Congratulations, Workday. Its share popped 74 percent when it IPOed today. Or should I say condolences? $470 million ended up in the pockets of investors instead of the cloud startup's war chest.
Meanwhile, Facebook is called a flop for filling its coffers with $10 billion by pricing shares at nearly twice its current value. This all raises the question: How should Silicon Valley define a successful IPO?
Let's be clear that I'm no career financial analyst, and this article will be a simplification. But there seem to be two conflicting motives in IPOs: raising the most money vs. displaying the most momentum.
Mo' Money
Facebook maximized the former, an asset with concrete value. To buy out disrupters and fight off other giants like Google for top-tier talent, it needed gobs of cash. That's what it got.
The only problem is that Facebook's share price has sunk so low since that it's generating scrutiny and may be hurting team morale. People are wary to invest in, develop on, or work for a loser, and if you look at the NASDAQ, that's what Facebook is.
Luckily it has natural defenses against the momentum loss. If you work there, you build something a billion people, most of your friends, and maybe your Grandma use. You're creating things that help people connect and share. It moves fast with a declared Hacker Culture. These make Facebook attractive to potential hires and third-party developers, offsetting the post-IPO slump.
Mo'mentum
Now let's look at Workday. It either grossly underestimated demand, or it purposefully maximized for momentum. Either way it generated a massive pop, and got very little flack for it.
Enterprise cloud software is critical and challenging to build. But despite becoming more consumer rather than CTO-focused, I wouldn't say it's sexy like a social network. Most people don't grow up giddy to build the cloud. If Workday wants the smartest minds to work for it after it's IPOed and the biggest rewards may have already been dealt out, it needs to look like a clear winner.
Meanwhile, having watched the vultures descend on Facebook, Workday may have played it safe, pricing shares conservatively to ensure positive momentum. It might not have needed those extra $450 million to buy anyone who looks dangerous. Seventy-four percent may have been overkill, but maybe prioritizing a rising price was the right move for Workday.
What Really Matters
So if you consider IPOs from this perspective, it's not necessarily about raising the most money or getting the biggest first-day pop.
Workday only "wins" if it doesn't end up without enough money to buy the scrappy new cloud kid on the block who might eat it's lunch in three years. And Facebook only "flopped" if all the money it raised can't convince people to board or stay on a sinking share price ship. Mo' Money, Mo' Problems, if you will.
What really matters is a company getting what it needs, not just the purse or the share price.
Workday is the leader in SaaS-based enterprise solutions for human resources, payroll and financial management, providing new levels of business agility for a fraction of the cost of buying, deploying and maintaining legacy on-premise systems. More than 130 customers, spanning mid-sized organizations to global Fortune 500 businesses, have selected Workday. Workday Human Capital Management and Workday Financial Management use modern, standards-based technologies to provide an unparalleled level of agility, ease-of-use, and integration capability. For more information...
Facebook is the world's largest social network, with over 1 billion monthly active users. Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz, Chris Hughes, and Eduardo Saverin to help build Facebook, and within four months, Facebook added 30 more college networks. The original...
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