In light of the huge quantity of initial public offerings (IPOs) being announced on a seemingly daily basis – with King, creators of Candy Crush, Just Eat and Poundland on the roster of Britain’s most recent floatations – some are hailing it as the rebirth of the UK market. But it’s not easy to estimate how far Blighty is from a truly headline-grabbing floatation like last year’s Twitter IPO. Given Israel’s start-up climate isn’t dissimilar to the UK’s, we asked Wix, an Israeli cloud-based web development platform that recently listed its first shares on the NASDAQ, to walk us through its IPO.
First, some background. “We still consider ourselves a start-up,” relates Omer Shai, the firm’s chief marketing officer, before admitting that the company actually now employs 600 people around the globe. “We have almost 44 million registered users and we are adding more than 1.3 million registered users every month,” he explains. However, despite a significant customer base and an international footing, Wix retains its entrepreneurial attitude, with each of its founders still holding active positions within the company.
After it was founded in 2006 by Avishai Abrahami, Nadav Abrahami and Giora Kaplan, the first few years of Wix’s life was spent developing its platform, a set of plug-and-play web development tools. Shai relates how an open beta was rolled out to consumers in 2008, which quickly began to pick up steam. With time, Wix has pivoted and adapted its offering: it has gradually transitioned into providing all of the tools a fledgling business needs to establish itself online. “We are much more than just a website builder,” Shai explains. “We have upmarket, external and internal business applications to give more comprehensive solutions.”
Over the years, Wix has brought in some pretty hearty capital backing. The company raised $1m in angel investment and $3.5m in a seed round in 2007. Such was the company’s potential that it secured a successful series A round, even as the world entered into one of its most severe lending contractions. “It was the week of the Lehman Brother collapse,” Shai comments. “That was a small one.”
Two more rounds of $10m and $40m brought the company up to a total investment of $61m; healthy by a lot of tech firms’ standards but not the sorts of figures that had been ploughed into firms like Facebook or Groupon by the time they listed. “Compared to other companies that have gone public, it’s not a lot,” says Shai.
This is one reason Wix decided to IPO. “Israel is similar to the UK: it’s a difficult place to build a Twitter, Instagram and Pinterest,” Shai comments. The same cannot be said for the US, where the VC environment is such that series D and E rounds can help support further growth – something there isn’t as much capacity for in the UK or Israeli markets. “There isn’t the funding that means companies can run on viral activity and know that money will come eventually,” he continues. “The culture is different.”
Both in Israel and here in Britain, the most feasible end goal for a majority of start-ups is acquisition. This gives founders and stakeholders a decent return and often involves senior talent being purchased along with the product but it also means surrendering control – something that might not always be in the best interest of all those involved. “For us, it wasn’t even an option,” Shai explains. “We knew in order to survive we needed to bring in the money but at the same time we had to continue to build the brand in a way that best served our users.”
Relinquishing control simply wasn’t in the enterprise’s interest or that of the many businesses that rely on it. In 2011, it was reportedly offered a deal that placed a valuation of over $200m on the company – a figure that would tempt many entrepreneurs. Shai’s response is vague. “We had some discussions but we weren’t interested in the offers,” he says.
In part, the team’s resistance to partnerships or acquisition was down to the fact that Wix, unlike big names such as Facebook and Twitter, wasn’t just an expanding platform that was still to monetise. “Wix isn’t just a story,” Shai says. “We earn money.”
As it has been built on a freemium model – building a loyal customer base whilst simultaneously generating revenue through value added services – the company has been drawing a significant amount in subscriptions. In fact, at the time of the aforementioned offer, Wix was generating several hundred million dollars a year in revenue.
Effectively, Wix’s execs knew that they already had a sustainable model with a huge potential to scale, meaning that their focus was on ensuring they could grow without losing their grasp on the reins. Shai explains: “IPOing was the best way to keep our independence and keep doing what we’d like to do.”
And, in November 2013, Wix did just that. Listing on the NASDAQ, the firm raised $127m from the sale of 7.7 million shares. “We’re the biggest IPO in the lifetime of Israel,” says Shai.
Impressive stuff. But in reality an IPO is far from the end of the story for a business: it’s only the beginning.
The prospect of taking on shareholders and the attached responsibilities in terms of corporate governance can give some enterprises second thoughts about going public. The fear that stakeholder expectations will restrict or damage an organisation’s culture is a fairly common one. But for Wix, it was business as usual. “Nothing changed,” says Shai. “A day after the IPO I already had four meetings with discussions about regular stuff.”
Shai feels this is partly to do with the fact that the company wasn’t built to just exit or list. The IPO was never intended as an end in itself for the enterprise; it’s simply been another step on Wix’s journey. “We weren’t thinking about exits,” he comments. “We were building a business: we were thinking about how to scale, how to listen to the users and how to make the product better.” This means that after the IPO there wasn’t a lurching transition as the enterprise attempted to establish its next set of goals: instead it was able to continue business as usual.
Given that Israel’s start-up culture is more aimed at selling than listing – much like our own – a significant question remains: what impact does it have when a major company does break through and IPO?
Essentially, it can also have huge ramifications for others in the ecosystem. “In Israel, Wix is a role model for other companies,” says Shai. Not only does the country’s more open-door business culture encourage start-ups to learn from their more established brethren but Wix is actively engaged in opening up access to talent from various international markets with its App Market. This means up-and-coming developers can serve their apps up to Wix’s customers alongside established entrants like Google, Instagram and Shopify.
If there’s one lesson the UK should be taking away from the Wix story, it’s that the more companies that scale without ceding ownership, the more it opens the door for those that follow. “It’s not only the IPO,” Shai concludes. “It’s also about how we can help others to cross so many chasms in the process.” 
