Written by Connie Loizos

The SEC is looking to make it easier for any company to test the IPO waters

Under the leadership of its newest chairman, Jay Clayton, the SEC has for the last two years made it clear that it wants more companies to go public already.

A new proposal, revealed today, may get it closer to that objective. Specifically, the agency has proposed giving any company that’s exploring a potential IPO a chance to explore its plans privately with potential investors — both institutional and accredited — before making any public pronouncements.

It would essentially widen the net to allow every company to “test the waters” before deciding whether or not to move forward with an offering, compared with the companies that are able to test the waters today, which are “emerging growth companies.”

Per the SEC’s definition, an emerging growth company is an issuer with total annual gross revenue of less than $1 billion during its most recently completed fiscal year.

The public now has 60 days to comment on the proposal, after which the SEC will decide whether or not to move forward.

You can pretty much expect that it will. The move follows a series of steps the SEC has taken to shift over to the public market some of the liquidity sloshing around the private market. In July 2017, it made it possible for any company to confidentially submit registration documents related to shares being sold in an IPO, a benefit that only smaller companies had enjoyed previously.

Acknowledging that companies may still choose to stay private longer, Clayton separately said last August that the commission wants to give more small investors access to more privately held companies for their retirement or other needs. He said that changes toward that end could happen “pretty quickly,” though the SEC hasn’t formally revealed any related proposals yet.

Airtable CEO Howie Liu on the continued importance of getting a ‘unicorn’ valuation

When in 2015, Slack raised money at a $1 billion valuation, founder Stewart Butterfield spoke candidly about why it was important to him, and why if Slack wasn’t assigned a valuation north of that number at that point in time, Slack wouldn’t raise anything. Said Butterfield, speaking to Fortune, it “means that we’re a part of that conversation about companies worth $1 billion.”

Fast-forward nearly four years, and things apparently haven’t changed much. Indeed, Howie Liu, the co-founder and CEO of Airtable — a 5.5-year-old, San Francisco-based company that sees itself as a coding platform for non-techies — says Airtable was very much focused on being valued at north of $1 billion when it closed its most recent round in November.

“There’s unquestionably a market-signaling effect in raising money at a valuation that, in our opinion, doesn’t come close to the ultimate expected value of the company,” said Liu, in conversation with senior Recode editor Teddy Schleifer at a recent industry event hosted by this editor. “It externalizes a little bit the progress we’ve made and addresses a lot of the open questions that companies face when they first start out. It sends a signal to our customers, to potential future team members and just the general community that talks about these things.”

The continued relevance of that billion-dollar number is interesting, particularly given that there were more than 300 so-called unicorn companies in operation as of last month, according to the research firm CB Insights. Even Liu acknowledged at the event that the number is pretty “arbitrary.” At the same time, he noted, it’s “something that I think carries gravitas in the minds of the general public. So I do think it matters to some extent.”

Airtable last year raised most of the money it has secured to date, raising $59 million last March from CRV, Caffeinated Capital and Slow Ventures before raising another $100 million in November from Benchmark, Thrive Capital and Coatue Management at a post-money valuation of $1.1 billion.

Liu suggested to Schleifer that Airtable didn’t need to raise outside funding, presumably thanks to the momentum its tools are enjoying with more than 80,000 organizations. According to a Forbes report late last year, one in six customers is paying for its freemium products, which includes a collaborative spreadsheet that can store images, videos, documents and URLs, all of which can be dragged around easily and make sense of otherwise disjointed endeavors.

“We’ve always had this long road ahead of us, and until somewhat recently, we’ve been able to sustain our operations without any external capital [owing to] a product that monetizes itself, from a customer base that gets real value from us.”

Asked then why Airtable would raise so much, giving up some company ownership to its investors in the process, Liu said there’s validity in the adage that the “best time to raise is when you don’t need to raise. You’re in the best position to make a case for investment if you’re at a point where you don’t need capital to survive.”

Indeed, don’t be surprised to see Airtable raise more money in the not-too-distant future, given its ambitions to be viewed as far more than a maker of productivity tools or spreadsheets or database products, though it offers all of these things.

“We’ve always been motivated by the fact that software is the most important medium ever created, or, at least, in the last 100 years, yet its potency is completely inaccessible to most of the world,” said Liu to Schleifer. “If you’re a programmer in Silicon Valley, you can tap into this very powerful technology as a medium for creative expression or economic value creation. Yet for everyone else, you get this kind of prefabricated result.”

Rather boldly, Liu continued on to say Airtable is creating a new category around democratizing software value to the entire world — and that it sees itself as peerless, for now. “For us at least, the way we see the world today, as we define the category that we’ve pioneered ourselves, it’s really more of this open territory. Maybe a serious competitor will enter at some point,” but Airtable plans to gather up as much market share as it can in the interim, he said.

Of course, there are many (many) productivity tools in the market with which Airtable competes. Liu, who reportedly favors simple black jackets, pants and shoes and was dressed accordingly for the event, doesn’t seem to care. In fact, he insisted at the event that an acquisition couldn’t be further from his mind. He noted that he’d sold his previous, very early-stage startup to Salesforce as a then recent-graduate of Duke University, but he suggested that Airtable is very much a long-term play that’s just getting started.

“We don’t entertain offers,” said Liu when asked who has been kicking the tires. “In order to get an offer, you have to at least accept an inbound invitation . . . and it’s literally not worth the time of day, talking. You do that if you want to hedge your bets and if you want a Plan B, if you need to bail out at some point, so you have this [potential partner].”

“So zero talks,” said Schleifer.

“Zero,” said Liu.

“And you think you can be a hundred billion, two-hundred-billion-dollar company at some point.”

“We do,” Liu said with a shrug.

SoftBank and Mubadala grow closer

The Japanese conglomerate SoftBank and Mubadala, the Abu Dhabi state investment company, have a closely intertwined relationship, and it’s one that the two are further cementing. According to the Financial Times, SoftBank has just committed half the capital for a new $400 million fund from Mubadala that aims to back European startups.

Industry observers might remember that Mubadala committed $15 billion to SoftBank’s massive Vision Fund as it was first being put together in 2017. Soon after, Mubadala opened a San Francisco office, as well as structured a $400 million fund designed to invest in early-stage startups to which SoftBank committed some capital.

The pact was understandable, including because Mubadala’s early-stage fund could theoretically provide SoftBank with a better idea of what’s happening at companies that are earlier in their trajectories than SoftBank typically sees. The move was also meant to better enable Mubadala to oversee the money it committed to SoftBank.

The newer fund appears to be raising questions, however. At least, the FT notes that the timing is “unusual,” given that SoftBank is currently saddled with $154 billion in gross debt. The new fund also “raises the prospect that Mubadala’s influence with the Vision Fund will only grow by allowing it to shape SoftBank’s tech investments,” as suggest by the FT’s sources.

Yet SoftBank may not have much choice but to work increasingly closely with Abu Dhabi. As the company’s CEO, Masayoshi Son, said earlier this month, the Vision Fund has spent about $50 billion of its approximately $99 billion in capital. Given the rate at which it has been investing (it just plugged nearly $1 billion into a company last week), its remaining funds might not last through 2020.

Meanwhile, it isn’t clear whether SoftBank enjoys the solid relationship that it once did with the Vision Fund’s biggest anchor investor, the kingdom of Saudi Arabia, which provided SoftBank with a $45 billion commitment for its current fund and that SoftBank was largely counting on to be its biggest backer in a second Vision Fund.

On October 3rd of last year, Bloomberg journalists talked with Saudi Arabia’s Crown Prince Mohammed bin Salman (or MBS), and he said he planned to invest a further $45 billion in SoftBank. Yet what few knew then was that five days earlier, journalist and Saudi regime critic Jamal Khashoggi had vanished after going into the Saudi consulate in Istanbul. As questions, and concern, began to spread over MBS’s involvement in the disappearance, many business executives canceled plans to visit Riyadh, where Saudi Arabia hosted an investment conference in the middle of October. Son was among them, even as he tried hedging his bets by visiting privately with MBS in Riyadh the night before the event began.

Whether that move angered MBS remains to be seen. It also isn’t clear whether the CIA’s eventual findings that MBS ordered Khashoggi’s murder, or the unflattering attention paid to Saudi Arabia because of that murder, is impacting where SoftBank is able to invest its capital.

Son, for his part, declined to say earlier this month whether he would consider taking more money from Saudi sources — which is perhaps telling in itself.

In the meantime, it’s barreling ahead with Mubadala, which will reportedly use its new fund to write to European startups checks of between $5 million and $30 million.

As with Mubadala’s San Francisco-based team, the idea appears to be to act as a funnel for SoftBank’s Vision Fund, steering it deals that Mubadala’s team sees as the most promising in its portfolio.

Mubadala’s European venture fund will be run out of a new office in London, which is expected to open this spring. The Vision Fund is currently also headquartered in London, with another office in San Francisco and, soon, offices expected in Shanghai, Beijing and Hong Kong.