Sarah Friar, chief financial officer of Square Inc.
Courtesy of Business Wire
By Dan Primack
November 19, 2015

Square, the San Francisco-based company whose first product allowed merchants to take credit card payments via the iPhones, began trading shares this morning on the New York Stock Exchange, after raising $243 million in its initial public offering. The IPO itself was disappointing — with Square pricing shares at $9 a piece, compared to an $11-$13 per share offering range — but the stock has popped more than 40% in early trading.

After Square’s (SQ) initial trades, Fortune spent some time on the phone with Sarah Friar, the company’s chief financial officer since 2012. What follows is an edited transcript of our conversation:

FORTUNE: Square last night chose to price below its IPO offering range. Was that a difficult decision, and was there any serious talk of postponement?

FRIAR: Ultimately we felt the time was right for the company to go public. We said throughout the roadshow that the business is incredibly healthy right now and that we have a number of really big opportunities in front of us. You saw the new hardware we rang the bell with, we’re at a point in time with major changes related to EMV and NFC technologies and Square Capital is hitting an S-curve. We can’t time the market, so we control what we can control and what was most important was to put extra funding on our balance sheet.

Did you get a sense from the roadshow that you’d price low?

We had really good meetings. I think a lot of people walked in with preconceptions about Square, because we’ve definitely been a company that has had a story told for us that isn’t our story — which is why I was so happy to be able to show and not just tell. When we walked out of meetings we heard consistently, ‘Wow, that’s a completely different business from what I thought it was.” They didn’t necessarily realize all of the things you can build on top of two million active sellers and the data at our fingertips. Not just from the core business, but also Square Capital and how the services work together.

People also think of Square as a payments company, but we were able to show that we’re really a technology company with a tremendous platform for sellers that provides a cohesive experience that they can’t get from anyone else. We’re doing that via a payments model, but don’t mistake us for a payments company.

The stock has popped substantially this morning. Do you regret leaving money on the table?

I’m just so happy we’re back on the road to driving the business forward. We put quite a lot of new capital on a balance sheet that had been healthy already — it was good to disprove naysayers by being able to show that — we repaid the credit revolver so, net-net, we’re just looking forward. It took a lot of work to get here, and there’s more ahead.

 

You came to Square from Salesforce.com (CRM) but, before that, spent more than a decade at Goldman Sachs (GS). How did your investment banking experience inform your IPO decisions?

I sometimes joke that, from an IPO perspective, I’ve surrounded the pin. I’ve seen it as a banker, a research analyst, a director and now as a CFO. And, I can say that the CFO seat is definitely where the most work is done, without question. I think what helped most of all was just keeping true north. The market is a long arc of the value you build, which always goes back to Square and our employees and our sellers. You need to remember that this is just a point-in-time…

We had a lot of our sellers here at the [NYSE] this morning, and I was standing next to a woman… who I had spoken to during a previous trip to New York about taking Square Capital and she told me she had done it. Then she asked me about taking it again for a different opportunity. This is what it should be about, focused on the business moving forward.

Speaking of that business: Square Capital currently provides merchant cash advances [MCAs]. Do you have any plans to become a licensed lender?

When we moved into this business, we chose MCAs as our product because we could move faster with them. Classic tech company strategy, move fast and then quickly iterate. It certainly worked since we’ve given out over 50,000 advances in just a year-and-a-half. But, absolutely what we hear from sellers is that they’d like for us to take on the rest, because MCAs require sellers to wait until it comes to an end before getting more, which doesn’t always work. So we’re thinking about that on the back end to see how we could structure it to be more like a loan. Investors would like that too, because we basically moved this off the balance sheet and they’d like to be able to securitize it. So some sort of loan-like structure on the back-end with a lending license, but still matching working capital and knowing the fixed fee you’re going to pay. There’s a lot of magic to make.

We at Fortune have focused a lot on how Square’s IPO price affects its early investors. How does it affect employees?

On a mega level, one really important tenet of Square is that we’re all owners. Every employee has equity, which I’m very proud of, so I really care that the stock will show the value created over time. It impacts people’s ability to send their kid to college or buy a house — all because of what we built together.

The message I sent to the team last night was to first take a breath and celebrate. Not many companies get to this stage, even though it may feel like they do. Then keep focusing on making life for sellers magical, and the market will pay us for that. Don’t gauge the impact you’re having by the stock price from one hour to the next.

Google blocked its employees from checking stock prices on the day of its IPO. Did you?

No [laughs]. I’m not sure that’s even possible anymore.

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