Rather than rely on VCs, startup goes public in Australia

To heck with venture capitalists! Okay, Joanna Weidenmiller, the CEO and co-founder of 1 Page Limited didn’t exactly use those words during our recent chat about her software firm, which helps companies move beyond resumes and LinkedIn profiles when evaluating talent.

But the phrase does neatly sum up the evolution of 1 Page from your typical VC-backed San Francisco startup to a rare American technology stock on the ASX, Australia’s fledgling stock exchange.

Over the objection of some investors, Weidenmiller recently decided to list her company as a penny stock on the ASX, eschewing the traditional VC timeline of funding and exiting startups in favor of a second-tier exchange that could provide faster market validation (and lots of cash) to a business that began just two years ago.

A failed IPO would have perhaps irrevocably damaged the company’s chances of one day being listed on Nasdaq, Weidenmiller’s ultimate goal. But her huge gamble paid off: the company raised a higher-than-expected $8.5 million from its August IPO.

Since then, 1 Page’s stock has more than doubled to over 70 cents per share. In doing so, Weidenmiller believes, she has forged a new financing model for Silicon Valley startups.

'Nasdaq and beyond’

“You don’t walk into a VC office and say I want to have a big IPO ... they think that’s a joke,” she said. By contrast, the institutional investors that subscribed to her IPO “want me to go all the way to Nasdaq and beyond.”

1 Page’s listing on ASX reflects a general flight of companies from U.S. exchanges over the past two decades. From 1991 to 2008, the number of companies listed on the major American exchanges fell 22.2 percent, according to a report by Grant Thornton.

“There is a depression in U.S. stock markets, evidenced by the precipitous decline in the number of publicly listed companies,” the report said. “This is not a global phenomenon; the United States is seriously lagging other industrialized nations in the formation of such listed companies.”

VCs make money when a startup gets sold or goes public, though the latter takes longer and must go through a gauntlet of regulation by securities officials. In 2010, it took companies a median time of eight years to go public, about twice as long as it did before the Internet bust of the early 2000s.

Thanks to a strong stock market, the median time to IPO dropped to 6.8 years last year. Startups, especially biotech firms, are increasingly listing on Nasdaq. But software companies still face a more difficult path to IPO, said Joel Rubinstein, chair of the capital markets practice at McDermott Will & Emery law firm in New York.

You can hardly blame a VC for choosing a quicker payday from selling a startup rather than waiting several years for an IPO that could ultimately flop. VCs need to answer to their investors too, so an exit through acquisition looks good — at least on paper.

Weidenmiller always wanted to take her company public. Along with her father, Patrick Riley, she founded 1 Page in 2011 based on Riley’s best-selling book “The One Page Proposal.” Instead of employers scouring through resumes and references, 1 Page’s software allows companies to evaluate and score candidates based on how they solve business problems.

For example, an apparel retailer looking to expand into China might ask a candidate to submit a one-page plan on how to devise a marketing plan that appeals to local tastes but still offers the cachet of Western brands.

Weidenmiller learned about ASX from her husband, a venture capitalist. ASX has been attracting a growing number of tech startups in Asia, who assume the ticker symbols of defunct mining companies on the exchange.

Rigor, transparency

Critics, including some VCs, say these exchanges don’t offer the same rigor and transparency as their more established counterparts in the United States and Europe. Unless a company has a “good story to tell,” some investors might shy away from a company that chose to list on a foreign exchange instead of the United States, Rubenstein said.

Moreover, if companies fail to execute a successful IPO or meet sales and profit goals afterward, they are stuck in financial purgatory, unable to return to private financing and burdened with a weak share price on a cut-rate foreign exchange.

“It’s suicide if you don’t hit your numbers,” Weidenmiller said. “If you don’t hit your numbers, you will compromise your company so much by going down this road.”

Fortunately for Weidenmiller, 1 Page attracted more than enough investors through its IPO. As a result, the company was able to buy out several early investors; 1 Page had previously raised $3.3 million from several VC firms including Satori Capital Georgetown Angels, Blumberg Capital and TMT Investments. Last week, 1 Page announced its first acquisition: $2.2 million in cash plus 7.5 million 1 Page shares to acquire some of the assets of BranchOut Inc., a professional social network startup in San Francisco.

Deborah Hewitt, a graduate professor of economics and international finance at the College of William & Mary, said companies often find it easier to list on Asian exchanges. Countries like Singapore and Australia have been eager to woo new businesses and offer investor money to foreign companies that might not be available in the United States.

And companies like 1 Page can eventually be listed on both the ASX and Nasdaq, she said.

“You can raise more money that way,” Hewitt said. “It allows companies to tap into other pools of money.”

Weidenmiller listed on ASX for other reasons. She believes 1 Page has growth prospects in Asia, so it makes sense to list on an Asian exchange.

“American companies tend to build their businesses for America and then they try to launch into an Asian country,” said Weidenmiller, who worked for several years in Shanghai. “For us, by being listed in Asia, we’ve built (our Asian presence) from the beginning.”

She also sees ASX a good training ground to prove its mettle as a publicly traded company before eventually moving to Nasdaq — which remains her goal.

“The world tells you your valuation, not VCs, whose valuations are more art than science,” Weidenmiller said. “We’re a still very young company. An exit is a big deal.”