Is it time for more Irish tech firms to go the IPO route?

25 Mar 2019

Fearless Girl statue, Wall Street. Image: MichaelFitzsimmons/Depositphotos

Many Irish tech companies are ripe for going public via IPO. What’s stopping them? John Kennedy outlines the potential rewards to be reaped.

The first time I met Peter Keeling was for a coffee in our local Dublin pub, Arthur’s, a few years ago and he told me about how his company’s data science technology was playing a key role in the search for life-saving drugs and treatments for cancer.

Little did I think that three years later, on Thursday of last week (21 March), the CEO of Dundalk and Belfast life sciences firm Diaceutics would be describing the proud moment the company went public that morning.

‘This is a story of our employees as well as our business mission’

Future Human

He said it was electric. “All the folk on the London Stock Exchange lip-read your countdown. All your data pops up on the giant screen and you wait to see what’s the opening price. We listed the stock at 76p and it opened at 92p. It’s hovering at the £1 mark,” he said, his voice trembling with excitement.

The company, which currently works with 20 out of the world’s 30 biggest pharmaceutical manufacturers and whose biomarker technology helps cancer patients potentially gain access to the correct drugs, raised £17m (€19.5m) on day one with a market cap of £53m.

It is the fourth Northern Ireland tech firm to go public after First Derivatives, Fusion Antibodies and Kainos.

Waterford-based virtual-reality (VR) player VR Education listed on the London and Irish stock exchanges last March, raising £6m in the process.

It is perhaps the most activity on the initial public offering (IPO) front we’ve witnessed in a long time and begs the question: why don’t more Irish tech firms IPO?

The next big step

A man and a woman stand beside another woman wearing a VR headset with a red background.

VR Education founders David and Sandra Whelan with a VR demonstrator (centre). Image: Shane O’Neill, SON Photographic

One of our highest-profile tech firms on the public markets was formerly New York Stock Exchange-listed Fleetmatics, which was acquired by US telecoms giant Verizon in 2016 for $2.4bn. Not bad for a company founded above a newsagent shop in Templeogue in 2004.

However, apart from these examples, Ireland has never quite fielded the same numbers of tech IPOs since before the dot-com crash of 2000 when so much seemed possible, when Dublin players such as Trintech, Baltimore and Iona strode the global markets for an all-too brief period of time.

The trickle of IPOs out of Ireland pales in comparison with Israel, which has the third highest number of companies listed on the US Nasdaq exchange after the US and China.

The argument that Israel has a giant military-industrial complex and Ireland does not is a cop-out. Ireland has more than four decades of uninterrupted investment by US tech giants, creating legions of seasoned and globalised executives, a strong entrepreneurial cohort, and a considerable number of large and mid-sized tech firms that have for too long been playing it safe.

And there is a new generation that is bursting with potential.

We have companies such as Cork’s Teamwork, which has traded profitably from day one without needing to raise any cash and is growing in a stellar way. We have companies such as Intercom, which was founded in San Francisco but is a respected tech brand headed by an Irish leadership team, is a big employer in Dublin and is currently valued north of $1bn. It feels ripe for an IPO. There are also companies such as Limerick’s AMCS, which has developed a compelling product story, is extremely well funded and could be ready for the next big step.

And don’t forget there is Stripe, a San Francisco payments company founded by Irish brothers Patrick and John Collison that is currently valued at more than $22bn. Market watchers in the US are eagerly anticipating a Stripe IPO although its founders are keeping their lips sealed.

To IPO or not to IPO?

Drug analytics player Diaceutics announces 30 new jobs

From left: Philip White, CFO, with Peter Keeling, CEO, Diaceutics. Image: Kevin Boyes/Press Eye

When firms IPO, they need to take this next step not only for their investors and shareholders – or the liquidity to enable them to expand through acquisitions, for example – but for their employees to share in the growth story.

As Diaceutics’ Peter Keeling came to terms with his company’s first outing on the public market, I asked him if he believes there are more Irish tech firms of scale that should be going public.

“I absolutely do. If we think of the evolution of the entrepreneurial environment over the last decade, we’ve had the arrival of decent venture capital (VC) and private equity. I think there’s a missing element here, and the missing element is the willingness and leadership to take companies on to the public markets. And I think there are different benefits of the public versus the VC route – for us, we hadn’t brought any VC on board. This is our first equity raise, which is perhaps somewhat unusual given the fact that we are 12 years in business, but it makes a lot of sense for us because it allowed us to continue our mission and not be diverted by perhaps the needs of a venture capitalist to drive up the value of the company quickly and then exit.

“We are trying to build towards this long-term mission of really building leadership in this space. So, the public markets for us really make a difference. Maybe the best way to answer the question is: ‘Should more of them do it?’ Yes. But it doesn’t fit everybody.”

The benefits to going public are pragmatic. “We are serving 20 of the world’s biggest pharmaceutical companies. They are in a regulated and public market space, and the first thing we want to be able to do is stand toe to toe with them as bigger projects emerge. Our market is at a tipping point and in the next three to four years our market will quadruple. If we had to go out on the road and raise VC when the opportunity to grow arises, it [would take] time and the opportunity could be lost. It is also a way of saying that we want to take the market leadership, which we do. It sends out that message.”

But, crucially, it is about people. “There are 46 employees who are owners of the business and we will continue to expand that. This is a story of our employees as well as our business mission. And, for them to look and see the value of their input into the company, not just in my nice words to them but in terms of their input driving up the value of the business and their ownership in the business, I hope that has an impact. Speaking to others who have done this, it has a real impact.”

The IPO is not a holy grail. It is not for every company. It is certainly risky. But if you have reached a certain scale and market velocity, it is a practical way of saying to the world – your customers, partners and employees – that you believe in your products and you are ready for the next step. It gives you currency to do more things to take your company to the next level.

If our tech industry is indeed mature and can stand toe to toe with the best in the world, then it is time to get on that stage and damn well swagger. If you are ready.

Fearless Girl statue, Wall Street. Image: MichaelFitzsimmons/Depositphotos

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years