Take My IPO . . . Please!

Mission Aborted

For Greg Gianforte, founder and CEO of Internet customer service software firm RightNow Technologies Inc., going public had been the goal since founding the company in 1997. "It was a logical step in the growth of the business," says Gianforte, 40. The Bozeman, Montana-based company filed its S-1 in April 2000 and hoped to raise $48 million from the offering for working capital and to expand its sales and marketing presence internationally.

Months after the filing, however, investors' receptivity to IPOs had gone from cool to frigid. "There were four or five months where it was going to happen next week," Gianforte says. "We were like expectant parents waiting for the time." It was on a private jet en route to an October road show appearance when Gianforte finally decided to pull the plug. "I said, 'Nope. Take us back to Bozeman.'" The plane turned around, and RightNow's IPO offering was withdrawn the following month due to market conditions.

The company was in a condition of its own. While revenue in 2000 was up 450 percent with sales at $26 million, the company had incurred expenses of $30 million in sales and marketing, administration and other investments, including $1 million spent gearing up for the IPO. The staff went from 130 to 350 employees within a year. Says Gianforte: "The IPO would have meant a larger cushion. Not going public raised the importance of profitability."

The new strategy in lieu of the IPO? First, find money some other way. Gianforte and his management team completed a $15 million second round of VC funding in late December with such VC firms as Credit Suisse First Boston and Greylock--no small feat in the current climate. But the company's rapid growth made things easier. "Raising money was not a problem. We made two phone calls," says Gianforte. RightNow will use the money for sales and marketing and product development.

The lack of an IPO also renewed focus on expanding the company's customer base. First, when the expiration date for two-year software subscriptions came up in the fourth quarter of 2000, the company secured renewal for 100 percent of them, despite a 250 percent price hike due to increasing functionality. Then the company surpassed 1,000 clients in January, adding AT&T, Hasbro, Reuters and the U.S. Postal Service to a client roster that already included names like Motorola, Nortel and Xerox. The company is executing the same business plan, Gianforte says, but with a closer eye to expenses and faster return on investment. "We're refocusing on the cost-saving aspects of our products, on the savings we can deliver to our clients." He expects RightNow to be cash-flow-positive again by the end of the year.

The biggest challenge may be internal. Although there were no layoffs after the lost IPO, "I wouldn't be telling the truth if I said employees were ecstatic [about not going public]," Gianforte says. He is confident the company will take another stab at an IPO when the market improves. But for the near term, he touts a new mantra: "It's a great time to be a private company."

CompanyOffering PriceYear-End Price% Change in Price
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Chris Penttila is a Washington, DC-based freelance journalist who covers workplace issues on her blog, Workplacediva.blogspot.com.

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This article was originally published in the June 2001 print edition of Entrepreneur with the headline: Take My IPO . . . Please!.

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