From Unicorn Startup to Public Company / IPO. Is it necessary ?

The ‘Unicorn” word become trending topic in Indonesia after presidential candidate debate as a national democratic party to elect Indonesian president for the next 5 years in April 2019. Starting from incumbent presidential candidate, Joko Widodo make an asking question to his political opponent, Prabowo Subianto about what kind of infrastructure planning to support unicorn startup.

The question blowing up the word of ‘unicorn’ because Mr. Joko Widodo had mispronounced the word to be ‘unicon’ –without ‘r’. So, Mr. Prabowo had time to clarify the pronunciation. The most important for me is not about the error moment about the mispronounced or the answer from Prabowo, but from this moment most of Indonesia society especially the lower class of community begin to aware and busy discussing that there are some local digital startup companies which had reach the certain investment stage from global venture capital so called unicorn.

Actually ‘unicorn’ word is a term for private startup company valued at over $1 billion (or around Rp14 T). The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures.[1] There are 4 startup company from Indonesia who won the title of Unicorn, they are Go-Jek, Traveloka, Bukalapak, and Tokopedia. They had an investment from venture capital because they have an economic and business value that could be utilized by the investors although for the time being these four Indonesia unicorn company is not yet profit or still losing money, that’s why they are called private company.

All of unicorn digital startup in Indonesia is a private company, it means that they don’t need to publish their financial statement to the public. Actually, they just present to pitch their vision, team member, business plan and performance privately to the certain investors. Then they are making a deal to the some business components to be growth. It could be the growth of active users, number of merchant, transaction, users behavior, regional expansion, or revenue. Even though, it is not easy to find venture capital that willing to invest in, but once the startup managed to convince the venture capital, they will get large funding but depend on the type of venture capital.

However, these unicorn couldn’t always depend on the funding they get from the private sectors, because, regardless of the amount of funding, its limited. Moreover, they need to burn the money by ignoring efficiency for achieving their growth of business components. This becomes a concern for the startup, nevertheless they have another option to switch into public company or Initial Public Offering (IPO). When they determine to become public, one of benefit they have is get more investment from public investors. But, they need to prepare one of activity that they ignored when they are still being a private company, that is to make audited financial ratio performance stable and growth.

Now we try more deeper about switching from unicorn startup to public company / IPO. Let’s make assumption, first, say they are ready to make a stable net profit then confidently expected to growth because of very good business planning they have. Secondly, these company hire professional and experienced Chief Financial Officer (CFO) to manage their financial operations. Third, they in collaboration with leading global auditor to make their financial report more reliable for public consuming. Everything has been prepared to enter a new world. But, there is one thing that they couldn’t be set, that is a public sentiment.

Employees walks in front of an electronic board displaying the stock market index at the Indonesia Stock Exchange (IDX) in Jakarta, Indoensia February 2, 2016. REUTERS/Beawiharta

When the big day come, these company become public with open their price share at certain number, for example $10 per share, this was because of the severe over-valuation of both companies in the private market by investors and venture capital firms. The market did not agree with both companies’ valuations, and therefore, dropped the price of each stock from their initial IPO range to $9. Because of this dropped price, some companies is slowing down, their valuation drops slowly then the management just only resist the pace of decline.

Therefore, it is important decision for unicorn company to switch into public company. It’s absolutely true that everything need to be prepare, but when they are get more sentiment from skeptical public investors that more high uncertainty than private investors. That’s why more unicorn company are choosing to keep in private to growing fast rather than slowing die.





PeWe Consulting Senior Analyst

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