KEY POINTS:
Our stock exchange has never had a heavy weighting of technology companies, but the feeling at this year's Morgo talkfest seems to be that a listing is becoming a more attractive option for tech companies seeking capital to expand.
Morgo attendees have heard over the last day from
Rod Drury, who earlier this year undertook a successful $15 million NZX listing for his accounting software company Xero, and Aaron Ridgeway, who is currently attempting to take his contact centre software company Datasquirt public, but on the Australian Stock Exchange.
Ridgeway was a bit alarmed at the Herald's take on his decision to seek public money across the Tasman rather than at home. He pointed out to Morgo's audience that he's not snubbing New Zealand in pursuing an ASX listing, but chose Australia because Datasquirt already has a profile there in the investment community.
He said he wants New Zealand investors to buy into the listing and he may well need them - Datasquirt must attract a minimum of 450 investors for the listing, which aims to raise up to A$12 million.
Datasquirt makes software which allows contact centres to communicate with clients using text messages, email and electronic fax, rather than making phone calls. It already has some good clients onboard - Yellow Pages, Fonterra, Coca Cola and Amway among them.
The Ministry of Justice claims its debt collection has increased by ten per cent following use of Datasquirt's technology to send out payment requests and reminders.
Datasquirt has customers all over the world, but it has built the broadest portfolio of clients at home, which you think would have generated strong enough interest to support a local float.
The ten minute investment pitch Ridgeway presented today at Morgo, painted a picture of a company with high growth potential that has already successfully commercialized its technology.
Datasquirt has existing revenue coming in and an experienced, internationally-flavoured board. Despite those advantages Datasquirt found much greater appetite for a listing across the Tasman, and having $2 million in first round funding already injected into the company from Australian investors, made an ASX listing a good fit.
"It's a big stepping stone to the global market and there's a big appetite for tech stocks," Ridgeway says of Australia.
Ridgeway and his co-founder Mark Loveys say they plan to keep Datasquirt headquartered in New Zealand, but the nature of public companies is that they and their executives need to be highly visible in the market where they are listed to keep investors happy. I hope the company keeps its New Zealand identity and a healthy local shareholding.
Datasquirt's public offering closes on August 16 with the prospectus available at its website.
In contrast to Datasquirt, Rod Drury capitalized on his profile as a successful entrepreneur at home to drum up interest in his NXZ listing for Xero.
"I reckon it's easier here, where you know people," he says.
Drury carefully assembled a dream team of executives and high-profile board members to lend credibility to the company, which closed its IPO fully subscribed.
"We took the minimum amount of money that allowed us to do what we needed," he says.
"The money all comes in at the end [of the offer period]. It was stressful...but we trusted our plan and kept quiet."
While the IPO could be considered a big success, there is a lot of expectation hanging around Xero, which, unlike Datasquirt, is effectively starting from scratch in terms of revenue and customers.
Drury says if he would have done anything different in the listing process, he would have taken more time to temper that expectation around growth in revenue and customer numbers.
"We'd have been clearer about selling the future. People were saying how can a business be worth that [without existing revenue]?" He says. The reality is that Xero's growth will probably be slow and steady until accountants and small and medium-sized businesses begin to understand how the internet model of delivering accounting software can help them
"We'll have to educate the market and I think we'll go through some dark days," says Drury who aptly sums up what its like to head a publicly listed tech company.
"It's like having your balls hanging out 24-7."
