SLI's IPO - behind the scenes

In a possible nod to Forrest Gump's "life is like a box of chocolates", Shaun Ryan says an IPO is like having kids.

"Everyone tells you it's going to change your life completely but you never really understand it until you do it."

Mr Ryan's baby, SLI Systems, is a Christchurch-based software-as-a-service company he helped found in 2001, which has just raised $27 million in its initial public offering – a possibility revealed exclusively by NBR's print edition in January.

The company's shares (NZX: SLI) enjoyed a bounce from the $1.50 offer price on yesterday's first day.

The potted history is this:

SLI (search, learn and improve) creates site search products that help companies' websites deliver better search results and rate highly on search engines, like Google.

The site-search software technology started life as GlobalBrain, which was sold to United States media giant National Broadcasting Company in 2000.

Mr Ryan and others bought back the IP the following year after NBC subsidiary NBCi went under.

SLI now has 375 customers (a figure from February this year) include Hard Rock Cafe and Teleflora in the United States, Next and Harrods in Britain and The Warehouse and Mitre 10 in New Zealand.

About 85% of its revenue comes from outside Australia and New Zealand, with the US and UK being its top two markets, in that order.

By 2014 the company will have 170 employees.

The recent IPO led to 18 million shares being issued at $1.50 each and left 69% of the company with existing shareholders, including Trade Me founder Sam Morgan.

The company has already turned a profit, on last year's revenue of $15.5 million, but has forecast losses over the next two years as the company expands.

Palpable relief
NBR ONLINE interviews Mr Ryan at the Auckland offices of its joint lead manager Craigs Investment Partners.

He lounges in a boardroom chair and sports a black pinstripe suit and open-necked blue shirt.

Mr Ryan, 45, a father of three children, the oldest of which has just turned 13, doesn't quite have the zombie-like appearance of a new parent.

But there's palpable relief the IPO process is over.

"Everyone said the whole process of getting ready is just really hard slog, and it has been. There's just a lot of work.

"So I think we went into it with eyes wide open."

What has his experience been?

"I've ended up relying a lot on other people in the organisation – first of all my other managers who weren't involved in the IPO process to run the company, with very little supervision from me.

"It was really good that I had those people at that stage they could do that."

As an aside, he quips: "Often the company runs better when I'm not there."

Burning the midnight oil
On the IPO process, SLI chief financial officer Rod Garrett and his team did a "cr*p-load" of work, Mr Ryan says, as did lawyers Chapman Tripp and the other advisers, including joint lead manager Forsyth Barr.

And then there was Mr Ryan himself.

"I woke up at all times because of my international travel and kids and earthquakes, and all that sort of carry on.

"I'd get up at 2 o'clock in the morning and find that the lawyer had just gone to bed and sent the latest draft of the investment statement and then I'd go and type a reply and they'd all have it there by the time they got at 7 o'clock, or whatever.

"For me it was quite a learning process because I really didn't know that much about the way these things work and the way institutions invest and the way brokers and investment bankers work."

Is it likely to float more of the company? Has it whet his appetite?

"We don't have any plans to do that.

"I suppose it's really going to depend on how things go in terms of what the opportunity it is for us; how well we are able to take this new capital on board and invest it and see a return from it.

"If down the road we see there's an opportunity to bring on more money and it has been a good experience then we've got that opportunity open to us."

A capital idea
SLI has strong links to cloud accounting company Xero.

Xero chairman Sam Knowles is an SLI director and Trade Me founder Mr Morgan invests in both.

Mr Ryan recalls advice from Xero chief executive Rod Drury – during a NZX masterclass in Christchurch – that listing is a great conduit to raising more capital.

The Xero boss certainly practices what he preaches.

Mr Ryan nods to the advice but is equivocal about SLI's capital-raising intentions, saying: "We're not necessarily going to replicate that but it's just interesting to have them show one way of doing it."

The SLI boss says going public is possibly credibility-lifting and good for the profile.

He has received a congratulatory note from NetSuite chief executive Zach Nelson.

Might the Nasdaq next?

"That would be a long way off," he says. "I can't see that for us – my intention is to stay physically in New Zealand.

"I think if we were to list on the Nasdaq whoever was running it would have to be in the US. So for the foreseeable future we're going to be here in New Zealand."

Hand on the tiller
The IPO has been satisfying and ultimately rewarding.

As the NBR print edition revealed last month, existing SLI Systems shareholders will rack up paper profits of $55 million and $12 million cash from its IPO.

Mr Ryan says he won't miss the process.

"I'm looking forward to just getting back to running the business and starting to execute.

"And then, of course, we're going to have some things to do as a listed company that we didn't have to do before."

Investors will be comforted Mr Ryan's hand seems to be firmly on the tiller.

He says the company has changed markedly since its 2001 roots and will change again after the IPO.

"It's going to keep me really interested. I don't have a hankering to go back and do the start-up thing again."

What about selling out of SLI when the kids get older? Perhaps go and lie on a beach somewhere?

"I can't see it; I can't see the appeal."

Mr Ryan says he admires people like his cross-town hero, the late Sir Angus Tait, founder of Tait Electronics, who was still turning up for work in his 80s.

"I can see how that would be stimulating."

dwilliams@nbr.co.nz