The days of the big exits are almost forgotten in the Israeli venture capital industry, but now and again something happens to bring home that the economic models on which venture capital is built are still with us. This time, the event is the secondary offering by shareholders in Swedish software house QlikTech (Nasdaq: QLIK), among them Israeli venture capital firm Jerusalem Venture Partners (JVP) on Friday.
The investors realized part of their holdings in QlikTech, selling 11.5 million shares for a total of $265 million. JVP, the second largest shareholder in the company after Accel Partners, sold 30% of its holding for $112 million, posting an unprecedented 4,000% return on its investment.
QlikTech was founded in 1993 as a software company in business intelligence (BI)), and raised a total of $30 million. JVP, run by founder and managing partner Erel Margalit, came to the company almost by chance. At the beginning of the decade, it was examining BI companies. It found that QlikTech matched the technological profile it was looking for, and that it sold its software only in Sweden. JVP, together with Accel, invested in QlikTech through its fourth fund in 2004, and became a partner in turning it into an international software house.
In July this year, QlikTech made its IPO. It had annual revenue of $207 million, but no profits. Since the IPO, the company has more than doubled its market cap, which now stands at $1.7 billion.
The secondary offering on Friday came at the end of the lock-up period after the IPO during which investors may not sell their shares, and it was over-subscribed. JVP raised the quantity of shares for sale by 21%, and in all sold 4.9 million shares for a total of $112 million, in addition to the exercise by the underwriters of their over-allotment rights, and at higher price than the target price. After the sale, JVP is still part of the controlling interest in the company, with a 15% stake, worth $260 million.
Margalit was surprised by the market's reaction: "This is the eleventh offering on Nasdaq I have been involved in, and nothing like this has ever happened to me. We are familiar with the dynamic. You release a prospectus with a high target price, and then the pressure on the share starts, and you don't reach the target. This time, the price was higher than in the prospectus. This is the first time I have been involved in an offering that closed at higher than the target price."
Who were the buyers?
"It was important to us to sell the shares to long-term investors. We didn't want investors to buy the shares to push up the price and then sell straightaway to make a quick killing, investors such as hedge funds, for example. We managed to allocate the shares to golden investors, such as Fidelity, which came in at the IPO and has now tripled its holding. We aimed at investors who would want to see the company grow."
QlikTech offers software that facilitates the exploitation of BI capabilities on an Internet platform. It has some 15,000 customers and 570,000 users in more than 100 countries. Among its largest customers are Canon, Deutsche Telekom, Panasonic, Mitsubishi, and Qualcomm.
How do you explain the success on Nasdaq of a software company from Europe?
"People see a company that is growing fast and offers something new. QlikTech puts enterprises on their feet, and people understand that."
What does it offer that's new? The world long ago gave up on software and on the ability of small companies to make waves in that world.
"I'm talking about the end of the era in which information belongs only to managers of enterprises. Sales come from below, and anyone who does not understand that there is going to be a revolution in enterprise software will miss out. Corporations need new thought paradigms in software. I think that the smart business community in enterprises is still in its infancy, and that it will yet grow."
Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2010
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