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Being a public company

Being a public company

  1. As detailed in our company strategy, GitLab wants to go public in CY2020, specifically on Wednesday, November 18, 2020.
  2. Going public is like graduating from high school, a great day but it shouldn't be the biggest thing you achieve in life.
  3. We have a strategy with clear goals for November 18, 2023 such as getting to $1B ARR.
  4. About stock prices, the father of value investing, Benjamin Graham, explained this concept by saying that: "In the short run, the market is like a voting machine, tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine, assessing the substance of a company." The message is: What matters in the long run is a company's actual underlying business performance so we should focus on our KPIs and particularly on growing our IACV.
  5. When you bring up the stock price in a work conversation the response should be: let's not get distracted by the stock price we can't control in the short term and focus on growing IACV instead.
  6. We can't control our stock price nor the volatility of that price in the short-term, of the two the volatility compared to the rest of the market is something we can reduce by realizing our plans, meeting expectations, and making sure investors understand our financial model, priorities, expectations, forecast and strategy.
  7. We will make everyone an insider, this means your trading is restricted but we can share financial information inside the company.
  8. We should evaluate spending proposals with Return On Investment (ROI) calculations, industry benchmarks, and the most efficient way to do things. Never compare the amount spend to our company valuation, revenue, or assets.

The path to being "ready" to go public

The two biggest problems in getting ready to go public is 1 and 3 below

  1. Predictability - Volatility is a problem
  2. Compliance
  3. Path to profitablity
  4. Scale
  5. We have 2+ years of runway

Disclamer

Statements on this page is being made pursuant to, and in accordance with, Rule 135 under the Securities Act of 1933, as amended (the “Securities Act”) and shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act.

Volatility

Our stock price will be more volatile than other companies because we have:

  1. Higher R&D spend as a percentage of sales
  2. Higher Sales&Marketing spend as a percentage of sales
  3. Higher growth that is less predictable
  4. Larger burn and lower profitability
  5. Addressed less of the Total Addressable Market
  6. More stories that influence our stock because we have more information available due to our transparency value

Cost goals are not due to going public

We plan to go public much earlier than most other companies do, since we are aiming to go public 5 years after raising first external capital. We will have a higher burn rate, a larger loss, and a higher growth than other enterprise software companies going public. Since we're going public at an earlier stage in our lifecycle, we will not look like other companies that are going public.

For example, our financial planning process includes setting a division's spend based on revenue growth as we move towards our long term profitability targets. The cost goals (as a percent of revenue) are important because they're how we measure running an efficient company. They are not because we aim to go public. Companies need to become more efficient as their growth rate slows overtime, as they take more market share. The hardest part of this process will be getting more predictability, especially when compared to other companies going public.

Will GitLab be acquired?

In the GitLab Unfiltered video above, GitLab co-founder and CEO Sid Sijbrandij discusses the topic of remaining independent as a company with Kristóf Éger. The coffee chat is transcribed, in part, below.

Our intention, from the moment we took external funding, was to stay independent.

The reason we want to stay independent is we think it will better allow us to preserve our culture — we have our six values that are important to us — and also to be a good steward of open source.

Now, we're not totally in control of that. The majority of GitLab is owned by venture capitalists. But, we do have some sway. If, as an executive team, you're not interested in being acquired, it's harder to acquire a company.

We're always more optimistic about the future than anybody outside of the company. That means that we have to keep growing. We have to keep growing IACV, and keep growing our revenue.

We also have to keep growing as a product. We're investing a whole lot of money in developing GitLab further. That shows up as a big expense, so that makes the company less attractive. Longer-term — if we build the right things, the right way — that makes the company more attractive.

We keep investing in the future in order to not get bought. We've been very clear with our investors what our intentions were from the start. We're doing everything we can to stay independent. - GitLab co-founder and CEO Sid Sijbrandij

Transparency

  1. We never want to go back in transparency. For example we never released financial information publicly because as a public company you can only do that when it is audited.
  2. At GitLab, we won’t become less transparent as a public company. We’ll be more transparent about our financials than we were before and we'll get less transparent about some key metrics during the quarter.
  3. We plan to be the most transparent public company there has ever been.