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Startups Vie to Attract an IPO Hero

By MAXWELL MURPHY, Senior Editor

Bob Bearden took four months off between jobs as a chief financial officer. He shed 40 pounds, rode his bike around Dallas and got a tan. What he didn’t do was worry about his career.

With hundreds of companies racing to go public, his experience as CFO for units of Expedia Inc. made his return to the game easy.

“I began the process by returning phone calls,” says Mr. Bearden, who was snapped up in January by uShip Inc., an online shipping marketplace. “There was no shortage of interest.”

The red-hot pace of IPOs has many startups scrambling to find a CFO with public-company experience. Out of the 37 IPOs in the U.S. so far this year by companies with a finance chief, 23 had a veteran CFO at the helm. More than half of those executives had led a previous IPO—double last year’s rate, according to recruiter Korn/Ferry International.

Founders say they want a CFO with a few battle scars to help them confront mounting federal regulation, handle any back-and-forth with the Securities and Exchange Commission, and to be the point person with analysts and investors.

CFOs with the right pedigree are stalked by headhunters. “The second time is better than the first, and the third time is better still,” says John Kogan, who was finance chief at four companies and now runs Proformative Inc., an online networking platform for finance executives.

A CFO is often one of the last major hires a company makes before going public. Startups usually focus first on developing their product, then on sales and marketing.

Still, according to the Bureau of Labor Statistics, unemployment among chief executives and CFOs was a minuscule 1.2% at the end of last year, down from 1.8% at the end of 2012.

The rarer their skill set, the more expensive the CFO, and their salaries mount with experience. The median pay for CFOs the year before their company went public was $606,200, according to data compiled by executive-pay consulting firm Equilar. The year of the IPO, their salary jumped to more than $730,000, and the year afterward it rose above $770,000, the data show.

Matt Chasen, the co-founder of uShip who hired Mr. Bearden, spent nine months sifting through more than 100 candidates to find a handful of prospects. Then he learned the bad news: “Every single one of them made significantly more money than I do,” he says.

Mr. Chasen forked over a salary for Mr. Bearden that is “in the ballpark” of his own, but he declined to elaborate.

Last month, Glassdoor Inc. hired Adam Spiegel, who led RPX Corp.’s public debut in May 2011. “I had known for a while that it was going to be expensive” to hire an experienced hand, says Robert Hohman, CEO of the career website. He wouldn’t disclose Mr. Spiegel’s salary, but said it helps that CFOs are “much more” interested in stock than cash.

Indeed, according to Equilar, nearly three-quarters of total compensation for CFOs was in equity the year before their company’s IPO, but dropped below two-thirds the year after.

Through Friday, there had been a total of 45 IPOs this year, roughly double those in the year-earlier period, according to Renaissance Capital LLC, an IPO investment advisory firm. The firm expects 250 to 300 companies to go public this year, raising a combined $60 billion to $80 billion, making this the biggest year by both measures since the dot-com boom.

In 1999 a record 486 companies went public; fewer did so in 2000, but they raised a record of nearly $97 billion, Renaissance Capital says.

All told, a CEO needs to work harder these days to woo an in-demand CFO.

“You have to convince the CEO that they have to be sellers [of the job], as well as buyers of finance talent, which is not easy necessarily when a CEO has a hot IPO,” says Kristine Langdon, a senior client partner at Korn/Ferry’s financial officer practice.

Not every CEO who dreams of ringing the opening bell at a stock exchange thinks an experienced CFO is a must-have. Greg Duffy, co-founder of video-monitoring service Dropcam Inc., recently hired Brad Roberts as vice president of finance.

Mr. Roberts has a shot at the CFO role at Dropcam, his boss says.

But the learning curve is steep. Mr. Duffy says Dropcam’s multimillion-dollar revenue is growing fivefold a year. “Your VP of finance is either going to be ready or we need to get somebody who has done this before,” he adds.

Stephen Vintz had never been a CFO before joining social-media marketing firm Vocus Inc. 13 years ago, and ran its successful IPO in 2005. Now, startups and executive recruiters have him on their radar screen, and he isn’t surprised.

“About 30 minutes after we filed our [IPO registration] I got a cold call from somebody offering to make me custom suits,” says Mr. Vintz.

Now that his skills are in high demand? “I’d be lying if I said I didn’t get calls,” he says.

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