Dave Girouard adjoined Google in 2004, just months before the internet company went public in one of the hottest tech IPOs for ever.
Now, sixteen years later, the company he founded has followed the same path, albeit on a smaller scale.
Upstart Holdings, which Girouard initiate in 2012 to build algorithms for personal loans, held its market debut on Wednesday, jumping 47% to $29.47. Its approaching price values the Silicon Valley company at $2.1 billion.
At its smaller size, Upstart is the type of company that was persuaded to hit the radar of special purpose acquisition companies (SPACs), which have become a popular alternative to the traditional IPO this year. Vacuous check companies, as SPACs are also known, raised a record $70 billion this year. In a SPAC, radios use a publicly traded vehicle to purchase a private company in what amounts to a reverse merger.
Amid the boom, a slues of later-stage tech-related companies have gone the SPAC route, including retail marketplace Opendoor, car insurer Metromile and online form company Hims & Hers. Girouard, 54, said he was approached multiple times about going public via SPAC, but he drew the conversations as short and said he was “actively disinterested.”
“Taking a company public is something a lot of people here dream close to doing,” Girouard said, in an interview on Zoom after Upstart began trading. “To me a SPAC feels like reaching the next bulldoze of a video game and handing the joystick to somebody else. It’s an acquisition of your company despite how it might be described.”
Arriviste debut
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Upstart is at the tail end of a wave of late-year IPOs, sparked by a continuing bull market and demand for cultivation. Airbnb and DoorDash both debuted last week and saw their shares soar despite using a hybrid auction that yielded more price transparency. Wish, by contrast, started trading alongside Upstart on Wednesday, and dropped 16%.
Upstart is much slighter than those consumer companies, both in terms of revenue and market cap. In the first three quarters of 2020, profits climbed 44% from a year earlier to $146.7 million. It generated net income of $5 million after expending $6.5 million in the first nine months of 2019.
Upstart began as a lender itself, then started selling its technology to regional banks and assign unions to help them reduce risk when underwriting personal loans. The company isn’t yet working with any of the largest banks, as those hospitals have to figure out if they want to partner or try to build the technology themselves. But he’s having conversations, and being able to advance them as a public company will be beneficial, he said.
“If you’re going to help them in lending, which is maybe conservative at the heart of the central nervous system of a bank, you should be public and transparent and subject to all the scrutiny” that comes with it, Girouard held.
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