06.19.2017 Australian Financial Review
BigCommerce plays IPO long game as revenue passes $100 million
The chief executive of Australian-founded e-commerce software company BigCommerce has outlined a long-term plan to take the company public, after it crashed through the symbolically important $100 million annual revenue milestone.
US-based CEO Brent Bellm said an initial public offering remained some time in the future, despite earlier expectations that it would list shortly after he took over the running of the company from Aussie co-founders Eddie Machaalani and Mitchell Harper in mid-2015.
He said the company was currently well-capitalised to achieve profitability after it raised a $41 million round last year, but would need to raise one more round of capital as a private company before it looked to go public.
It doesn't publicly disclose its financial performance, but Mr Bellm said it had recently broken through the $100 million annualised revenue barrier and was still growing rapidly.
"The general rule when you IPO is that you're doing it because you're creating equity for more shareholders, rather than raising money needed to run the company, and you should always go into an IPO process with a big and healthy balance sheet, with an excess of cash," Mr Bellm said.
"My career has been spent running, for the most part, public and very profitable companies, and my aspiration is to make us a public and very profitable company too."
The company is now based in Austin, Texas, but remains closely watched in Australia because of the rapid growth achieved by its Sydney-based founders Mitchell Harper and Eddie Machaalani, who started the company in 2009. It still has a significant local presence with both engineering and sales operations, but like fellow local success story Campaign Monitor its founders no longer run the company.
Mr Harper stepped back from day-to-day involvement with BigCommerce when the pair decided to hire Mr Bellm and now advises other start-ups on how to grow quickly.
Mr Machaalani had taken on the executive chairman role, however The Australian Financial Review can reveal that he relinquished that position to Mr Bellm at the end of 2016. Both remain as non-executive directors.
Mr Bellm said the founders deserved great acclaim for having created a platform that had become one of only three truly important global e-commerce platforms in a sector that was incredibly competitive. BigCommerce sells a software-as-a-service (SaaS) product, which is used by predominantly small and medium-sized retailers to build, launch and manage online stores.
He said that, alongside BigCommerce, there was only two genuine rivals globally in Magento and Shopify. Another e-commerce platform, Demandware was acquired by Salesforce for $US2.8 billion in 2016, a deal that Mr Bellm said gave an indication of just how valuable these companies were.
"We're not profitable yet, but we're on a path to get there. And I note in that that the other two e-commerce platforms that are or once were publicly traded – Shopify and Demandware – to my knowledge, have never had a profitable quarter either," Mr Bellm said.
"What the market has made clear is that a globally-winning e-commerce platform – of which there are only a couple out of 500 contenders – is an extremely valuable asset."
Competition brings opportunity
Locally, Mr Bellm says the impending arrival of Amazon will be a boost for BigCommerce as it will increase the likelihood of local businesses increasing their focus on online selling. BigCommerce's platform is configured to enable its users to sell on Amazon as well as their own websites, and he said local retailers should see the opportunity for upside in its arrival.
He said stats in the US showed that while some larger, general merchandise sites suffered due to the dominance of Amazon, smaller and medium-sized retailers and specialised sellers were doing well online.
"Amazon should not be viewed, first and foremost, as the enemy by most sellers online, instead it should be viewed as an opportunity," Mr Bellm said.
"Retailers can use its Marketplace as a wonderful way to sell in a different way than they sell on their own branded website, they can use it for special sale items, or just to sell everything and get people to notice they exist. For BigCommerce, our native integration with Amazon is a big plus because very few other platforms have it."
Looking ahead to the question of a BigCommerce IPO, Mr Bellm concedes that the US markets are not currently bubbling with tech activity. A large number of big name, so-called "unicorn" tech companies with valuations north of $US1 billion ($1.3 billion) have remained private for much longer than many investors would have liked, and he suggests there is an element of over-valuations holding back IPOs.
"There are a lot of companies that have gotten ahead of themselves, in riding up their valuations as a private company and that are challenged to get public market investors to value them as highly," he said.
"I think more companies would go public if they didn't have to deal with the overhang from their private market valuations ... ultimately the public market valuation is the right valuation, so if my thesis is right, then they must be over-valued in the private market."