Start-up company Noosh, founded by Ofer Ben-Shachar, has closed branches and laid off some 50 employees, a quarter of its workforce, "Globes" has learnt. In May, the company withdrew a draft issue prospectus it had filed with Nasdaq, explaining the step as due to "unsuitable market conditions". At the high end of the intended price range of $11-13 per share, the flotation would have raised $52 million at a company value of $450 million after money.
Noosh was founded in 1998. Until recently, it employed about 200 people. It has developed a kind of station for managing communications projects via the Internet. The service is aimed at organizations. It includes printing, packaging, production of electronic media, and direct mailing. Customers include insurance giant Aetna, Bank of America, General Electric, and Wells Fargo.
So far, the company ha s raised $88 million in private placements. Investors include the ATV fund, the Accel fund, Ricoh, and GE Capital.
Dave Hannebrink, Senior Vice President of Marketing and Business Development, told "globes" in response, "The reason for the layoffs is that we have decided to focus on large customers, and therefore we didn’t need all of our sales force. I’m not prepared to say how many people we laid off, I know they said between 40 and 50. I can say that’s not far from the truth. But we have not laid off any development or support people. The company is not in difficulties.
At the end of March we had $59 million in cash, so that we did not need to raise money from the public. E wanted to exploit the opportunity there was in the market. Today we have a turnover of $1 million per week, and 150 customers. We withdrew the draft prospectus because market conditions were not good.
In the private financing round we held in April, the market was at its highest, and our value was 4500 million. We have a huge agreement with GE, which is also invested in us. That company spends $1 billion on printing a year, and we have an agreement with them for $600 million of that. We decided not to spend money on building a brand. We have already reached a good enough position in the market."
Globes: Why cancel the flotation, and not postpone it?
Hannebrink: "There are all kinds of rules that apply to you while you are waiting. Now we can again behave like a private company.
If you really have an agreement worth $600 million a year with GE, you could surely obtain an excellent value, despite market conditions.
"The B2B market has taken a heavy blow in the US. It lost two thirds of its value, and is only now beginning to recover."
But that affects companies without profits. You say you have a very substantial cash flow.
"We think we can be profitable within a short time. We can always go back to the stock exchange, and this time quickly, because most of the work has already been done."
Published by Israel's Business Arena on July 18, 2000