us way further up the scaling path. Complexity goes way up in every dimension you can think of.
I think a conductor is the best metaphor for a CEO. They used to play an instrument. They don’t anymore. They’re not actually producing any music. They’re getting all kinds of music out of everyone else. They’re making sure everyone knows what sheet of music we’re on. Are we all clear on the pace and tempo of what we’re trying to do? I need a little more from you right now. I need a little less from you right now. OK, we’re in rehearsal. Stop, we need to do that piece again.
Did anything that transpired during or after the IPO catch you off guard that you didn’t expect?
The biggest thing that surprised me about the whole process is how much longer it is than I thought. You always hear about T-minus six- to nine-months to the IPO, you do this thing called a “bake-off.” You basically bring in a bunch of bankers and let them pitch.
What I didn’t realize is, for the two years before that, you’ve been going to investor conferences, spending time with bankers at their conferences. You’re building relationships with investors, building relationships with bankers, beginning to understand the pros and cons of different firms, beginning to understand the pros and cons of different investors and what they’re looking for, what resonates with them. So there is just this huge long ramp that I didn’t have any idea existed before we got down this path.
Being in Austin, we were somewhat off the radar. We were not in [Silicon] Valley. Not on the other coast. There was this kind of, ‘Wow, you’re one of the more interesting companies I haven’t heard of’ conversations with people.
The IPO process — was it physically grueling? It is a very demanding stretch. There is a particular thing called “the road show,” where you’re literally, every day, for about two weeks, where you are from sun up to sun down in meeting after meeting. The thing I tell people you can compare it to is if you go interview for a job and you get eight to 10 straight interviews and people say how exhausting that is. Now do that 10 days in a row.
You do individual investors. You do small groups of maybe 10 to 20. [And] we did a handful of those things in major metros like Boston and New York with like 100 investors. All day, every day, you’re either pitching the story or answering questions. I’m not sure I’ve ever been more exhausted than I was at the end of that.
Who do you bounce ideas off of in Austin?
Bill Wood at Silverton [Partners], John Thornton at Austin Ventures, Ravi Mhatre at Lightspeed [Venture Partners], and Bill Bock, former president and CFO at Silicon Labs, after he was the COO at Tivoli.
What advice might you have for other CEOs on their way to running a public company?
Talk to people who have been through it. Get a sense of what it’s really like.
Some aspects of it are really hard. Sometimes I don’t like the “p” in IPO — the fact that your salary gets published. That part is not fun. But I would tell people, don’t get hung up on those things. If it’s the right thing for the business, just do the right thing for the business. (McClain received a base salary of $307,500 and total compensation of $426,823 in 2016, according to a filing with the U.S. Securities and Exchange Commission. Cunningham’s was identical.)
What’s a nugget of wisdom you received when you were younger that’s stuck with you?
This older guy at IBM when I was a junior sales guy, he said, you should probably spend about 90 percent of your time on your job and 10 percent of your time on your career. People that spend 100 percent of their time on their job are always frustrated that they never get in the career where they wanted to be. And people that spend more than 10 percent on their career tend to fail at their job because they’re thinking about where they want to go.
Who are some people who remind you to do the right thing and things will take care of themselves?
John Wooden [the deceased legendary coach of UCLA’s men’s basketball team] would say, ‘We don’t prepare for the other team. We prepare ourselves.’
My way of thinking about it in the business realm is: Control what you can control. You can control who you hire, you can control the quality of the product you build, you can treat people the right way — customers, employees, etcetera. If you stay focused on those things — they may not be sufficient — but they’re necessary to building a good company. If all else fails, I go back to the Golden Rule. Jesus got it right. If you treat people the right way, a lot in life goes right.
Read on Austin Business Journal here (paywall).