Initial public offerings can be full of pitfalls and challenges, including the need to comply with the complex regulations of the securities market and dealing with cybersecurity risks.
Andrew Casey, CFO of cloud security company Lacework, has some experience in this area. He led his former company, WalkMe, through its 2021 IPO and is now getting Lacework ready for its own potential IPO. His experience informs his thoughts on what needs to happen for the current icy IPO market to thaw, and what companies such as software-as-a-service providers need to consider.
Andrew Casey
CFO, Lacework
First CFO Position: 2020
Notable Previous Employers:
- WalkMe
- ServiceNow
- Symantec
- HP
- Oracle
Editor’s note: This interview has been edited for brevity and clarity.
BOB VIOLINO: When might Lacework launch an IPO, and what are you doing to prepare the company for the possibility?
ANDREW CASEY: There are several things that a SaaS business needs to have in place to consider a strong exit through an IPO. Many of them are things we’ve already achieved at Lacework. Some we are still working towards. Things that help set up a successful IPO include going after a large total addressable market and showing an improving cost structure and path to profitability. Especially in the current economic climate, the days of growth at all costs are gone.
Once a company has these core fundamentals in place, the IPO process gates revolve around timing and the power of three: three years of audited financials, three quarters beating growth and free cash flow targets and three diverse and independent board members. Any business considering an IPO needs to have a product differentiation, acknowledged by customers, that solves difficult and expensive operational problems. Lastly, a company would prefer favorable market conditions. Recent listings suggest that the IPO window may be opening up.
How did your experience leading your former company, WalkMe, through its 2021 IPO prepare you for a potential upcoming IPO?
CASEY: Going through an IPO is an invaluable experience. Throughout my career, I've learned lessons about the importance of building a strong investor base, establishing durable growth business processes, and aligning the company on the actions required as a public entity.
At WalkMe, I joined and was told our timeline to go public was six months. Normally, this is an approximately 18-month process. I’m proud that we were able to execute a successful exit under that time constraint. That said, one of the key learnings for me is the benefit of taking the time to solidify all the points I mentioned in answering your previous question.
“Any business considering an IPO needs to have a product differentiation, acknowledged by customers, that solves difficult and expensive operational problems.”
Andrew Casey
CFO, Lacework
At Lacework, I’m committed to bringing investors along on our journey, hearing our story, and tracking the progress as we deliver on the strategy we laid out in the past. If and when Lacework lists on the public markets, outside investors will be very familiar with our story, our value proposition, our strategic focus and our business because of the time and effort we have put into sharing that journey with them at investor conferences and through other channels.
What needs to happen for the current icy IPO market to thaw?
CASEY: The current icy IPO market could potentially thaw if several factors align. One of those factors is market stability. The broader market needs to stabilize, as uncertainty and volatility can deter companies from going public. A stable and positive market environment can increase investor confidence and appetite for new IPOs. Folks are primarily looking to anticipated cuts in interest rates from the Fed to open up the IPO window. That said, recent listings have performed well in early trading so perhaps things are shifting already.
Why might companies in hot areas such as artificial intelligence and cybersecurity decide to keep growing and taking market share instead of going public?
CASEY: Staying private allows companies to maintain greater control over their operations, strategy, and long-term vision without the pressure of quarterly earnings reports and shareholder demands. By staying private, companies can focus on innovation and product development to strengthen their competitive position. Additionally, some companies may prefer to delay their IPOs to achieve higher valuations in the future, especially if they believe that their growth prospects will continue to improve.
"The current icy IPO market could potentially thaw if several factors align. One of those factors is market stability."
Andrew Casey
CFO, Lacework
Why is it important for companies moving toward an IPO to have a strong cybersecurity strategy in place?
CASEY: Just like companies need to have financial fundamentals and processes in place ahead of an IPO, in today’s environment they need to be treating their cybersecurity programs just as seriously.
Going public exposes a company to increased scrutiny from regulators, investors, and the public, making it a more attractive target for cyberattacks. A strong cybersecurity strategy can help protect the company's valuable assets, including intellectual property, customer data, and financial information, reducing the risk of data breaches and cyber incidents that could damage the company's reputation and financial stability. Now, with the SEC’s new cybersecurity disclosure requirements, there’s even more pressure to have defendable, repeatable processes in your cybersecurity practice.