Not all startups succeed after an ASX listing, but a few are thriving.
As I have argued many times in this column and can attest from personal experience: startups are hard work.
By definition, startups are fledgling organisations trying to change consumer behaviour, develop or disrupt entire industries, and do so on limited budgets.
But they come with scalable business models and technology, so can grow very fast and create enormous wealth if they light the blue touchpaper.
Until recently, in a Western Australian economy devoid of early stage venture capital but bursting with funds for public listings, some early stage tech companies have gone down the route of an ASX listing.
How have they fared?
In the table (right) I have selected 20 local tech companies that have gone public during the past 15 years.
As you can see, only four have a current share price higher than their listing price: Orthocell, Qoria (formerly Family Zone), PYC Therapeutics, and Argenica Therapeutics.
“We needed funding and venture funding wasn’t really around in WA at the scale we needed for what we were trying to achieve back in 2016,” Qoria chief executive Tim Levy told Business News.
Although share price is not the only measure of a company’s success – revenues, employee numbers, consumer satisfaction and impact with their products are also important – it will have to do.
Of the 20, two have been delisted or suspended from listing: the wearable tech firm Nuheara, and the online property auction system Openn Negotiation. Both listed in 2021.
Meanwhile, many more have lost nearly all their value since listing: Norwood Systems (-92 per cent); Intelicare (-95 per cent); Rent.com.au (-87 per cent); Wide Open Agriculture (-89 per cent); and Cycliq (-85 per cent).
Little Green Pharma (-73 per cent), RLF Agtech (-70 per cent), iCetana (-63 per cent) and Pointerra (-56 per cent) have also lost a majority of their value, even though iCetana has picked up of late.
So, it’s a been tough ride for most. Overall, if you’d invested $2,000 across all of them ($100 each on listing day), your portfolio would be underwater.
This may strike you as odd, because at listing time they each would have raised millions of dollars (far beyond the realm of the average startup), and have a strong story to tell. They would have an executive team with a track record, a competent board and the sound governance expected of the ASX.
“Capital is expensive, be it publicly or privately sourced,” Mr Levy said.
“The benefit of public listing is diversity of investors, liquidity. But also the regulated nature of it means trust is inherent and transacting is efficient.
“For example, capital raising can take a couple of days, not months like in private equity and venture capital worlds.
“My advice is don’t do it until you’re operating cash-flow positive. Capital markets punish you if they believe you need capital to survive.”
Indeed, life in the public eye is not easy. The ongoing compliance costs are significant. After the initial interest and publicity over the listing day, inevitably gravity sets in on the share price.
I would never advise a tech company to go public. Feeling your way in the goldfish bowl of a public-listed entity is not much fun.
There are plenty of impressive tech firms in WA that have grown substantial, scalable businesses without recourse to the ASX. Think Virtual Gaming Worlds, HealthEngine, Agworld, Picture Wealth, U Group and WeMoney.
The most impressive of all – Perth-born Canva – is still private, and worth north of $40 billion.
With the advent of some early stage venture firms setting up in WA (there should be seven here by year’s end) there is a growing pool of more than $150 million searching for deal flow.
While eight tech companies went public between 2020 and 2021, only two have since.
Perhaps the era of startups listing on the ASX is over.
• The author is a shareholder of iCetana, has spent 25 years in WA’s startup sector, is on the WA government’s Innovation Advisory Board, and is chair of Startup WA
