SoFi's CEO Anthony Noto says WeWork is a 'gut check' moment for startups eyeing IPOs, and highlights how boards need to change their thinking

Asa Mathat for Vox Media

SoFi CEO Anthony Noto said the WeWork fiasco has been a wakeup call to other startups.

• Anthony Noto, SoFi's CEO, told Business Insider that the recent turmoil at WeWork should be a gut check for startups eyeing the public market.
• Noto, who previously led Goldman Sachs' global technology, media, and telecom group and served as Twitter's CFO, said boards now have more of a responsibility to understand the type of leadership required at different stages of a company's growth.
• He also said companies may need to be willing to accept a lower valuation in the public markets in order to meet long-term goals.
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A high-profile tech industry executive said WeWork co-founder Adam Neumann's dramatic exit from his CEO role is a signal to all startups eyeing the public markets that their boards need to consider the leadership required to make the jump.

Anthony Noto, the CEO of personal finance startup SoFi, told Business Insider that the struggles WeWork has faced in trying to go public highlight the need to distinguish between a CEO that has ambitious plans to quickly grow a company from scratch, and one that understands how to manage it once it has reached a certain size and valuation.

"I think there is a general theme that's starting to become more prevalent - that CEOs and companies have different phases of development that require different types of leadership," Noto said in an interview with Business Insider on Wednesday.

"As the company goes through those phases, the boards now are increasingly being challenged to figure out the right person for the right job at the time," he said.

Read more: Adam Neumann is out as WeWork's CEO, but that's no 'silver bullet': VCs and proptech experts think it will take cutting passion projects and cleaning house to right the ship

WeWork has recently postponed an IPO, and media reports showed it had been mulling a huge valuation cut in order to lure investors. Its S-1 filing revealed details behind its wide losses, and that mounted pressure on Neumann, who already was in the spotlight because of his financial entanglements with and behavior while running the fast-growing company.

On Tuesday, WeWork said Neumann would step down as CEO and lose a big chunk of his voting power, though he will stay on as non-executive chairman.

In the statement announcing the move, Neumann said intense public scrutiny had become a distraction in running the company. Current WeWork execs Artie Minson and Sebastian Gunninghamwill head the company as co-CEOs.

Noto is no stranger to the public markets and leadership turnover. A long-time banker at Goldman Sachs, he served as head of its global technology, media, and telecom investment banking group and helped the bank win the role of lead underwriter in Twitter's hotly-anticipated IPO.

He eventually left the bank in 2014 to serve as the social media company's chief financial officer. In 2018, he was named CEO of SoFi after cofounder Mike Cagney stepped down from the role amid allegations of sexual harassment.

Noto said boards are now being forced to consider that the person that led the company to major success early on might also not be capable of bringing them to the public markets.

"I think the boards are just being put to task for the first time in, quite frankly, a couple of decades," Noto said. "I think it's a gut check for the industry and it will be a theme that every board has to start to think about more proactively so you don't get to this flashpoint."

See more: JPMorgan's Jamie Dimon met with WeWork's Adam Neumann this weekend to hash out how to get its botched IPO back on track

It's worth noting WeWork investor SoftBank led a $1 billion Series E round for SoFi in September 2015.

Noto added that those eyeing the public markets also need to be willing to accept how the public market will value them, even if it's lower than what it achieved privately.

He pointed to Jack Dorsey's decision to bring Square public. In 2014, Square raised $150 million in its Series E at a $6 billion valuation. Just over a year later, Square went public at a valuation of just $2.9 billion.

Currently, Square's market cap stands at roughly $25 billion.

"I thought Jack was prescient in that he was willing to accept the value from the public markets that was meaningfully below the value that the company got as a private company, with the view that over the longterm it won't matter, and he was 100% right," Noto said.

"But the difference between going public and not going public could have really impaled the company. So he prioritized going public over getting the right value."