“With today’s tools, you have easy access to information surrounding the success and progress of any company, regardless of whether it is or is not listed,” said Moshit Yaffe, Co-Founder, and CEO of Zirra, at the London Stock Exchange Annual Capital Markets Conference that took place on Wednesday 14th June in Tel Aviv. “Private companies are more and more afraid to go public because of the requirement to disclose numbers. But we at Zirra, a tech company that analyses other companies using big data and A.I, say: transparency is already here. private companies are not as private as they think.”
Yaffe participated in a panel of CEOs, dealing with questions regarding startups going public and the process preceding it. The panel was led by James Clark, Head of Tech and Life Sciences in primary markets at the London Stock Exchange. Before starting Zirra, Yaffe took Vigilant Technologies public at AIM but now all energies are focused on the privately held startup company established in 2014 that raised $2.5M from investors such as former Microsoft execs Moshe Lichtman and Soma Somasegar, AOL, and Professor Dan Galai.
“Common sense tells us that financials are crucial to understanding the company’s progress and chances of success. But in fact, your current financials are not the critical factor in determining your success because it doesn’t say anything about your future,” said Yaffe. “Even if you won a significant deal with a customer – it has nothing to do with your next deal or with how your financials will look in two or three years from now. So, today, we can already tell a lot about a company, whether it is private or not.”
Yaffe added: “As a company that promotes transparency, we behave in the same way. If a Zirra clone analyzes Zirra, it will get all the necessary information it needs to do so. By going public, you are not opening yourself up to transparency because that exists already. Going public suggests that you, as a company has realized the benefits of IPO: gaining more business, getting people to know your company, and liquidity for investors” said Yaffe.
From left to right: James Clark (LSEG), Ido Erlichman (Crossrider), Moshit Yaffe (Zirra), Amir Gutman (Aviv Venture Capital) and Inbal Lavi (XLMedia)
Yaffe also shared some tips for entrepreneurs that are considering to go public: “It is vital to realize the amount of money you would like to raise and to plan what you’re going to do with it. You have to think about the consequence of such a move for your current investors, including the very early ones. Taking a company public is not the hard part, but the day after: where you need to focus on not only delivering but also on meeting lots of investors and directing your energies towards them, as well as towards running the company.
Inbal Lavi, CEO of Webpals, an XLMedia (LON: XLM) subsidiary, shared the company’s road to an IPO. “We were generating cash all along the company’s history, so it’s not that we couldn’t grow had we not listed. However, the plans were bigger than that, and we felt we could use the public platform to raise more funds, and enhancing our business both organically and via acquisitions. In the end, we didn’t make any acquisitions because we were highly diligent regarding M&A’s, but we did heavily invest in our technology. When I joined the company in 2014, there were a few developers in the company. Today we have over 70, and they created a platform that allowed us to deliver the results we get paid for.”XLMedia, now traded at £258 million, is a performance marketing company that deliver online and mobile users to businesses through a publishing arm and a media arm. The company raised £17 million on the Stock Exchange. “We did have some struggles in the process,” said Lavi. “when we came to the market, we found it quite difficult to explain what we are and what we do. There was no real comparable to our company; we were compared to the Israeli adtech sector which is different from the other, so only to explain and tell our story to investors was quite challenging. We worked very hard in talking to investors, trying to understand how we can refine our story because our story was hard to digest. But the biggest challenge was- and still is- planning the right strategy and delivering it.”
Ido Erlichman who became Crossrider’s (LON: CROS) CEO last year, spoke about the successful pivot the company had in the last year, raising the company’s stock in 234%. “The board decided to change the focus of the company from advertising technology to cyber and from B2B to B2C, to go up in the value chain and be closer to the end user. Because we had expertise in the cyber security space, we decided to either develop or acquire a product and build up our user base.”
“There are two simple rules I’d suggest you adopt: Firstly you should manage the business and let your broker maintain the share price, and second, always under promise and over-deliver. By keeping these both rules, you will get the appreciation in the share price domain.”
Aviv Gutman, a managing partner at Aviv Venture Capital, said that due to the vast diversity between companies and thanks to the bigger number of growth companies, there is also a difference in financial needs. “Companies first need to decide if they want to go public or raise private money, and this decision should be the first one,” he said. “Later, the company needs to tackle the question if the IPO fits its goals as well as its founders and the company’s culture. In general, if the company wants to raise money, it doesn’t need to go public.
“Going public should mean an answer to these questions: What are the goals of the company? What are the characteristics of the management? The management team needs to be very representative, very strong, frequently talk with investors, invest a lot with investor relations. It is a statement to say I’m going to be public. I’m going to be here forever, I’m not looking for an exit- although it happens, as was in the case of Mobileye that was sold after its IPO in Nasdaq. In the same time, a willingness to go public goes hand in hand with allowing some liquidity for employees, and early angels investors.”
Gutman continued with a tip to entrepreneurs thinking about going public: “Entrepreneurs believe that they should go for an IPO only in NASDAQ and only if Goldman Sachs or JP Morgan will take them public- otherwise, it doesn’t compensate for the effort. This is a big mistake. The ELITE program of LSE presented here is doing an excellent service to entrepreneurs in that manner: it educates them, and prepares them with best practices, ideas, skills of working with IR and investors and the market – and this is very important. I’d put the focus on entrepreneurs education at least one year before going public.”
James Clark concluded the panel by saying: “I’d like to think that our biggest competitor is ignorance, because in many cases decisions are made not based on business cases, but based on emotions or ego. So, whatever your future looks like, always do due diligence ahead of making decisions like an IPO. Often, the best decisions are based on numbers, so you have to make sure you have them.”