Ceccarelli Let’s not forget though that private equity funds play a major role themselves in IPOs, which create an exit option for them. Half of the entire European IPO volume from 2014 through 2016 was backed by private equity. The 2016 IPO of VAT and the 2015 IPO of Sunrise on the Swiss Exchange are two examples.
Weber However, smaller companies, and especially companies in the start-up or development stage that are not yet ready to go public, need alternative sources of funding. We at investiere.ch, for instance, enable select privately held companies to efficiently access capital and a network of investors via our platform.
So, is the choice of means primarily determined by the amount of capital needed?
Ceccarelli Yes and no, because raising capital is only one of the reasons why companies go public. An initial public offering is much more than just a one-time opportunity to raise capital. A company that is already listed on a stock exchange can easily raise additional capital. A listed company’s stock also gives companies a liquid currency that can be used to fund inorganic expansion. Listed companies are able to attract leading talent, for example by offering employee share plans. Another reason for going public is publicity. A stock exchange listing can strengthen a brand, and makea company appear more open and credible in the eyes of customers and suppliers. That can help a company to stand out from competitors or to enter new markets.
Weber We obviously can’t keep pace with a stock exchange where publicity is concerned. Nevertheless, we do influence the visibility of start-up companies when we add them to our portfolio. There are important trust factors in the search for venture capital: Who has already invested? Who is investing in the current financing round? The credibility of the investment increases with each new investor. After seven years in operation, we’ve built a good reputation with investiere.ch. We have strict rules that determine who we want to join forces with. We examine more than 1,000 companies each year, but present only 15 to 20 of them to our community. A commitment from us builds confidence and may attract other investors.
Ceccarelli We also are committed to enhance the visibility of small and midsized companies – and thus potentially enhance their trading liquidity on the market – through special programs like Stage.
Which brings us to liquidity.
Weber Venture capital is very illiquid. Our investors want to shepherd a company over a lengthy period. In contrast to classical investment funds that are captive to their cycles, we remain flexible. It’s not about flipping shares that have just been acquired. From a company’s perspective, the possibility of trading shares would actually cause considerable uncertainty. How can additional financial backers be enticed on board if some shareholders are already selling their stakes, perhaps even at sharply reduced prices? That would also harm the aforementioned reputation of our community.
Ceccarelli Stock exchanges, of course, have always allowed securities to be bought and sold, also after the initial raising of capital. And they are open to everybody, regardless of one’s budget. There’s a touch of irony in the fact that stock exchanges remain the measure of all things in the democratization of stock ownership.