“Going public is a means to an end, not the end itself,” said Assaf Wand, CEO and Co-Founder of Hippo, in the wake of Lemonade’s successful IPO on the NYSE last week. “It’s another way to get funding. It has pros and cons – you need to deliver quarterly reports, under-promise and over-deliver over a certain period of time, and there’s a cost associated with that.”
As a recap, the Lemonade IPO was priced late last Wednesday at $29 a share, above the initial and upward revised range. On Thursday, the stock went up 140% on its debut and another 17% on Monday to $81 a share and $4.5B market cap.
Assaf was speaking on a panel with CEOs of Israeli FinTech unicorns – Scott Galit (Payoneer) and Eyal Shinar (Fundbox). The panel was hosted by Viola and Start-Up Nation Central, and presented the Israeli FinTech Report 2019. But the topic of Lemonade’s recent IPO took center stage in the CEO panel discussion, which was moderated by Viola’s own Omry Ben David.
Assaf continued: “We can have a discussion on Wall Street vs. Main Street – how companies like Tesla are worth more than the rest of the car companies, how Impossible Foods is worth more than Heinz and General Mills together. There is a lot of disparity. With the rise of retail investors – the Robin Hood investors – and in an environment where there’s no gambling or sports, consumers are shifting to the online stock market, and they’re going to brands they know. And Lemonade did a phenomenal job in this – on branding, on storytelling, on creating a loved brand in insurance. They built a millennial brand, which resonates with the new wave on investors.”
“An IPO can be an amazing step in an entrepreneur’s journey,” said Scott Galit of Payoneer. “It can build a brand, it can create sustainable financial independence, it can create value for employees, value for shareholders, improve your chances of succeeding with customers. But it really has to be for the right reasons at the right time… For many years, as entrepreneurs, we heard that our responsibility was to create shareholder value, that our obligation is to the investors. I’m a big believer that value to shareholders is an output, not an input.”
“Make sure you’re aligning the interests of what you’re doing with the long-term interests of the company, the customers and the employees – and if you are, you’ll create sustainable value for shareholders along the way.”
Eyal looked to history to teach us lessons about the current disparity between the stock market and the economy as a whole. “It’s mind blowing,” he said. “It feels like what happened in Europe in the 1920s. You had big money printing efforts to pay debts. People in the real economy were in bad shape, but the public markets were breaking records every day. What we see here – inflation in the public market prices vs. the CPI prices. So everything that suggest real growth, and not just multiple growth – which is mainly technology – breaks records. There’s so much demand – from the Robin Hood crowd or institutional money – to put money in something that can generate returns, that you see a lot of money pouring into every IPO.”
He says this is having real implications on how companies perceived the IPO route, and not necessarily for good. “I know that companies that are probably not ready to go public are about to go public.”
The Lemonade IPO delivered on the promise that the US IPO markets are wide open for Israeli FinTech leaders. But just as a means to an end, an IPO is another path to funding and credentialization – one of many for the established FinTech category leaders that are being built in Israel.
Israeli FinTech startups saw a record-breaking $1.8B of equity investments in 2019, with median deal size reaching $10 million – up 33% from 2018. In a sign of maturity of the FinTech ecosystem, there were 6 mega rounds ($100M+) last year alone.
Will Lemonade’s IPO re-open the discussion of alternative ways to access capital? We look forward to seeing how this will play out as we move into the back half of 2020.