Monday, August 11, 2014

Planning for the IPO Transition

The IPO is a major transition for the company, because it significantly impacts three constituencies -- shareholders, employees and board.
Below are some suggestions for handling the three transitions:

Shareholders:  transition from private shareholders to public shareholders.
1) New public shareholders
     - Before the IPO road show, get to know each other.  The best investor due diligence is watching a company over time.
     - At the IPO, select right new public shareholder base with the right allocations and pricing.
     - After the IPO, continue to earn the public shareholders' support on a quarterly and long term basis.  Key factors are (i) the "consensus estimates," which becomes the street's financial plan for the company, and (ii) the company's strategic positioning, which impacts the company's long-term value.
2) Existing private shareholders.  Manage the overhang.
3) Develop a long term IR strategy to manage all shareholder needs.

Employees:  transition from equity/going public incentives to public company compensation.
1) Prior to the IPO, recruit new employees
2) Prior to the IPO, lock up existing employees
3) After the IPO, implement a public company compensation strategy.

Governance:  Transition from private company to public company compliance.
1) Implement public company finance, such as systems, processes, controls, reporting and risk management.
2) Implement public company board compliance, such as "independent" board members, active committees and many experts.

Transition:.
1) Take advantage of the new SEC rules (eg, JOBS act) permitting a phased transition to becoming a public company rather than the prior abrupt one.

Sunday, August 10, 2014

Korean Cool >> Global >> More Korean Unicorns

This is from Euny Hong's new book --  "The Birth of Korean Cool:  How One Nation is Conquering the World Through Pop Culture."

The Economist wrote an insightful review of her book, called "South Korea's soft power:  Soap, sparkle and pop":

"FROM 'Gangnam Style' and competitive electronic sports to kimchi-flavoured pot noodles, South Korea’s cultural exports are eagerly consumed around the world. Filipinos are hooked on its dramas. The French love its pop music and its films. Last year South Korea raked in $5 billion from its pop-culture exports. It has set its sights on doubling that by 2017....

Much has changed since 1985... [when the] country had no mods, rockers or hippies.  Dramas were 'provincial and tedious.'...  From this unpromising position South Korea managed to charge past Japan to become Asia's foremost trendsetter, and Ms Hong interviews superstars, chefs and cultural critics to discover why.  She finds that cool can be manufactured, up to a point.  South Korea's is a side-effect of the culture-exporting machine that was created at the end of the 20th century and has been nurtured by the government ever since...."


The success of Korean Cool played a key part in the success of Com2uS global business.  It provided the confidence and experience to pursue a global strategy -- despite the initial failures.

Success will lead to even more success.  

Golf is a good example.  Ms. Pak Se Ri's victory in the 1998 US Women's Golf Open triggered a huge Korean golf boom.  This resulted in 9 Korean female golfers winning 13 major LPGA championships.

Saturday, August 9, 2014

Com2uS -- a Korean Unicorn

Com2uS's market cap exceeded US$1.2 billion today -- making it a Korean unicorn.

We invested in Com2uS in 2005 believing that mobile games would be a great new category but worried that a Korean startup would have limited upside.  Many worry about the relatively small Korean market.  VC's generally don't raise this issue about Israeli startups, because of their ability to go global.

For the last quarter, Com2uS reported record revenues of $41.5 million USD (43 billion KRW) and profit of $13.5 million USD (14 billion KRW).  

Interestingly, 68% of revenues came from outside Korea.  Com2uS's games are succeeding globally.  For example, Summoners War: Sky Arena (an RPG game) made the Top 10 for top grossing apps in 34 countries on Google Play and in 30 countries on iOS.  “We were able to secure our presence in both major and emerging markets around the world with the global success of Summoners War and Ace Fishing,” said Baek Yong Choi, Com2uS CFO. “With offices in the US, Korea, Japan, and China, we plan to solidify ourselves as the global leader in mobile games by leveraging our user base and know-how with all our titles going forward.”

Congratulations Com2uS!!  Also for becoming a Korean startup role model.

Saturday, June 21, 2014

Thanking the early customers of MobileIron

At the MobileIron user conference, MobileIron and Storm Ventures thanked 12 individuals "for your belief and trust as a four year veteran of the MobileIron Global User Conference."  These early customers are absolutely critical for the company's success.  Being first with the startup -- whether as the first customers, first employees (ie the founders) or the first investors -- requires a huge amount of faith and trust.

Ajay and Suresh, cofounders of MobileIron, gave these awards to those 12 individuals.
On behalf of MobileIron and Storm Ventures, we thank those 12 long-term believers of MobileIron -- especially since the company now has over 6000 customers.

Thursday, June 19, 2014

First Teaching Customers (the right ones)


At our LP meeting, Ajay Mishra discussed how he targeted the right customers and partners (even before building the product) and then closed them.  Ajay did it first as cofounder of Airespace and then later as cofounder of MobileIron.

Ajay emphasized getting enough different perspectives (from different potential customer segments and different potential go-to-market partners), especially from outside the bay area.

In raising the first $500k financing Storm for MobileIron, Ajay showed the report card on the original 24 teaching customers and partners for Airespace.
Ajay followed the same formula with MobileIron.

Sunday, June 15, 2014

The MobileIron Journey


We achieved a major milestone in the startup journey last week with the IPO (NASDAQ:  MOBL).

Achieving this milestone required sacrifices and faith from many people – starting with Ajay leaving a secure position at Cisco to merely explore enterprise mobility as the first employee, then Suresh joining a "company" on faith as the second employee to design a yet undefined product, then Frank adding his considerable personal endorsement to the company as a board member (when the company had more board members than employees), then Bob leaving a large bonus at Cisco to join MobileIron as the third employee and cofounder (even with no commitment for a Series A financing), and then Gaurav and Matt financing a startup based solely on an idea and three employees.  The company recently added its 700th employee.

Even after the Series A financing, many people joined the MobileIron journey on faith -- whether as executives (such as Ojas, Jeff, John, Mike, Vittorio, Laurel, Todd and Sean) or investors (such as Paul, Norm, Brent, Frank, Jeff and Steve).  At the NASDAQ ceremony, I met our very first customer (now that definitively required faith in the MobileIron journey).

Getting to the IPO required many sacrifices and overcoming many obstacles.  After all, startups by definition are always out-manned, out-spent and out-gunned by the then larger competition. It resembles Henry V and the English army at the battle of Agincourt.  Despite being outnumbered 5:1 against the fresh French army, the English won and Shakespeare memorialized it in a play called Henry V.

For the IPO, many people (especially in finance, legal and marketing) sacrificed many late nights and weekends.  Even while celebrating the NASDAQ opening in NYC with their families, John and Jeff were constantly on the phone closing deals.  

In that spirit, I remember the countless sacrifices made by employees, investors and partners (and their families) for the sole purpose to help the company.  That spirit resulted in the IPO. That spirit leads to a great company.

Although a successful IPO is a huge milestone, it is just one milestone in the MobileIron startup journey.  Prior milestones include Incubation, Initial Customer Traction and Category leadership.

But, the MobileIron journey does not culminate with the IPO.  Rather, we just moved to the next level -- like going from the minor leagues to the major leagues.  I look forward to the next milestones in the MobileIron startup journey to becoming a great company.

Saturday, May 17, 2014

Analyzing Zendesk's Financing History


Since Zendesk just completed a successful IPO, I prepared this chart to understand Zendesk's financing history.  The chart compares Zendesk's financing history (as shown by the price per share of the newly issued preferred stock -- the red triangles) against the company's performance (as shown by annual revenues -- the green boxes).

Zendesk's company performance is amazing!  The company's revenues are growing exponentially.

Normally, we would expect a similar curve for the price per share of preferred stock.  The Late Stage Investors (Series C and Series D) clearly identified a great company.  The company has most likely met or exceeded expectations at the time of the Series C and D financing.  But, in hindsight, the valuation multiple was too high. The cause is obvious -- the public market valuation multiples for high growth software companies have declined by 50% in the last 60 days (drop in Valuation Multiples).  That's why i mentioned in a prior blog post that the late stage investors are truly experts in pricing (Late Stage Investors Resembling Sherlock Holmes).

Investing in hindsight is so easy.