Co-founder and CEO of the TenderHut Technological Capital Group. Entrepreneur and investor. More than 20 years of experience in IT sector.
If the scale of your business becomes sufficiently large and you still have an appetite for growth, the next step is to figure out how to acquire additional funding. One path is to list the company on a stock exchange. According to EY, the most effective candidates for listing often devote two or more years to building business processes and infrastructure, recruiting management staff and reorganizing information flows. One of our first decisions, immediately after my company decided to debut on the market floor, was to choose the exchange market where we would make our public offering.
When we initiated the process of entering the stock exchange, we considered making our debut on several markets: Outside of Poland, we also analyzed stock exchanges in Sweden (Nasdaq Nordic Stockholm), Switzerland (SIX Swiss) and the United Kingdom (AIM).
Below, I will share our observations concerning these stock markets and present the conclusions that led us to make the final decision.
Nasdaq Nordic Stockholm
For TenderHut, Sweden was a natural choice, as we have numerous Scandinavian customers. This is an interesting trading floor when it comes to acquiring financing for technology companies. This particularly applies to companies in the phase of initial, dynamic growth.
According to a PwC analysis prepared for TenderHut, many companies balancing on the profitability threshold — with a high revenue growth dynamic — are listed there. These companies have a tendency to invest in growing their customer base, skills and the market, at the expense of a transitional deterioration of results. This feature of the market indicates that those investing in it understand perfectly well what early-development-phase projects entail and are able to evaluate both the potential of a given project and the risk associated with it. A very important point is that we would not have to teach investors the nature of our business, how we achieve our goals or explain our choice of course of action.
Within our group, the line of business concerned with solutions for laboratory systems plays a significant role. The PwC analysis emphasized that the Swiss market is very strong in terms of industrial laboratories from all sectors. Our presence on this market was critical to us — and though we have already achieved that presence, a stock exchange debut would be the cherry on top. According to our internal research, the long and complicated process of acquiring customers is compensated by the emphasis of the Swiss on long-term business relationships.
Naturally, a debut on the exchange in Zurich also carries prestige and substantial growth of recognition of the organization among investors. However, it is precisely due to the maturity and stability of this marketplace — and the size of the companies listed there — that we acknowledged that our company was too small an entity to elicit real interest from the investors there.
Another option we considered was the alternative trading floor in London (AIM). Companies from the technology sector make up 12% of all companies listed there. Importantly, from the perspective of a software house organization, this marketplace has much experience with such organizations, as about 60 companies from the tech sector are already listed on it. We also considered the investment capabilities of investors operating in London and the number of peers, i.e., comparable companies. Players on the AIM exchange have experience and understand businesses that place rate of growth as their top priority — both in terms of the size of the customer base and supported technologies, which translates to very high revenue dynamics.
From the perspective of a Polish organization, we could not find a company from our country with similar experience that had debuted on the London stock exchange. Until now, operations by Polish companies have been infrequent and involved dual listing or debt listings, rather than substantial capital gains for growth and acquisitions.
After five years of work, we are currently listed on the NewConnect market in Poland since April 2021. This choice was not so obvious, but the argument to take small steps and take the time to learn the realities of operating as a publicly listed company won out. Our collaboration with PwC in this scope — which prepared analyses for us — helped us significantly.
The costs of entry and consulting services in the listing process spoke in favor of NewConnect. The fact that this market is familiar with IT/technology issuers with a representative customer base was also a plus. PwC highlighted that this trading floor is also distinct in terms of the number of entrants with a scale of operations similar to ours. It was not without significance that Poland is the natural home for TenderHut from the perspective of both the regulatory and business environment, after all.
Based on my experience, these are the three crucial questions you should ask yourself before deciding on which exchange you are going to debut:
1. Are there other companies on this exchange like yours?
Check how many companies like yours — in terms of sector, investment strategy, technology, etc. — are listed on this market. If you are going to debut on a foreign market, check if other companies from your country are listed there.
2. Does your organization have experience in the given legal environment — will it be able to meet its requirements?
Remember the Roman rule: “Ignorantia iuris nocet,” or “not knowing the law is harmful.” Come prepared and — if you don’t know what you’re doing — ask for help by consulting other companies. Try to choose an exchange where regulations and information requirements are like those on markets you’re already familiar with.
3. What costs do you consider acceptable when it comes to making your debut?
It’s important to remember that making your stock market debut costs money. There are two types of costs: 1. Consulting and promotion. 2. Administration fees. What amount is acceptable? That depends on the financial goals you want to achieve.
But the costs of raising quantities of equity should always be adequate to the volume of capital you want to collect through the debut process.