For many growing SMEs, taking a company to public listing (also known as IPO) is more than just raising capital.
It is an indication to the world that the business have made it. This is why numerous entrepreneurs long have the ultimate dream of going IPO - which can not only boost your business' abilities to expand into new markets, but also have an unofficial approval stamp of your business model.
This week's guest features Pamela Lim, a veteran entrepreneur who has "been there, done that", being the first Singaporean entrepreneur who managed to achieve dual-listing approval for NASDAQ and SGX at a market capaitlization of over S$1 billion.
In this interview, Pamela will walk through with you on the steps to taking your company to IPO.
SeedIn: Welcome everybody! Today, we have Pamela Lim joining us as one of our guests. Welcome Pamela! Hi!
SeedIn: Pamela comes from a very accomplished entrepreneurial background. She ran 3rd Frontier and she brought it almost a duo listing, but eventually she exited the business at about $600 million. Was that right?
Pamela: No, the $600 million actually is the valuation of the company. That was the market valuation of the company when we were about to list, but we sold the company not at $600 million, it had to be lower.
SeedIn: I see, it’s still a very accomplished result. A lot of other entrepreneurs look up to you for the accomplishments that you have achieved. Thank you so much for doing this interview with us. Let’s start off with a brief introduction of your entrepreneur story. Shall we?
Pamela: Okay, My entrepreneur journey started when I started my first company
We actually provide software to banks and stocks trading firms to operate their .com, we had customers like Citi Bank, OCBC, almost all the banks in Singapore that time. And we were the software provider.
In year 2000 which is 2 years after we started, we manage to get an approval for 1st level duo listing for NASDAQ and SGX. During that time it was quite rare for an Asian company to get that.
SeedIn: You were the 1st Singaporean company, right?
Pamela: Yes, to obtain the 1st level duo listing. The 1st company that actually managed to get duo listing is Creative, a Singaporean company. But they did a third-level listing, that means they got listed in US first, then they came back to Singapore to get listed again. We were the first to get both countries at the same time.
SeedIn: What is the second level? Just for curiosity.
Pamela: Actually, I don’t know. This was told to me by some NASDAQ people.
SeedIn: Why go IPO in the first place if it’s profitable and doing well?
Pamela: It opens a whole different market. Even now, to be successful in business, you need a lot of capital. I don’t know what’s it called now, but we call it "Warchest".
We were just not competing in Asia, we were competing with the world. In America in Silicon Valley we’re talking about millions and millions of dollars. If your profit is only 2 to 3 million dollars every year which is not a lot and you are competing with people with hundreds and millions of dollars, you can’t expand as fast.
Those days, we wanted to race. We tried to build on a different scale and a different manner. Without that kind of cash, you can’t do it.
SeedIn: Going IPO you need to have that capital, do you also have partners? What if your partner says "I don’t want to go IPO". Did you encounter such things?
Pamela: At that time, I was the CEO and majority of shareholder. What happened was at that time, because it was so early, we had very little dilution or other players in the company.
SeedIn: Did the other partners and stakeholders also agree to the IPO?
Pamela: There were two of us, it was just me and CTO. He’s too busy
The process for me, I don’t know if other companies do the same, it would be quite different because I didn’t go through with the rest of the round like other people. For me, I started the company, became profitable, made it fast to expand to different countries and I decided to go IPO.
At the time we decided to go IPO, we only have two shareholders in the company. We didn't have VCs, angels or anybody, so I made the decsion.
SeedIn: Is this going after the approval stage or before?
Pamela: No, just the time we started the IPO.
SeedIn: I see, Okay.
Pamela: They were not brought in. It’s not like a VC that was with you all the while then go IPO. It’s like I need to go IPO now. But back then, my name is not good enough, so let’s find somebody else. A lot of people came. We had 11 term sheets, and I decided on one and that’s the only thing they did with us, IPO.
SeedIn: When choosing a VC fund helping you with this whole IPO process, could you describe a little bit more. From the time the company wants to go IPO, from the time of decision, what are the steps if you’re going to IPO?
Pamela: If you want to go IPO first of all, your accounts should be shipshape, right?
SeedIn: Right. So first step, you need to make sure that your accounts are clean.
Pamela: Yes. You need to have a good auditor like one of the big 4 to come in and clean your account. You need to get lawyers and of course investment banker. Those are the people.
SeedIn: Investment bankers, okay.
Pamela: Of course you have the printers and all the other stuffs these will come later and naturally. The most important I think would be the auditor.
SeedIn: The first thing is, which stage should consider a company growing?
Pamela: For me, I knew I was going IPO the day I started the company
SeedIn: For other companies, let’s say they are mid-size and they are maybe doing few milion, in top line and bottom line maybe doing 1 million or 2 million somewhere there. A lot of business owners think that may not be big enough. What size must they be in your experience to be worthy of the IPO?
Pamela: Different people have different views. Ultimately, it’s what your story is. What your potential is and what your history is. The people or investors buying into your future, of course they will look at your past as reference. When I first started a company I knew that, the moment I start right, if I declare that start right, my past must be exponential.
SeedIn: Exponential growth otherwise.
Pamela: Exponential growth, if you don’t experience exponential growth from the day you start, then that becomes your history. People judge you by history. If your history is a gentle one person will think that you’ll be gentle forever.
If your course is an exponential one, then people are expecting that your course will be exponential forever. So you want to put yourself on the exponential curve when you start. There’s no number on how many million are you going to make, it’s more on what can you promise and you can bag your promise of what has been done in your track records.
SeedIn: How should one be doing this in a very brief way? What kind of story should they pin?
Pamela: I think it depends on which industry are you in. Let’s talk about IT industry. IT industry is moving very fast.
What kind of products do you have and how will you push it in the market? What are you going to use the money for? If I’m going to invest in your company, I want to know, what are you going to use my money for? So, do you have that story? You know, I’m going to use some money to do this, it’s going to grow for how many times. So, do you have a story and how are you going to use it? Where are you going to send it to? That will be your story. Why would people invest in you?
SeedIn: Some business owners just want to get rich. If that’s the case, if that’s the reason they are going to IPO, what would you say to such people?
Pamela: Firstly, if you IPO there is no guarantee that you can exit completely. Most investment bankers, I’m not familiar with Singapore, because when I did my listing, I just follow everything. The rules to remember would be more NASDAQ rules.
I think Singapore is the same, some banker may not agree. To be able to cash out during the IPO may not be possible. However, by listing your company on IPO or a board you’ll get liquidity on you. It means there’s a market for it.
If you’re private company, you cannot sell your shares just like that. As long there’s a public market, you have a place to sell it. Can you imagine if Bill Gates will say, I will sell how many percent of the stock of Microsoft! What’s going to happen to the future price?
SeedIn: Yeah, it’s going to grow up.
Pamela: You’ll go down.
SeedIn: You mean if he wants to sell it for personal gain.
SeedIn: if you’re going to sell for personal gain, then you’ll go down.
Pamela: yes, who’s going to buy your shares right? People might be tough, he knows something that we don’t know that’s why he’s selling his shares. You need to consider all these if you think you’re going to be rick with
SeedIn: Tell us more about the VC fund. You’re helping other business to get listings. Please do share.
Pamela: We decided to set up a fund, an equity fund. Our main aim is to do
We feel that is what lacking in Asia. Only a few companies move from growth to an established one. That’s why we start a fund for those companies who want bigger exposure and credibility.
SeedIn: During the six months, can you walk us through a little bit of what happened during the six months like what do you do, what do you wait for, and all that?
Pamela: First thing you need is a prospect first right, so you stand by the lawyer. For us, we have to write for both NASDAQ and SGX, so there are two sets of lawyers.
I think these days we can do for half or maybe two or three hundred thousand in just one exchange right, the printing itself of a number is being just two hundred thousand dollars “Just the Printing”. It’s the whole process in managing the printing and those days is not as advance now right so we have a certain listing printers so the price have saved you. It’s not just a printing black and white is a whole process in managing your document.
SeedIn: Ok, let’s go back into the six months, so come at the prospectus is one thing so what’s next after that?
Pamela: So imagine you’re asking a lawyer write your prospectors, how much must you tell him? A lot. He has the right because he is part of the company so you can imagine you to educate him first and it’s a very long process.
We talk about almost like twice a week in a meeting and very often goes into midnight you know, yeah its tough and then you have all the details already, already, already, already I don’t know why so many times on the accounts and there’s a lot. And then as you progress after a month your numbers are still moving you know so you must be a shape shifter because it’s a very serious process, in fact during those times I gave birth to my fourth kid.
SeedIn: Oh no! So how did you manage?
Pamela: The next day after I gave birth I had to go back to the office and its already process and it was tough yeah.
SeedIn: Balancing everything, so on top of that the three kids, and the fourth kid making sure their business run and then eye peeling the company is like three jobs if not more at going once.
Pamela: Yes, and the same time while doing this time you know I’m not sure how escape it is and you’re not supposed to talk about the IPO but at the same time you must be visible so people know when you come and sell yours, you need to do showing, you need to sell your and you need a lot of visibility at that time, you need to go overseas a lot to tie up, to do your shows, To make your talks, but without telling people you’re going IPO.
SeedIn: So tell me about, the experience you’re going to raise awareness about the company what do you among investors? But was the message like what do you say?
Pamela: You needed to say about the company first of all I went to some area that’s very new right, can you imagine in 1990’s people are trading, buying, selling stuff and it’s not even common today and those days is really new and people is interested to know what kind of technology is it and we were doing more voice and electronics.
The means of voice into trading in those days right, which is very advance right, so people want to see about it and people want to get know if you get investment banker involve and were talking about Nextstop Investment Banker right and you’re in a photo they get you involve, they organize conferences you are there and the fact that you are there people know your somebody and everybody wants to network with you so naturally you will get a bigger and bigger circle.
SeedIn: Were jumping all around the place, but you mentioned one point about while going IPO you need to have a certain kind of story, past track record. Neo group the catering company that listed in Singapore a few years ago ah, I don’t remember what exactly was their story, but they tried to record, they margins wise, they were making a loose but they still managed to go IPO, is it revenue numbers more important or is it more?
Pamela: No, you need to sit down and look at your own company right and think what is best for yourself.
SeedIn: I see ok, and that’s why they need advices like yourself because looking at strategy they think from inside out, but if they have a third person perspective of like your VC fund, for example where you help other company is called IPO then you will be more familiar with the whole IPO process, what’s a good strategy for the company?
Pamela: Yeah, honestly, if you want to IPO and you don’t have the strategy rather don’t because if you just think you want the IPO for the sake of I don’t know beyond your reach if it doesn’t work you must support the needs and you have a plan for the company. You need cash to realize that planning it makes a lot of sense.
Why? We just want to become rich that’s why we want to go IPO and there’s no reason to go IPO because you can get right without going IPO so really what is your plan? So for a company who wants to go IPO, I have a separately to fulfill an IPO fits in so let’s say I have this strategy and I need let say two hundred million dollars to get there.
There are many ways to raise two hundred million dollars, I can go and borrow from friends, banks, sell equity/private equity, or I can go public and these are the few ways. All of them are very easy and each one must be considered before you jump on and go IPO.
And everyone has his own merit and even borrowing money from your parents has its own merit and IPO definitely has his own merit and it comes with its cons as well. The key is to sit down and consider all of these things and decide which the best is for you and at the end of the day if it’s still IPO and honestly I feel it’s not difficult.
This is the best way for me and I know all the people and I still want to go forward, then there’s always a way to do it. There are so many roads to IPO is just people don’t know about them.
SeedIn: What are some roads to go in IPO since you mentioned that there are many different roads?
Pamela: Of course, there’s a bad value thing, there’s a reverse listing then there’s also swap shares to become a lister. I can’t think of all of them right now.
SeedIn: Well, I think Parenial did a reverse listing
Pamela: But it really depends what is the reason for wanting to leave the scene and if you to the subject or the company that’s going to let you do the reverse takeover, the company that you want to take over must have the right attributes for you or it becomes a conflict.
SeedIn: As a parting note, what advice would you give to someone that is considering an IPO as one of the many ways of raise funding?
Pamela: Never close your door, I started my IPO process six months after I started my company and it is very early. Then I started during my business according to that plan, most people don’t do that, most people come to a point where people say “How about IPO?” then they started thinking and a lot of times it takes too long to get to that point.
My belief is that “If you ever think of it just sits down and plan for it” and see if it makes sense and if it doesn’t ok, just put it on the backbone and found out after a few years, but don’t close the door before you even look at it, that’s my belief and you will always look at it first and if it’s not possible now six months later I need to know what I need to do to get there.
So I was told when I first started my IPO process in 1999 so I started the business in 1998. 1999 I started looking IPO seriously and the first thing I did was to get the auditors in place and then everything else started to go and then we know we bringing the lawyers, everybody, accounting and then we had a kick off meeting and started from there.
Then people would start telling you on what to do and one of those things I was told to do from the very early of my business was I need to go the company 25% bottom line and top line. I knew that from the moment I started my business I was growing the company at 25% per quarter.
You need to have a target so that you go for it and you move very quickly otherwise you will always walk like a zombie so that’s how I deal with things.
SeedIn: That’s what they say you need to always start at the end in line and you obviously started from the end and you wanted to go IPO, when you started you didn’t have a plan on going to IPO but you knew that that’s their intention so you move around.
Pamela: No, I was very clear, I want the IPO and just that and I was very clear I would be the first one
SeedIn: Nice and then you went there and you got their approval just that slightly before you went ahead to do the road show of the IPO somebody offered you.
Pamela: Yes, we got bought up so the thing is that’s how I believe things should be done know what you want and if you know what you want just plan for it. Today is fine, but tomorrow you can’t do it again so you must have a plan for tomorrow.
SeedIn: Pam, thank you so much for doing this interview and I think I got quite a lot of notes and yes, it’s extremely helpful not just for the listeners and we got a lot of answers because SeedIn they are also planning something big as well. Thanks a lot Pamela cheers!
Pamela: You’re welcome