04/12/2021
Taking your company public is hard.
We know this because we’ve done it. Our co-founder and chairman Dominik Richter founded HelloFresh in 2011. He led the company through seven stages of funding before going public in 2017. Dominik remains the CEO today and the company is valued at over $10 billion. Under his leadership, HelloFresh stock has grown over 500% since the public debut.
Dominik took HelloFresh public in Frankfurt through the traditional IPO process because that was the only viable option at the time. Today, there’s a new way to go public that, when done right, provides founders with a far more efficient and fair way to enter the public markets than the traditional IPO provides.
This alternative path to going public is called a SPAC, or a special purpose acquisition company, and today, we’re excited to officially announce the launch of our first SPAC: Tio Tech A. We’ve completed a $345 million listing on the Nasdaq. With our first SPAC listing complete, we will now focus all our energy on our mission to bring an EU unicorn to the US public markets.
In this post, we’ll expand on our mission, discuss what type of company we’re looking for, and share some valuable insights for founders who are considering going public via a SPAC.
EU Founders Need a Better Way to Go Public
The European tech ecosystem is booming.
In 2016, there were just 28 unicorns in Europe and the entire tech ecosystem was valued at $191 billion. By 2020, there were over 150 and the ecosystem was valued at $961 billion and there have been just 27 new unicorns in Q1 2021 alone.
While Europe is home to incredible entrepreneurs building incredible companies, going public in Europe isn’t very compelling for EU founders when they compare themselves side by side with their US peers.
For one, many of the national capital markets are not a very welcoming environment for technology businesses: Investors are more concerned about short-term profitability and less understanding of the need to invest into growth in order to become global tech leaders.
Hence the average profitability of a public EU technology company is 21.6%. In the US it is -7.6%.
Access to capital is another reason: Last year the top ten tech IPOs in Europe raised $32 billion while the top ten in the US raised $133 billion. The US has over 10 times the market capitalization of technology public companies compared to all of Europe.
And of course a fair market valuation matters as well:
All things being equal, when an EU founder compares themselves side by side with their US peers, they find that while their companies are valued at 14x revenue, in the US similar companies are valued at 19x revenue.
That’s why in the past a lot of founders and Company Boards in Europe have been content with exits in the hundreds of millions. With Tio Tech we want to change that and help aspiring EU entrepreneurs to not sell too early and build a great business for the long-run.
We are there in every step to partner with aspiring founders and help them list on NASDAQ, the premier exchange for the highest quality global tech stocks. But going public isn’t just a geography decision. Founders must also consider how they will go public.
The Problem with the Traditional IPO Process
The traditional IPO process is not founder-friendly. That’s the same whether you are in Europe or the US.
The few founders who get their company to the stage where they can even consider going public face a tough reality: the traditional IPO process is daunting, expensive, and, most importantly, a major distraction to founders and their teams.
When you have a high-growth company to manage, having your entire management team pulled away for six to 12 months in order to meet with investment bankers and investors to educate them on your business, explain your strategy, and sell your vision is a costly distraction to have.
This is where SPACs come in. They solve the problems that exist with traditional IPOs by providing founders a more streamlined approach to going public.
When it comes to being public, we believe that founders should be in the drivers seat.
Founder Benefits of a SPAC:
- founders pick the timing (and save time with a leaner process)
- founders decide on the value of their company (vs being told a few hours before trading)
- founders pick their long-term investors (vs ending up with a random shareholder base)
- founders decide on the best partners and operators to have onboard
In short, a SPAC like Tio Tech gives founders far more control of the process while saving time and money.
This is why established the Nasdaq-listed Tio Tech SPAC to partner with a fast-growing EU tech company and provide their founders with an efficient and fair way to go public in the US!
Providing EU Founders an Efficient and Fair Way to Go Public in the US
We believe European founders work too hard to have all their efforts end in a disappointing sale that was forced upon them because they had no other option. We’ve been in these situations many times ourselves.
As founders of fast-growing EU tech companies, with deep roots in the EU tech ecosystem, we believe that EU founders who desire to be true global leaders will find no better long-term partner than us to take them public and set them up for long-term success as a public company.
We are founders from Europe ourselves with a long proven track record of starting and scaling technology companies and we want to partner with other founders who are similar and are ready to make the transition from being a private company to a public company.
Unlocking the Hundreds of Billions of Dollars Locked Up in Europe
The estimated total enterprise value of European tech companies founded after 2000 is almost $1 trillion yet the majority of that value remains in the private markets today.
Our mission is to unlock that value by building a bridge between the public markets and promising EU tech companies. We believe this bridge will pave the way for the next great global category leader to come out of Europe.
We look forward to executing on this mission, partnering with a visionary founder from Europe, and providing the long-term support they need to succeed as a public company.
— The Tio Tech Team
