Business Management

Emotion, graft and focus: Inside a tech IPO

The Israel-headquartered security software company CyberArk recently celebrated the first anniversary of its September 2014 initial public offering – the day when shares are traded for the first time. The art of the IPO is much discussed: how you price the company, who owns institutional stock, and how you tell your tale. And then the real work of how you persuade the markets that you are going to be around, and growing, for the long-term.

Despite the initial excitement, not many people know what goes on behind the scenes of a floatation. I spoke to CyberArk CEO Udi Mokady about the experience.

Mokady, who co-founded the company as a “digital vault” for critical data, says he is happy with progress so far on the tech-heavy NASDAQ exchange but believes his company is “just getting started.”

Despite this focus on the present and future, he recalls the day of the IPO and the build up to it with clarity.

“It’s like drinking from the firehose, as the Americans say… every day is like three weeks. But the CFO had done it before so for everything on the procedural side we had experience.”

Like many modern CEOs, Mokady dislikes the term “exit” for an IPO, with its implications of having completed a project. He even told an organiser to change the word when he was presenting at an event, having seen a ‘From startup to exit’ sign.

“They changed it to ‘From startup to IPO’. It’s a potential exit for investors and there is something in that, but really it’s a change of tier. There was more credibility and awareness – it was a new stage.”

A different approach

CyberArk, 15 years old when it had its IPO, was quite distinct from many modern tech floats where companies are focused on growing revenues and often defer profitability for many years.

“We were a mature company and people were shocked when we walked in and said we had been profitable for three or four years. We said we wanted to run a real business. The year prior, the investment bankers came and said, ‘Oh, you’re profitable, why would you be profitable?’ Now I meet them and they say, ‘Oh, the world has changed: being profitable you get so much more credibility.’”

The roadshow, when companies attempt to impress potential institutional investors in the run-up to floating, was challenging, and Mokady says he felt like a character in a reality TV show or a sportsman training for a big event.

“I think of it athletically,” he says. “Every morning started with a call to European investors and [I had the attitude of] ‘bring it on, we’re on a mission’. Eleven cities and meetings from dusk to dawn. Very early on it was physically very hard: meetings and meetings and meetings. You’re answering questions and you’re not sure if you’ve already answered that question in that meeting or the prior one.”

Mokady says that there was pressure but he didn’t react to it in a negative way. He quips that his wife always knew that he was wedded to the business but only asked that he ensured he had other time dedicated to family.

On the eve of flotation, are there sweaty palms?

“The beginning of the IPO, you’re definitely nervous. You’re about to float and you don’t know how you are going to be accepted. On the day there is relief, excitement…”

There was no ringing the virtual bell as sometimes happens for market debutants but there was an opening ceremony. As the first trades were made in CyberArk stock he had a brief moment to put what was happening into perspective.

 “We IPO’ed on a Thursday morning and I was just eager to be back with my team and my family. My wife and kids had come down to watch the ceremony but maybe symbolic of what was to lie ahead was that I was taken by our PR team to meet journalists. But in the evening we had the whole team there and we had a few drinks. There was no party but there was definitely raising a toast.”

Some emotion after what must have been an emotional time?

“No tears but a lot of hugs, a lot of embracing and high-fiving. I wasn’t just thinking about myself but my team and a lot of them had been there for a long time or even from the beginning.”

The stock did well on opening, effectively doubling in value on the opening day, and the flipside of this is that sometimes there’s a perception that the company has “left money on the table” by underrating itself.

“I didn’t feel it and then I looked to my left and right and they were all pleased and understanding that you want to get a successful IPO even if people from the side-lines feel you could have optimised the gain. I got emails from all the way around the world congratulating me.”

Preparation and perspectives

Mokady had prepared for life as a public-company CEO by speaking to two of them to gauge how life would change.

“I got different perspectives,” he recalls. “One was very cynical and talked about the life of [financial] reporting, and the other one was more in tune with my mind-set that this is a great platform.”

What about the supporting cast, I ask. VCs and investors have long had a shark-like reputation, bolstered by TV shows like Silicon Valley and the movie industry’s recent interest in how the modern technology business was created.

“It’s very different from what would be portrayed in Hollywood, partly because you self-select,” he says. “You get this bake-off and all of them we knew from way back. And that would be my advice: to get their personalities, have a sushi dinner or a beer. It wasn’t the classic world of Wall Street. They were very professional and they at least seemed to like us. They were very low maintenance and that’s us: very low maintenance, get to meetings and do our best. We also had great lawyers and an accounting firm has been with us for many years.”

Any surprises along the way?

“The one surprising thing is very basic: there’s a build-up into the roadshow and it is very intense but when you dissect it they’re just investment meetings. Some of the mythology can be dumbed down and there was not an inch of the business they could ask about that I didn’t personally get involved with.”

Mokady didn’t receive any formal training on dealing with the media or analysts as a public CEO, nor did he attempt to create some cinematic narrative arc as so many companies do, although he says he did have to think about filings and presentation of plans. Telling CyberArk’s tale came naturally as there was a demonstrable tale of success, though.

“We thought differently,” he says. “Everyone was building doors [via perimeter security software architectures] and we built vaults. It was a genuinely exciting story and we were selling to visionaries.”

A year on, CyberArk’s shares have swung around a fair bit, reaching as high as $76 and dipping as low as under $28. As I write this, they sit at about their midpoint, making the company “worth” about $1.6bn. But Mokady says he tries not to get diverted by the froth that can sometimes bubble up.

“All you can do is execute,” he says. “I was pleased in all our [quarterly fiscal] reporting and I coached myself to think long-term. Our employees get it and see I’m in a good mood and focused [regardless of price movements]. It can be frustrating: once in a while you see a story that doesn’t understand how the market [that CyberArk plays in] operates. We’re in a new market and you can’t understand it by backward-looking reports. Or sometimes people read something into really minute things when we’re telling a very true and solid business story.”

Being a public CEO tends to lead to fame of a kind and Mokady has become a regular commentator on security matters but says it’s part and parcel of the job and he appears to have zero desire to be the fast-talking CEO of cliché, forever attempting to get an angle for his company.

“What I like to be is kind of an expert in information security so the type of things I do on national media is to talk about these things. I can talk about Udi but I’m actually talking about CyberArk. It’s funny because investors always ask me do I get phone calls after a breach and I say CyberArk is not an ambulance-chasing business.”

His focus remains on building a company that will deliver value to customers and he looks more at what’s going on in the busy infosec world than at the nonstop moving needle of stock charts.

“Hackers will have motivation for many years,” he says. “I think it’s going to remain to be something where our grandkids will be kept busy.”


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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