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A
We like to go into beer drinking countries first, wine drinking countries second. And while it sounds comical, the truth is like there's a lot underneath that in times of success. Your paranoia should increase if you want to be successful over the long term.
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Welcome to Fintech Leaders where we explore the stories behind today's most innovative financial technology companies. Coming to you from New York City, I'm Miguel Armaza, co founder of Gilgamesh Ventures, a fund that backs early stage fintech entrepreneurs. Today I sit down with Taylor Lauber, CEO of Shift4, the integrated commerce platform founded by Jared Isaacman that has tripled its market cap to $7 billion since going public five years ago. While quintupling profitability.
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We didn't support a single hotel eight years ago and now we support like 40% of the hotels in the country.
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Shift 4 has grown 3,000 employees in just one year, processing payments for 40% of US hotels and 75% of stadiums across every major league.
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A
And that's very humbling. So we actually think that you need to do, you know, a 5x to expect a 3x in the return on your stock. And that keeps us humble and it keeps us hard working.
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We discuss the build versus buy versus partner framework that drives billion dollar acquis decisions, why their international expansion is driven by beer drinking countries.
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First, the profitability of the company has.
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Quintupled how to achieve 16% free cash flow yields on every investment dollar and what it's like taking over from a founder who's also a private astronaut.
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Basically every dollar we've invested over the last five years has generated a 16% free cash flow yield.
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B
If you enjoyed this conversation, I invite you to leave a review on Apple, Spotify or YouTub. How are you kind of adding your signature to the company? Although I know this is of course a continuation strategy. You're very aligned with Jared. You've known him for a long time. You've been in the company for many years, but still you're in charge now, right? So how are things different?
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A
Yeah, it's a great question. I think anytime that you are asked to kind of take the torch on an endeavor that's been as successful as this one, do no harm has to be way at the front of your mind. This is an owner operated business that's run incredibly successfully for 26 years. Jared still is our largest shareholder by an order of magnitude. He still controls the company from a voting perspective. So do no harm is way at the front of how we think about things. And really you want as little to change from a strategic perspective as possible. With that being said, the business has evolved constantly throughout those 26 years. So you can't ignore the fact that in a business that I don't know had 3,000 employees at the beginning of last year and will have 6,000 at the end of this year, you have to change constantly if you want to continue to maintain growth, continue to be as effective at larger scales. So one of the things that I kind of like, I don't know, robbing or from my previous employer was just what I call a battle rhythm that is really, really predictable. So whether you're the first employee who joined the company, who is still here, by the way, or the 6,001st to join the company, there should never be a guess about what a Monday morning is going to look like versus a Thursday afternoon versus a Friday evening. I come from Blackstone, where the ability to kind of predict your week and quite frankly the year ahead was immensely valuable at disseminating lots and lots and lots of information. I mean, we needed to read many hundreds of pages every weekend to stay relevant with what a business like that was seeing given its scale. And so to try to instill that philosophy inside of shift four is something that I'm taking very seriously. I want to be able to take as many inputs as possible and get them into as many hands as possible. And to do that, you need to create predictions.
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B
That reminds me of my conversation I had with someone you, you might or might not know. Nigel Morris, of course, found co founder of Capital One, co founder of qed and he was talking about the difference of his job today, venture capital, where every day is an unknown and he has so many portfolio companies and every day something blows up. Whereas when he was running co running Capital One, by October of this year, he had a lot of predictability for 90% of the numbers for next year and maybe even the year before. And I've heard Jeff Bezos say similar things. Is that kind of how you look at it? Tell me how you think about planning over the next eight quarters?
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A
Let's say, yeah, I kind of separate the two concepts, right. @ any scale business, there is a predictability to what the next kind of 24 months is going to look like. By way of example, the largest contributor to our payment volume growth in a given year is the annualizing the merchants who joined us the year before. So I agree with that sentiment that at a particular level of scale like X percent of the year ahead from a financial perspective is understood where I would just say it's a little bit different in kind of how we think about operating the business is all of the attention almost by, by the inverse definition of what I just mentioned. All of the attention needs to be on the things that will annualize into 27, 28, 29. That's where you need to be focused. And so trying to give people the ability to, number one, just create enough predictability in their daily life so that when the uncertain happens, they're not unprepared for it and they're not waiting around for the next piece of information to arrive. They know when it's going to arrive and they're not kind of guessing at when they need to report out. That's really important because we do focus all of our energy on what's going to make us a better business five or ten years from now if you're doing a good job. There's always some inertia to a scaled business. But you can't let that inertia convince you that you don't need to apply efforts if you want to continue to grow. Because as everyone knows, products can age very quickly if you're not focused on them. So I separate those concepts for those.
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B
Reasons. Yeah, I mean speaking of like five year plans, you guys went public five years ago and I just checked this morning, your market cap, I think it has tripled since you, since you ipo, roughly, of course. So there's growth, things are working. Of course, a lot of this growth is coming inorganically. Right. You guys are big fans of M and A. It's something I really want to talk about. You have publicly said in the past that you rarely choose the exact moment when you're going to do mna. Right. It is. Our decisions are years in the making. You're waiting until the stars align to pull the trigger. Help us understand internally how you think about M and A. Yeah.
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A
Sure. Well, I think a few just points of a clarification first because you know, I don't know how I think interpreting an idea like the value of the company has tripled over the last five years. Sounds interesting. The profitability of the company has quintupled. So we don't actually think we're doing a great job. We actually think that investors are more skeptical of our success now than they were a few years ago. And that's very humbling. So we actually think that you need to do a 5x to expect a 3x in the return on your stock. And that keeps us humble and it keeps is hardworking in terms of growth. Inorganic isn't how I would describe growth. M and A driven for sure. And the idea behind this is we are constantly evaluating the kind of technology stack that commerce requires. And it is very complex and it becomes more complex every day and it varies by industry, et cetera. And when you study that, it becomes very obvious to you what the best pieces are of a stack and which pieces command mindshare in the minds of merchants and which are just commoditized functions that the merchant needs. We joke that at times the payments industry has been looked at like long distance companies, like I need to pay for this thing. But like, does anyone love MCI versus AT&T in 1995? No. They kind of just needed it to work. And so if, if, if that's true, which we believe it to be, approvals, declines, refunds, relatively commoditized but essential services, then you need to seek out technology that a merchant says, wow, I want that. This is going to help me run my business better. And you need to bundle it with those commoditized services because there is a lot of value, a lot of revenue, a lot of profitability in them. So that kind of gives us a framework for once you've identified the technology, is it something you need to build because it doesn't exist in an optimized way? Is it something you can buy that would be great, or is it something you need to partner with because of one reason or another? That matrix of understand the technology, understand where value is described, and then decide build by partner is something that we take very, very seriously. And we build a lot. I think M and A attracts the attention of investors, but building is the core of what we did. We actually didn't do a single M and transaction for the first kind of 15 years the company existed. And there are also scenarios like what we do for hotels, where you could never buy everything or build everything. If you think about a Wynn Casino resort, there are hundreds and hundreds of revenue centers using dozens of different pieces of software. And at least at this moment in time, we can't go buy Microsoft and we can't go buy Oracle to insource the entirety of the technology technology solution there. So that brings us to kind of the last solution, which is where do you buy? And where we buy is when we can get access to a great piece of technology, an awesome base of customers that has yet to consolidate all of these commerce features under a single roof. And if the price works and the math works, then you do it all day long. And so that last criteria of does the Price work is why we're, why I tend to say we don't get to pick when we do M and A. Because if you're very disciplined about that, you will do as many transactions as present themselves under your really rigid framework. And we have a rigid framework. So we bought aggressively at times over the last 18 months. We bought, you know, half a dozen companies and then we bought nothing in other stretches because the math didn't work. But what happens when we do this is we get a great piece of technology, access to lots of customers that are, by the way, paying five or six other vendors for their commerce experience to work. And you cannot convince yourself that any merchant likes to do that. They want as few vendors as possible and as reliable solution as possible. So oftentimes we will acquire a business and we'll say to these merchants, we can now do as a result of a combined company what you were paying for happily, plus 10 other things. And in doing so, you're going to save a lot of money and we're going to earn a lot more. It's great for everyone involved except for those 10 other vendors that were pointing the finger every time it didn't work, that all needed to earn margin, et cetera. So that's been our philosophy. I think what you need to be careful about is the organizational impact of that M and A. And if we're buying a technology resource, it can't look like a part of, it can't look like an a la carte menu next year it's got to be part of a cohesive ecosystem because if you maintain a lot of parts, you won't have a 50 plus percent margin business and you will have undoubtedly an aging technology stack, et cetera. So on the surface there's this M and A strategy that says be very disciplined about what you pay for it, but move with extreme conviction when you find something that works underneath the hood is it can't look like a separate business. Like if it looks like a separate business six months from after when you bought it, you failed. So really, really aggressive kind of integration.
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B
Strategy. Yeah. Tell us a bit more about that, about the integration strategy. Realistically, how long does it take for a full seamless integration and what have you.
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Learned? So it depends a little bit on the asset. But if we're buying, let's say a hypothetical, I don't know, point of sale software asset, it can be extremely quick. I mean, within the day of the acquisition, you are onboarding all those employees into your HR system as if they're a new employee off the street. You literally say all that old data is irrelevant. Just sign up, complete this form. This is where your paychecks are going to come from. This is your new email address. We'll forward the old stuff to you and you're off to the races. That works well because we're in the business of connecting hundreds of point of sale systems into a centralized ecosystem. So we can really think about that. Like the software is the satellite, we're the central hub and we go to market that way. And where you're placing most of your energy is on go to market. You're retooling the business. You're saying, stop charging for that software. Yes, it's great, but you're going to bundle it with payment processing and we're going to monetize the relationship that way. You also kind of put some mandates out there, like you will no longer cooperate with other third parties. Like you're going to deliver a cohesive solution. And that change of go to market is something that quite frankly requires a lot of attention. You can't take a business that's been doing something 10, 20 years and change it without a ton of focus. So our energies are placed there. And then it's really about just making sure that you are constantly de emphasizing the legacy way of doing business in favor of a cohesive go forward model. So by way of example, we buy a software company, we say you're no longer charging for your software. Every new customer is going to get payment processing and a bundled, vertically integrated, integrated solution. And by the way, all your employees are part of our HR ecosystem, our productivity suites, et cetera. Just doing that and educating them on the go to market. A year later, you're going to find legacy revenue streams have dried up to nothing and there's this large basket of integrated customers that are all contributing to the pie just like any other payments customer at shift 4. So almost definitionally, you're deprecating legacy processes and systems. You don't have to think about kind of old billing systems because they have no revenue in them by the time you've completed this exercise. And the customer that joined you via that acquisition looks just like every other payments customer. And definitionally, again, they're paying you revenue in the way every other customer did. So there's some tricks we've certainly learned along the way. Heavy emphasis on kind of the new go to market, a lot of rigor around what information we need from the past versus what's nice to have, and just making sure that communications are as clean as possible. That is the one thing, day one priority of every acquisition is that everyone is on. Whether it's Slack or our email system. They need to see how we communicate and why we communicate and be able to navigate this kind of bigger organization they're a part of. And yes, there is a rigorous delete the parts bounty program inside of, inside of shift 4. If you can find a part and a reason that's not necessary, you actually get paid to get rid of it, which is pretty.
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B
Cool. So a big component of M and A that you keep talking about is the people. And it's a way for you to hire hundreds of people at once. How about going to the more atomic level? What have you learned? You know, not just over the last got a 12 to 24 months that you've doubled in size in terms of headcount, but, but even going way back, what have you learned about recruiting? Do you have any, any frameworks around bringing great talent on.
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A
Board? Yeah, I'll start by saying M and A has been a phenomenal way for us to grow talent. And I don't think that's always understood. When a business is acquired, it's not the immediate assumption of those acquired employees that they're going to be one of the most valuable growth drivers of the business or that quite frankly, they're going to replace a bunch of open headcounts sitting out on LinkedIn somewhere for new jobs. And we struggle with that. Right. When we acquire a company, the immediate assumption of the acquired employee is I might be redundant. And we're like, no, no, no, that's not how this works. We would have had to hire a bunch of you anyway. And when you hire depending on your standards, you get it, you get it wrong half the time, even with a rigorous recruitment process. And so for us to know that we've diligence the business, we've assessed the talent they are in our industry, they understand our products and they will undoubtedly win more with our philosophy is a much better proposition for us as a hiring company. There's a change in go to market, there's certainly a change in kind of philosophy and that creates uneasiness, uncertainty, some arguments from time to time. But the reality is we win more. And when an employee recognizes that they're contributing in all the ways they historically have, but they're winning more, they stick around. And so the stats are probably skewed a little bit from our recent acquisition of Global Blue. But like over 75% of the employees at Shift 4 came from acquired Companies, which is really, really interesting. And I think that speaks volumes to the acquisition strategy. There's always a cynic, and that's kind of why the capital markets exist in the way they do. About does the M and a strategy work? 75 + percent of the employees at our company came from acquisitions. It.
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B
Works. That's wild. So international expansion, I know that's top of mind for you. And you know, M and A has been great for that expansion, right? I mean, I think SmartPay is one of those acquisitions internationally, especially in Asia. But why not just double down in the us? Why go.
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A
Internationally? For the same reason I mentioned earlier, which is we have to focus on what the business is going to look like 10 years from now. The US is doing phenomenally well and it will be the driver of our growth for the medium term. But if you don't plant the seeds and grow in new markets, you won't be an enduring business 10, 15, 20 years from now. But I won't say that like it wasn't our idea. Right? We weren't sitting around saying we got to leave the United States. It was actually our largest customers who said, what you've been able to assemble for us in the United States would be incredibly valuable to us outside the United States. By way of example, we didn't support a single hotel eight years ago, and now we support like 40% of the hotels in the country. When we were delivering this value proposition to them, it was the hotels saying, what you've consolidated and built for us in the United States is it's cheaper, it's faster, it's more convenient to work with. I know who to call when something's broke, not working, which is really valuable. We want that in Europe and we want it in Latin America and we want it in Asia. What we struggled with was it's really, really hard to build out payment capabilities in those places. There are completely different ways of doing business in those countries. Different payment methods, different deposit methods, different expectations about when funds are going to come in if you're a merchant, and how they're going to get to your bank account. So we took as far back as seven years ago where we were told, we need to be international, seriously. And we started to look at ways to get there. We applied our Build Buy Partner algorithm to it, and buy was all we saw. Build was going to take forever. It was going to take a boatload of capital. And yet we didn't find businesses that were a natural overlay to this. Obviously the product didn't exist outside the United States. And so there wasn't something that we could naturally buy. And so we kept a very disciplined, rigorous model. We ultimately found a kind of cross border e commerce business that had the right plumbing for us. And we said if we own this, could we enable it with everything that's made us successful in the United States? It took years. I mean we closed on that asset in late 2023. And by the way, just owning the technology doesn't necessarily give you the right to actually go find customers. So we had to invest in the go to market model. But lo and behold, like we weren't boarding a single customer in the United Kingdom six months ago and now we're boarding over 1,000amonth. So the it was a customer led kind of journey we're on. But as we assessed the market and validated the customer's opinion, it became very obvious to us that in many parts of the world the payment experience looks like it did in the United states in the mid-2000s. And that sounds, it sounds like hyperbole. But if you think about let's pick like the most developed market outside the United States, let's pick London, let's pick, go into a pub, let's grab a couple pints and there might be some software that that pub operator uses to run their business. It's going to be sitting on some random third party hardware and when it comes time to pay, they're going to look at the screen and then they're going to pull up some old bank terminal and they're going to punch in what you owe and they're going to hand it to you. And that's like a completely antiquated, non integrated experience, ripe for error, that we solved that problem 20 years ago in the United States. So it was obvious that we could repeat our playbook and be successful. It took a few components to make sure that we could do it in a way that didn't risk a ton of capital. But once we were able to find those, and it was a hell of a lot of patience, I mean it was six years from we should do this to having the capabilities to do it. And now this is kind of the first year we're adding actually a bunch of merchants around it. It's well worth the journey. I can't promise you that the merchants we're boarding today are going to look as economically attract attractive as the merchants we have in the United States. But I can damn sure promise you that 10 years from now you're going to have a really, really strong business that has the kind of margins, growth and durability that we've been able to deliver in the United States because it's the exact same playbook, just with real, real strong capital discipline and how you run.
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B
It. Given that you are stepping into so many markets across different continents, what instances have you encountered where the payment system is actually more developed than the US and then maybe you can bring something.
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A
Back. Yeah, sure. So I'll say from the standpoint of the consumer, the payment systems are generally more advanced. And what I mean by that is, as a consumer, you don't necessarily care that that device that was brought to you is not integrated to the merchant's POS software. You're just tapping your card, you're getting prompted for a pin. I think examples of things like 3Ds, where you buy something online in Europe and your bank contacts you immediately to verify that it's real. Those are all really great consumer advancements. But the merchant side has been neglected for the benefit of the consumer. The consumer has generally gotten a pretty robust experience and the merchant has not been able to use a lot of integrated technology because there's these, I don't know, PIN numbers in the way or these security flags. So I don't want to send the wrong connotation. But where we are technologically today, we can overcome all of those features and deliver the merchant a great integrated experience, no matter how robust that consumer experience is. So we're finding that today merchants are suddenly able to deliver the great consumer experience with all the security that has been offered through, you know, the last 10, 20 years. In Europe, you can have a mobile payment experience. You don't have to, like, let the waitstaff member run away with your credit card. But that mobile experience can be tightly integrated and the merchant doesn't have to guess what money is hitting their bank account, what the patron's like five star rating was or two star rating was on that meal, etc. So I think the payment systems are one thing, but the merchant's ability to engage with them and quite frankly accept multiple payment systems is not nearly where it should be. Outside the United States. If you've been in those corners of Italy where they've got five payment terminals because you want to pay with an American Express, they got to go to number three versus a local debit, number one, et cetera, we can solve a lot of that with technology. And merchants love ripping four iPads off a wall and consolidating it down into one solution. We do have philosophies that guide our growth. I know as an American company trying to expand abroad, it can seem like you don't pay attention to the nuance. And the nuance matters a lot in local markets. So we have some philosophies that guide us. We like to go into beer drinking countries first, wine drinking countries second. And while it sounds comical, the truth is like there's a lot underneath that. There's a lot of things that make it easier to set up a business, to do business, the flexibility towards innovation, etc. All exists. And then the wine drinking countries that move a little slower because the wine tastes a little better. You know, you hit those after you've learned all the mistakes of international expansion that you're going to learn along the.
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B
Way. I love that simple concept. And by the way, this has been the strategy for a long time. If you look at big banks expanding internationally, they were following their customers, right? The US banks, the Japanese banks, the European ones, even the Chinese. So it makes a lot of sense. Yeah, we've also, funny, we've also backed at Galgamesh Ventures, we've invested in some founders who pitched international expansion at their companies because their customers were asking for it. The company said, no, we're staying put in our local market. So these founders left to build themselves. Just interesting aside. So Taylor, you part of shift 4 strategy has also been vertical expansion, right? By industries. You mentioned you weren't in a single hotel seven, eight years ago, not now. You're in over 40% in the U.S. do you have also framework on how to think about the verticals that come next? For example, you recently expanded to luxury, right? How did that come.
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A
About? Yeah, we do. It rarely starts with the vertical first. For what it's worth, it usually starts with us seeing a problem that we've solved before and trying to apply that problem solving to a new vertical where there's lots of opportunity. So I'll give you a couple of examples. We exiting 2017, we owned a lot of restaurant software and we needed one platform to integrate it to for our own benefit, just so that we didn't have to maintain lots of different payment integration layers, et cetera. Which brought us to these hospitality gateways that if you're a hotel, there's only like four of them in the world at that moment in time that you could work with. They had all of the features that a software company like us needed to process a payment. They had all the institutional knowledge of how things like bar tabs and incremental authorizations in hotels work. And when we recognize that. We said, wow, there's actually a lot of scarcity in this technology in the hospitality industry. We should own this. And we bought like two of the four. We bought as many as we could. And lo and behold, you're in 40% of the hotels in the country. Country with a highly differentiated technology stack. A few years later, we were asked to tour a stadium in Las Vegas. They were just trying to sell us a suite because we had a big office there and they were building a new stadium. And we said, wow, this looks just like the hotel we just left. There is a ton of different revenue centers. There are lots of different things you could pay for. You need to create for the operator of that stadium. You need to create a seamless reconciliation experience, whether it was a ticket purchase or a parking voucher or a jersey sold, et cetera. And we can solve this problem just like we have for hotels. We just need a few software suites that are a little bit more specific to stadiums than they are to hotels, by the way. We kind of came to that conclusion in 2020. We ran our build by partner algorithm. We said we were going to build a lot here, but there's one asset that, that stadiums are jumping up and down for in the mobile ordering space. And we can afford it, and it's a great business. Let's do it. We are now in like 75% of the stadiums in every league in the United States just four years later as a result of that. And so when we think about vertical expansion, there is no limit to where this can go. You know, Jared, through his charitable endeavors, got to know St. Jude Children's Research Hospital. And in looking at how that business collects their revenue, it's donations as a not for profit. But we found they have 70 different software suites, you know, give or take, one for gala, one for online auctions, you know, maybe five for different mobile giving experiences or recurring gifts. And we said, wow, each one of these is a separate deposit. It's a separate point of reconciliation. It's not at all consolidated. Could we build for you what we do for hotels and stadiums? And they obviously say, yes, that sounds very interesting. So it's a lot of just kind of looking for problems and making sure that the vertical is large enough to warrant the investment in solving those problems. And I'll tell you what we found is it's got far less to do with the vertical and far more to do with the size of the business. Big businesses collect revenue lots of different ways, and they need that simplified. That's kind of the lesson we've learned, undoubtedly. So it's taken us into gaming, it's taken us into travel, it's taken us into not for profit. And global retail was a really simplistic algorithm. It was, we know how big this TAM is, we know how valuable this is, but to have a foot in the door, we need a point of difference that is immense. If you want a meeting with some of the best retailers in the world, you better have a point of difference. And what do we think a point of difference is to the likes of, I don't know, let's call it an LVMH or an Inditex. And what we found was this concept of VAT tax refund, allowing the foreign traveler to get a discount on the goods that they purchased was an incredible difference maker. It was something that, while it didn't cover the entirety of commerce in a store, really, really drove valuable, wealthy shoppers into stores. And the large retail, luxury retail brands paid a ton of attention to who was servic them in this regard. And so we came to that conclusion probably six years ago and explored ways to build ways to buy, ways to partner. And the algorithm worked just at the end of last year when one of the largest market share providers in the space said that we'd be interested in a business combination. And now we're off. I hope that we're talking a year or two from now. And I get to say a year ago we weren't in a single global retail location and now we're in, you know, an overwhelming majority of them with our services as a result of that.
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B
Process. I guess two things, two takeaways from that answer is, number one, it takes years, right? Like sometimes five years in the making or more. And number two, I think it's what I like about the story of the stadium and the hospitals is you're always paying attention, right. Whether it's a social visit or whether it's a due diligence visit or anything, you're always paying attention. I love that mindset. How do you think about innovation in the payment space? Where's it going? I just, I would love, as a venture capitalist, I'd love to hear your take, you know, because you're definitely at the forefront of.
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A
Payments. Yeah, sure. So I'll separate kind of the merchant technologies from simply payments. Right. Payments are what they've always been. Faster, easier to access with as little friction and cost as possible. That is innovation, I think something like Pix in Brazil, right. Which is, we would call it an alternative payment method. In the United States. But it's how the vast majority of Brazilians pay for their goods. And it really kind of leapfrogged the traditional evolution from cash to debit, credit, et cetera. So there is constant innovation in how people pay and how easy it is for the merchant to get that. So like separating the two constituents. Consumers want to pay in as easy a method as possible. And merchants generally want to take everything they can, but really just get it in their local currency with as low cost as possible. We have these jokes as we serve the not for profit industry. Charities will take a broken down car. If they can ascribe value to it, they will accept it. So it is not our job to try to tell merchants what currencies or payment methods or anything else to accept unless we have high conviction that will drive more business to them than they're currently conducting. Then once they accept those payment methods, our job is to obfuscate all of that complexity and just give them their local currency with as much frequency as possible. That innovation is constant. You'll hear things like stablecoins today, but three years ago it was buy now, pay later. A few years before that it was the advent of the pixies of the world, the ideals in the Netherlands. There are new transfers of value popping up all the time. We try not to get too religious about any one of them. Just make sure our merchants are able to accept what consumers are approaching and want to pay. With Apple Pay being a great example of something that emerged over the last 20 years that's now pretty ubiquitous. And then on the acceptance side, there's obviously tons of innovation that comes into before and after I receive those funds? What are all the ways to optimize the experience? What's all the information I can connect to that payment experience that can help me make better decisions about attracting the next customer? So those are kind of the areas we focus on as a business. Again, I think if you try to get too, too opinionated about how people should pay or how people should receive receive, you're not actually serving your customers.
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B
Well. Pleasing the market as a publicly traded company is never easy. Of course, that's an understatement. You mentioned revenue has quintupled whereas market cap has not has 3x. How do you balance making very long term term investments? Be it M and A or anything else, just internal investment, R D. So how do you balance that long term mindset with the just quarterly non stop.
- [38:58]
A
Reporting? I think consistency. I think if you expect that investors are going to. I don't know, give you the benefit of the doubt out you shouldn't. They have a massive universe of choices. And so what you need to do is you need to stick to what you're good at and you need to have investors understand that you are going to do that and that you're not going to change your methodologies for the sake of a short term trend. At least that's how you attract the good investors, the ones that are going to expect you to quintuple the company over the next five years and give you the latitude to do that. In our company, by way of example, example we didn't take any outside capital for the first 15 years the company existed. That philosophy of if we're going to spend a dollar, it is going to be scrutinized every way imaginably and we're going to demand the highest returns on that dollar possible is something that takes investors a few years to recognize. The discipline. Discipline. But once they see the discipline, I think they tend to have an appreciation for it and an understanding for it. We still learn every single day when we announce an acquisition there is undoubtedly this, like, I don't know, this explanation process we have to give to the market of, wait, why did you buy this VAT tax refund thing? What the heck does that have to do with restaurant payments? And, and yet over time, the pattern recognition builds up among your largest investors and they get excited. Our investors that really understand the discipline we have in spending a dollar get really excited when they watch us spend a dollar because they know the return they're going to get on that. I think we did an analysis recently. Basically every dollar we've invested over the last five years has generated a 16% free cash flow yield. And so if people can kind of see enough of that to get excited about it, they'll trust you. But I can tell you, early days of being a public company, that wasn't always the case. We raised nearly $700 million in a convertible instrument that had zero interest attached to it and it converted to equity only if our forward multiple grew to, I don't know, 45 times forward or something like that. And we said we don't need the, but if it's available on these terms, we're certainly going to take it. And within months of doing that, investors are like, when are you going to spend it? When are you going to spend it? We're like, with respect, the capital markets that afford you the ability to borrow money for free are not capital markets you should be investing into. You should be borrowing the money and saving it for the inevitable point in the cycle when it comes time to deploy that money. And that's obviously what we did. And so it does take, I think, that cycle of a bit of euphoria and a bit of kind of overly aggressive pessimism and watching how a company behaves through that before you get the buy in. But I can't promise you that we don't get tons of questions every time there's this little blip in a corner of our industry about is this new thing, the boogeyman that's going to destroy the, the whole market. I think investors have stayed sane by being very, very, very cynical and that serves them.
- [42:44]
B
Well. Taylor, any favorite books that you find yourself recommending often or rereading.
- [42:51]
A
Often? You know, I think it's always a balance. I try to kind of split history and, and business and I think there's usually a lot of lessons in both of those things. Anything Bill Bryson has always been interesting to me. Just sort of zoom out from your day to day and take a look at kind of the brief history of nearly everything as an example of one way you can get some perspective. The Acquired podcast has been a real big one for me and just the humbling lessons that the great businesses we have interact with today started 90 years ago, like these aren't, these aren't short term endeavors is another area I spend a decent amount of time and yeah balancing that concept of history because you will find like a lot of lessons repeat themselves throughout it. And if you study far enough back, you see the problem that's just around the corner and how they dealt with it at that moment in time. Time coupled with, with business because we, we do have to get a lot done in a short period of time and learning, learning who's made more efficient use of their time is, is something that always I've seen a lot of value.
- [44:03]
B
In. Yeah. Speaking of acquired, I went to their live recording last.
- [44:09]
A
Night. How was.
- [44:10]
B
It? And they, they took over. I'm sorry. Radio City Music Hall. It was as, as good as you could hope. It was.
- [44:19]
A
Great. Awesome.
- [44:20]
B
Awesome. I mean I'm inspired.
- [44:22]
A
Now. That's.
- [44:24]
B
Great. Taylor.
- [44:26]
A
Yeah.
- [44:26]
B
Yeah. Thank you for, for doing this. Thank you for joining. Congrats on, on everything you're doing and I know we'll be talking a lot.
- [44:36]
A
More. Sounds awesome. Great to.
- [44:38]
B
Meet. Thanks for tuning in. I hope you enjoyed this great episode with Taylor from shift 4. If you want more interviews, make sure to subscribe, follow and leave a review on Apple Spotify YouTube or wherever you get your shirts. It helps and means a lot. And if you have any suggestions or thoughts about the show, just drop me a line on Twitter or LinkedIn. Signing off till next week. I'm your host, Miguel.