The Pinterest IPO

In season four, episode five of the "Acquired" podcast, hosts Ben Gilbert and David Rosenthal discuss the intriguing journey of Pinterest from its humble beginnings to its recent IPO. Initially a mobile shopping app named Tote, Pinterest pivoted to become a visual discovery platform that's not quite a social media company. With more users than Snap but fewer than Twitter, Pinterest boasts a user base that's 80% moms in America. Despite a failed first attempt at monetization and a niche market primarily composed of women, Pinterest has demonstrated significant potential in the e-commerce space. The hosts also delve into Pinterest's careful management and infrastructure-building, contrasting it with the aggressive growth tactics of other tech unicorns. They explore the company's IPO pricing strategy, which was conservative in light of the Lyft IPO's aftermath, and consider Pinterest's future challenges and opportunities, including international expansion and monetization.

• Users demonstrated strong personal connection and engagement with the company.
• The woman dressed up as Pinterest for Halloween shows a unique and creative level of brand loyalty.
• A user hand-made 25 ornaments for the company, indicating a high level of dedication and appreciation.

"Oh, the users used to drop by the office. That's so crazy to me." "And the woman dressed up as Pinterest for Halloween." "Yeah. And, oh, here's, here's ornaments for all of you. How many, how many people work at your company? Great. I'll hand make you 25 ornaments."

The quotes reflect the speakers' surprise and delight at the level of user engagement with their company, exemplifying a community-oriented relationship between the company and its users.

• Season four, episode five of Acquired focuses on the company Pinterest.
• Pinterest is characterized as not a traditional social media company, yet it has a large user base.
• Pinterest is popular among mothers in America and originated from a pivoted mobile shopping app.

"Welcome to season four, episode five of Acquired, the podcast about technology acquisitions and ipos. I'm Ben Gilbert." "I'm David Rosenthal, and we are your hosts. Today we are talking about a company that is not a social media company. Or is it Pinterest?"

The quotes serve as the introduction to the podcast episode, setting the stage for a discussion about Pinterest and its unique position in the tech industry.

• Pinterest had a "nice little pop in the market" following its IPO.
• The company's market performance is part of the broader narrative of its story.

"So we've got one day of data here, and we'll be, of course, talking about the entire story of Pinterest, but had a nice little pop in the market as well that we'll touch on."

The quote indicates the hosts' intent to discuss Pinterest's market performance as part of its overall story, highlighting the financial aspect of the company's journey.

• The Limited Partner (LP) show is a secondary podcast focusing on company creation topics.
• A detailed discussion on term sheets was featured in the LP show.
• A new sign-up trial was introduced to make it easier for listeners to access the LP show.

"So last week on the LP show, we spent an hour diving into a required topic for every entrepreneur, the term sheet." "We have heard from a lot of you that you wanted to listen to the LP show, but you weren't sure how it worked. So we decided to change the sign up and offer every new person who joins a seven day free trial."

These quotes explain the content of the LP show and the rationale behind introducing a new sign-up trial, emphasizing the show's educational value for entrepreneurs.

• Pilot is a company providing accounting, tax, and bookkeeping services for startups and growth companies.
• Pilot has grown significantly and is now backed by prominent investors.
• The hosts endorse Pilot's services, emphasizing the importance of focusing on core business activities and outsourcing the rest.

"Our next sponsor for this episode is one of our favorite companies and longtime acquired partner pilot for startups and growth companies of all kinds." "Pilot is the one team for all of your company's accounting, tax and bookkeeping needs, and in fact now is the largest startup focused accounting firm in the US."

The quotes highlight Pilot's role as a sponsor of the podcast episode and the hosts' positive view of the company's services, positioning Pilot as a valuable resource for startups.

• Ben Silberman grew up in Des Moines, Iowa, in a family of doctors.
• He attended Yale and initially pursued pre-med before developing an interest in technology.
• Silberman moved to Silicon Valley and worked at Google before deciding to start his own company.

"And there was another Ben, Ben Silberman, who was growing up in the middle of the country in Des Moines, Iowa, around this time." "Ben Silverman talks about how it is a really great place, and it's going to play a big part in the story here."

These quotes provide background on Ben Silberman, co-founder of Pinterest, and foreshadow the significance of his upbringing in the development of the company.

• The global financial crisis in 2008 impacted Silberman's ability to find co-founders and raise money.
• Silberman and his co-founder Paul Sciarra started with a different app idea, Tote, before pivoting to Pinterest.
• FirstMark Capital became the first institutional investor in the company then known as Cold Brew Labs.

"So Ben's out there. He's all alone. He's quit. He's gone." "They decide to call the company cold brew Labs because it sounded cool."

These quotes illustrate the initial struggles and decisions made by Silberman and his team in the early days of their startup, leading up to the creation of Pinterest.

• Mobile shopping was a novel concept with limited consumer adoption.
• Iterating on mobile shopping platforms proved difficult.

"I think that not only was there only a small segment of people willing to do this crazy thing called shop on their phone, but then even more so, it was really hard to actually iterate on this thing."

The quote highlights the initial reluctance of consumers to shop via mobile devices and the challenges faced by developers in refining mobile shopping experiences.

• Ben Gilbert met Evan Sharp in New York through a mutual friend.
• Evan, an architecture grad student, had an interest in tech and design.
• Ben and Evan bonded over a shared interest in collecting and organizing online content.
• Despite Evan's reluctance to join a startup, he contributed to the project that would become Pinterest.

"Pinterest really keeps finding the exact right people for these roles with just the right backgrounds."

This quote emphasizes the serendipitous nature of how the Pinterest team came together, each with the right skill set for the project's needs.

"You should come join me and Paul at Cold brew and work on what we're working on. Tote."

Ben Gilbert invites Evan Sharp to collaborate on Tote, an early iteration of what would become Pinterest, recognizing the alignment in their interests and skills.

• Tote had a feature that allowed users to save items for later, which was popular among its few users.
• The team decided to expand this concept beyond shopping catalogs to all internet content.
• Evan Sharp designed the grid layout, which was adaptable and prioritized vertical photos.
• The grid layout was initially web-only and later proved ideal for mobile.

"He comes up with probably the most important unlock that really makes this happen from a product standpoint. He comes up with the grid layout."

Evan Sharp's grid layout became a fundamental feature of Pinterest, demonstrating the importance of design innovation in product success.

• Pinterest launched in January 2010 but struggled to gain traction.
• The founders did not have a specific target user in mind, which later turned out to be primarily women.
• Early growth hacking attempts, such as setting Pinterest as the homepage on Apple store computers, had no impact.
• TechCrunch Disrupt exposure and Ben's parents promoting the platform in Des Moines showed early signs of user engagement.

"They email all their friends in Palo Alto. Everybody that they know from Google and Divi is friends at Facebook. And Evan, of course, is going to Facebook at this time, and nobody uses it."

The initial launch of Pinterest failed to attract the attention of the tech-savvy crowd in Palo Alto, despite the founders' connections.

• Ben Gilbert attended the Alt Summit, a women-focused design and blogging conference, which led to the discovery of Pinterest's core audience.
• The collaboration with Victoria Smith and the "Pin it Forward" campaign engaged bloggers and their followers, leading to user growth.
• The platform's growth reached 40-50% month over month, signaling product-market fit.

"The bloggers get really into it, and they, of course, all have their small but rabid fan bases of their blogs. Their audiences love it."

The success of the "Pin it Forward" campaign illustrates how partnerships with influential bloggers helped Pinterest gain a dedicated user base.

• Pinterest attracted the attention of investors like Shauna Fisher and Kevin Hartz.
• Early employees, Sarah Tavell and Leslie Kincaid, played pivotal roles in securing investments and building the company.
• Pinterest raised a $10 million Series A in May 2011, followed by a $27 million Series B in August 2011, and a $100 million investment in May 2012.

"Shauna invests, and then she introduces Kevin Hartz, who's the CEO of Eventbrite, co founder and CEO of Eventbrite with his wife Julia at that point, and also a prolific angel investor in Airbnb and others. He invests."

The involvement of prominent investors like Shauna Fisher and Kevin Hartz highlights the growing confidence in Pinterest's potential.

• Ben Silberman became the official CEO in April 2012.
• Pinterest's cultural impact grew as public figures like Michelle Obama and Anne Romney joined the platform.
• The company's valuation increased significantly, reflecting its rapid growth and user engagement.

"Ben goes back to the Alt summit in 2012. And that's where he has the slide that has the. There might be something going on in California in that talk, but one of the questions from the audience is this woman who says Pinterest is something like the best thing that has happened to my business and my following and the worst thing that has happened to my actual blog because I now do everything on Pinterest."

Pinterest's influence extends beyond individual users to businesses and content creators, becoming a central platform for sharing and discovery.

• Pinterest took a different approach to growth compared to typical Silicon Valley hypergrowth companies.
• Instead of pouring money into growth, Pinterest focused on building a foundation to support future hypergrowth.
• Leslie was brought in as site operations manager and Pinterest began hiring experienced executives.
• Pinterest recruited key personnel from Facebook, including Tim Kendall, Barry Schnitt, and Don Faul.
• These hires contributed significantly to scaling the company's senior management and infrastructure.

"So, yeah, they brought in Leslie as site operations manager. They got really serious about hiring executives, and they start bringing over again."

The quote emphasizes Pinterest's strategic decision to prioritize operational and executive infrastructure over aggressive growth spending, highlighting the hiring of Leslie and other executives as a foundational step.

• Pinterest invested in hiring women engineers and promoting diversity in their engineering team.
• Tracy Chow, an early Pinterest engineer, became a leader in recruiting and diversity initiatives.
• Pinterest's engineering team had a significantly higher percentage of female engineers compared to other Silicon Valley companies.

"Pinterest has way higher percentage of female engineers than your average Silicon Valley company and is a huge asset to that."

This quote underlines the importance Pinterest placed on diversity within its engineering team, which set it apart from other companies in the industry.

• Pinterest moved from Palo Alto to San Francisco, marking a shift in the center of gravity for Silicon Valley startups.
• The move was facilitated by Tim Kendall, who found an abandoned chicken factory in Soma for their new office space.
• This relocation was symbolic of the broader tech industry's migration towards San Francisco.

"Pinterest moving up from Palo Alto to SF was the start of really the center of gravity shifting up to San Francisco."

The quote captures the significance of Pinterest's move to San Francisco, indicating a trend in the tech industry's geographic shift.

• Pinterest initially avoided monetization in favor of thoughtful growth that would benefit users.
• The company had a negative experience with affiliate links through Skimlinks, which they quickly retracted after user backlash.
• Pinterest's monetization strategy evolved over time, leading to the launch of promoted pins in 2014.

"They thought, well, this is pretty interesting. It was probably designed as an experiment from the get go, but they worked with a company called Skim Links in early 2012, and without warning, they pulled all of the affiliate links, rewrapped them with skim links, powered Pinterest affiliate links."

The quote describes Pinterest's early monetization experiment with affiliate links and the subsequent user response, illustrating the company's trial-and-error approach to revenue generation.

• Pinterest experienced a plateau in user growth after hitting 100 million users, with difficulty attracting male users.
• International expansion helped reignite growth, but the user base remained predominantly female.
• The realization that Pinterest would not be the next Facebook but rather a platform with a specific target market impacted the company's valuation and growth trajectory.

"They just can't get men to use the product and is still a big issue to this day."

This quote highlights the challenge Pinterest faced in expanding its user base beyond its core demographic, which had implications for the company's growth potential.

• Despite a smaller user base, Pinterest's position in the commerce flow allowed for significant monetization potential.
• Revenue growth was strong, with substantial increases year over year, indicating the effectiveness of the monetization engine.
• Pinterest's unique value proposition in discovery and curation created a differentiating factor in the advertising market.

"They do 755,000,000 in revenue, which is a serious amount, especially given the."

The quote points to Pinterest's successful revenue growth, underscoring the company's ability to monetize its platform effectively despite a comparatively smaller user base.

• Pinterest's IPO was initially priced below their last private valuation but eventually traded higher on the market.
• The pricing strategy aimed to create a modest pop in the market, contrasting with other companies like Lyft.
• Pinterest's IPO performance suggested a cautious optimism about the company's financial future.

"So then on this past Wednesday, April 17, they price the IPO at $19 a share above the range, and that equates to a $12.6 billion market cap, very slightly above the last private valuation."

This quote details the IPO pricing strategy and the market's response, indicating a positive yet measured reception to Pinterest's public offering.

• Bulls point to Pinterest's growth rate and potential profitability as indicators of a promising future.
• Bears argue that Pinterest's market may be limited and face competition from other platforms like Instagram.
• Pinterest's unique position between search and social advertising creates a niche but valuable market.

"The biggest bear case, at least to me, is that they will not be the only ones to own this market for long."

The quote reflects the bear perspective on Pinterest's market position, suggesting that competition could threaten Pinterest's dominance in the discovery-based advertising space.

• Pinterest's core market is similar to that of lifestyle magazines.
• The platform skews heavily towards women, with interests in design, home, and fashion.
• Men do engage with Pinterest, but to a much lesser extent compared to women.
• Pinterest struggles to expand its user base beyond its core demographic.

"The market for the core Pinterest product is the same market as lifestyle magazines. And if you think about what is the market for lifestyle magazines, it tends to skew heavily towards women."

This quote explains the primary user demographic of Pinterest and highlights the challenge Pinterest faces in diversifying its user base.

• Pinterest experienced a "down round IPO," which is when a company goes public at a valuation lower than its previous private valuation.
• Despite a lower share price, the end market cap was higher due to the issuance of new shares.
• Pinterest's IPO was not as detrimental as Square's IPO, which had a significant down round effect.
• Pinterest's employees were not severely affected by the IPO pricing in terms of stock options.
• The cautious approach to the IPO valuation may have been influenced by the aftermath of the Lyft IPO.
• Public markets are valuing companies within a range similar to private markets, which was a concern for many investors.

"They effectively had a down round IPO... Basically everyone is in the clear now... they swung the pendulum hard the other way."

This quote discusses the nature of Pinterest's IPO and its implications for the company's stakeholders, suggesting a conservative approach to valuation.

• Pinterest had significant cash reserves and was trending toward profitability, raising questions about the need to go public.
• The company could have considered a direct public offering (DPO) due to its financial position.
• The decision to raise additional funds through an IPO may have been strategic, possibly to prepare for new investments or international expansion.
• Pinterest's international user growth is notable, but their international monetization remains minimal, indicating potential areas for investment.
• The IPO could have been a conservative move to ensure stability, as DPOs are still relatively untested compared to traditional IPOs.

"They've got cash in the bank. They're going to get profitable... This international expansion is interesting because it's growing really fast from a user perspective... But they're really not monetizing at any significance internationally."

This quote highlights Pinterest's financial health and the potential reasoning behind its decision to pursue an IPO, including considerations for international growth and monetization.

• Pinterest is managed differently from its peers, with a focus on infrastructure ahead of growth.
• The company is perceived as well-managed but operates in a smaller market compared to other tech giants.
• Proper management is crucial for success, regardless of market size.
• Pinterest is considered more of a tools business, with less significant network effects compared to platforms or marketplaces.
• Despite weaker network effects, Pinterest has a strong content-driven flywheel, where user engagement leads to more content and vice versa.
• Pinterest's tool-like nature does not prevent it from competing effectively for advertisers.

"Pinterest, the market is smaller, it's extremely well managed, and will be a smaller company in the long run. But I feel like much better managed."

This quote compares Pinterest to other companies, emphasizing its smaller market but highlighting its strong management as a positive aspect.

• Significant economic events can create opportunities for new companies.
• Persistence and adaptability are key; not giving up on building something can lead to success.
• Maintaining a cohesive team through failures and successes can be highly valuable.
• Pivoting should be timely, and shutting down should be a last resort if there's still potential and resources.
• The IPO has raised substantial funds for Pinterest, which may be used for strategic moves or expansion.

"Just not stopping doesn't mean banging your head against a wall with something that isn't working. It means not giving up on the idea of building something, period."

This quote underscores the importance of perseverance and the distinction between stubbornly sticking to a failing project and persistently striving to build something successful.