Fittingly it was with a tweet that Twitter announced the filing of a S-1, the first formal step towards an IPO. The document remains confidential so debating their financials is nothing but a speculative argument at this point. Twitter has become my most important social messaging platform, a place where (as @hunterwalk) I’m able to share ideas, find new interesting voices, discover great content and get a snapshot of what the world is thinking. I use other products but I live in Twitter.
The reportedly 2,000+ Twitter employees must be thrilled about this next phase of their company. Besides generating incredible wealth for many of them, being a public company is both a symbolic step towards becoming indelible and a very real milestone with both benefits and costs.
I arrived at Google in late 2003, prior to our S-1 being filed in April 2004. There was already lots of internal and external speculation about our trajectory but until the document went public, no one understood just how powerful a business model the company had created. During my interview process Google HR was very secretive about the value of my equity. In fact they told me only the number of shares I had been granted. Without knowing the number of shares outstanding or the enterprise value of the company, a grant total was totally useless but they essentially said “trust us.”
What changed once we went public and how might these same shifts impact Twitter?
- Data Got Locked Down: Before our IPO Google was notably open with its data internally. There were many ways to access near realtime revenue and other tools we could use in the course of managing daily business. With the public offering came regulatory requirements and many of these dashboards went behind authenticated logins, where only certain Googlers could access based on job needs. If you filed for access there was often a delay in approval. Larry, Sergey and Eric remained committed to being as open as possible but the days of our sales chief standing up at Friday meetings and announcing revenue for the quarter were obviously over. Google has done a remarkable job of remaining transparent internally but with a stock offering comes certain changes that are non-negotiable. If they haven’t already, Twitter employees will soon find themselves partitioning tools and data by function
- Public Currency for Acquisitions, Hiring: Whereas all stock to this point as been speculative — it *might* be worth something in the future — liquidity in the public markets means Twitter will have a strong weapon for more acquisitions and hiring candidates. Not necessarily the employees who want the IPO pop (more on that below) but they can put together packages which match the current expected value of one’s current employer. From an acquisition standpoint it will be interesting to see whether Twitter uses cash or stock. Stock is cheap now but expensive later if you believe the share price will rise. Google historically pays cash, although there were notable examples such as the YouTube deal.
- A Different Type of Employee Gets Hired: It’s silly to say that Twitter will no longer be a startup once they IPO. The reality is they’re not a startup now — risk is off the table, thousands of employees, hundreds of millions in revenue. Post-IPO though there’s a psychology that seems to impact potential hires — you start getting fewer risk takers applying and more careerists. This isn’t absolutely a bad thing — hiring more experienced leaders is important for a company’s stability and Twitter has certainly already raided lots of Google talent to build its management layer — but it does start to change the personality of the company. People would sometimes ask me if post-IPO did Google start hiring “B+” talent instead of “A” (the assumption being that the best people would no longer want to work at Google). My answer was a definitive NO. We still hired “A” quality people, it was just increasingly a different type of smart. More pragmatic, more about scale. Our founders worked hard to maintain the culture and I think much of Larry’s first few years as CEO has been about returning to what he remembers Google being in the early 2000s. Twitter CEO Dick Costolo and his team will have the same challenges — some old timers memorializing “the old days” while also realizing that Twitter 2014 cannot be the same as 2008.
- Flight of Talent: There’s usually a burst of departures in the six months after an IPO, then it kinda returns to normal levels. Lots of fully-vested “old timers” leave. Since many Twitter employees are sitting on heavily appreciated stock options, a public offering will finally give them the liquidity to sell shares. Important to note this isn’t just about getting cash in their pocket, it’s about getting cash to pay the IRS for the tax burden that would come with exercising previous stock grants.
Having many friends at Twitter I’m obviously happy for the company. As a Twitter user it’s bittersweet because while this IPO will increase the stability of the company, it also will continue to push them to seek growth which may evolve aspects of the product I love so much.
When Google finally went public in August 2004, after a long and weird registration process, there were a few minutes of clapping, high fives and private calculations of net worth. Then we all went back to work.