I wrote this for today’s Irish Times: it reflects on my own IPO experience, and why I believe Nasdaq IPOs are an important measure for any tech. economy.
New York, 26th February 1997, 9.29am. The coming of age after six years of infancy. A Croke Park-pitch of a room, hundreds of computer screens replacing the light lost by blind-dimmed windows, replete with silently intense players grizzled beyond their age. The second-hand tranquilly rotates to mark the opening of the market at 9.30am, and the Lehman Brothers trading room explodes, keyboards pounding, phones shrilling answered with bronx cacophony. Our own stock opens its very first day up, our trading volume is good, and our initial public offering (IPO) on the US Nasdaq stock exchange is completed after a full year of preparation with our bankers, underwriters, analysts, and lawyers.
I recommend that once in your life you should experience an IPO. I am unsure I would ever want to undergo one again but what an adventure! One city for breakfast meetings, a flight, another city for lunch meetings, a flight, another city for evening meetings and a late dinner, hotel checkin before midnight for a 6am departure the following morning. A surreal breakfast order of McMuffins through the darkened windows of our stretch limousine at a drive-in on the way to the first meeting of the day. Three transatlantic Concorde flights, bumpy chartered aircraft flights, rushed VIP transits through airports. A crazy three week roadshow criss-crossing continents, ten back-to-back hour-long meetings for almost each of those days, reiterating the same bylines and key messages, and repeating the same jokes. Outwardly relaxed and cheerful, inwardly exhausted but adrenaline stabbed.
The Nasdaq IPO was when our company achieved adulthood. Rather than being a little known Irish company with interesting technology, we became a trusted, financially transparent, mainstream player in the global market. We were able to grow, not just because of a healthy balance sheet, but also because we were able to attract experienced staff, credible partners, and deep relationships within our industry. By the turn of the millennium, one market analysis placed us as the tenth largest pure-play software company in the world.
From the dot-com crash of 2001 until the middle of last year, Nasdaq IPOs had become unfashionable and challenging because of investor sentiment. Furthermore, the Sarbanes-Oxley act introduced under the George W Bush administration in 2002 as a reaction to the demise of Enron and others, requires both CEOs and CFOs every three months to personally certify the financial results of their corporations as being free from fraud. As one such CEO, this responsibility certainly made me deeply attentive to our corporate operations worldwide. I often wonder which of our own highly paid executives of Irish companies, banks, semi-states and public bodies are prepared to likewise personally certify their own enterprises every 90 days.
But recent months have marked a deep change on Nasdaq. At the time of writing, the Nasdaq market is up almost 20% since January 1. In all of 2008 and 2009 there were just eighteen IPOs. There have been nineteen venture backed IPOs so far just since the start of this year. Since their recent IPOs, Invensense (motion-sensing technology) is up 125%, Jive (enterprise social networking) is up 115%, and GuideWire (insurance software) is up 75%. The Facebook Nasdaq IPO is yet to come.
President Obama’s administration is stimulating economic growth of the US indigenous sector. At the time of writing, the “JumpStart Our Business StartUps”, or JOBS, Act is about to be receive the Presidential seal. This aims to further encourage IPOs, and hence the catalysing of capital and investment, by easing the regulatory burden on companies wishing to go public. It reduces regulatory burdens on young public companies for up to five years after their IPO, and in practice would apply to the vast majority of Nasdaq IPOs. It also facilitates “crowd-sourcing” of investments of up to US$2 million for start-ups, allowing small investments from members of the public.
Our own Government and its numerous agencies are obsessed by employment creation. Our indigenous technology sector has frenetic start-up activity led by serial entrepreneurs and enthusiastic founders. Employment growth is blossoming in the sector, met in part by skills immigration. However I believe that the virility of the sector will only be sustained when we have a steady stream of infant companies coming of age as mature adult public companies. In turn public companies can muster the financial resources and attract world class executive management which are necessary to grow into global leaders and brands. If Ireland is to have long term stability and growth in its economy, with Irish global multinationals, then I believe Ireland needs a steady stream of fresh public companies, thus cultivating a healthy and vibrant indigenous technology sector.
In the global technology sector, there is really only one public stock market counts: Nasdaq. In my view local exchanges, including the UK AIM and even more so the Irish stock market, achieve little to enhance a technology company’s credibility as a global player. If Ireland is to have a serious indigenous technology sector, it should measure its success by the number of Nasdaq IPOs each year from Ireland. If the Irish enterprise policy is to cultivate a serious indigenous technology sector, it should be focussed on investment policies which encourage growth to the public markets and to the Nasdaq in particular.