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Physitrack CEO: Why an early IPO is rocket fuel for revenue generation

October 9, 2017

An IPO is commonly referred to as an "Exit" by venture capital investors.

After what in 2017 means a considerable time as a private company, with round after round of capital raising at increasingly rich valuation levels, the IPO "exit" is more of a "last round" of capital raising that is necessary to realise gains for investors and key stakeholders rather than a tool to boost core business drivers like revenue growth and profitability.

In this article, Henrik Molin, the CEO and co-founder of Digital Health startupPhysitrack, that recently announced its Nasdaq First North IPO plans, focuses on a key non-investor perspective of the IPO, namely that of the IPO's impact on revenue generation, and why it can be beneficial to a company to consider an IPO earlier in its life cycle.

And as you will see, an Exit is not at all part of the picture.

The Premise: Using an IPO to Boost Enterprise sales

Since the very early days of Physitrack, we knew that the main market that our company was targeting - Digital Health for Enterprise clients - was slow-moving and conservative; the people we wanted to do business with needed more than just a fancy product and great sales speak.

Specifically, we knew that our clients would demand that we behaved like a mature and sophisticated company, and not just in terms of appearance.

We knew we needed three things to achieve this:

  • A stable, long term-focused team
  • Revenue / profitability focus
  • A transparent, well-governed company with best practice legal, compliance and accounting processes.

In letting concrete IPO plans transcend our business every day, we knew we would have a great shot at achieving all of these points and our team worked very hard to get there. 

It was a relief to finally share our IPO plans with the tech press, and we are now about to join an exclusive club - in the endless private alphabet round climate of 2017, it’s especially exclusive - and we know it’s the best thing we can do for our continued revenue acceleration.


I list a few of the major points below.

Longevity is Key

If your company is in enterprise SaaS sales, especially in healthcare, you are operating in a very conservative industry - people's wellness is at stake so it needs to be - and your strongest card to play to win business is that of longevity.

Longevity is arguably even more important than your product’s exact fit to the client’s needs, as a savvy client working closely with you can put the extra bit of love into a SaaS solution that might not 100% fit their business. They are more than happy to invest time and effort with you to fix that if they know that you are the best company for the project.

That is, you are the best company for them as long as you are able to show them that you have the staying power to not only go through a tweaking exercise that might take months to complete, but that you will be around in five, ten or fifteen years. 

The ROI perspective a healthcare Enterprise client will have on an investment in your (hopefully) groundbreaking technology is namely that - from half a decade, and up.

If you are a high-burn startup that needs the lifelines of private rounds to sustain a negative cashflow situation, you are at a major disadvantage. Actually, you can forget about getting past the pilot stage altogether - something that is becoming more and more evident for many of the "soon to be dead" Digital Health businesses (good CNBC article) funded to the tune of $14 bln in the last few years .

If you, on the other hand, are a company that has managed to rack up the right financial metrics to swing asset raising through an IPO, you are by default one cut above any privately financed company in terms of your expected longevity.

An IPO will increase your chances to win business dramatically as it signals long term financial stability like no other capital raising method.

Transparency is Sanity

As discussed above, enterprise clients are very concerned with your staying power.

You might think TechCrunch headlines, valuation numbers and capital raise tombstones are enough to persuade them to buy from you as you are swimming in venture capital for several years.

Think again: Private cap raising will have limited or no impact on their decision.

You see - They have no idea what’s behind your fancy cap raise numbers, and what’s in those terms sheets as details are not public. 

Hey chances are that even your own team doesn’t know the terms of your raise, so your clients won’t know either.

Things like:

  • Who, at the end of the day, really controls the company when the term sheet also controls vetoes, capital controls and strategic decisions?
  • Who has the power to fire you, your top sales guy and your co-founder?
  • Who has the power to sell the company from under you?
  • What is your personal drive to stay onboard if you have given away preferred liquidation rights left, right and centre? What are those shares you hold really worth to you?
  • What is behind your valuation metrics - revenue, EBITDA, user growth…yup no one knows that apart from a select group of people, and your client is not one of them.

In short: Who is your client doing business with?

Private / VC-funded company - beyond reading fancy headlines - they have no clue. 

And good luck providing full transparency with the kind of confidentiality clauses you are faced with in private rounds.

Publicly funded company - everything is public. Any dirty (and clean) laundry is subject to public filings and regulatory oversight, and once per quarter when you have to issue your quarterly report.

Guess which company your conservative Enterprise clients would prefer?

Clean Governance is King

The “all boys” cultures of aggressive startups are perhaps entertaining to read about - Zenefits's frat-like shenanigansUber’s sexual harassment accusations and countless other stories of poor-governance controversy that come about when hypergrowth-fuelled culture spirals out of control.

Your Enterprise clients will want you to run a clean ship. They don’t want to admit to their boards of directors, or to their clients that their tech was purchased from a company that is making the headlines as a “bad boy” business.

What better way to be forced to run a tight ship than with an IPO?

Everybody knows, especially your clients, that if you want to place your IPO in rock solid hand, you need to look for rock solid investors.

Rock solid investors will, like your Enterprise clients, be conservative by nature and by going public, you will need to run a very tight ship to make sure they are happy.

If you don’t keep things clean, forget about your rock solid investors, and prepare for your share price to go off the side of a cliff.

An IPO will put you at the pinnacle of solid governance and your Enterprise clients will love you for it.

An IPO should be a Hello, not a Goodbye

Last but not least: an IPO done at the right time in a startup’s life will mark the beginning of something, not the end of something.

Did you also notice that IPOs are called “Exits” in the age of endless private alphabet rounds?

Your clients will not want to do business with a company whose key individuals that make up the glue that holds the company together are getting ready to Exit.

They will want to do business with a company that is ready to Enter into a new era that will last for until their half-decade plus ROI starts to kick in.

Think Entry, not Exit.

Go for a warm core team Hello, rather than a monetisation-driven core team Goodbye.

N.B. My conclusions are based on an IPO on a niche exchange like Nasdaq First North, supported by ample revenue, profitability and a strong team of in-house and outsourced resources that have the capacity to make it happen without disrupting day-to-day revenue focus.


Physitrack is a Digital Health company that was one of Apple’s first Mobility Partners. Physitrack provides patient engagement solutions to healthcare companies in 102 countries and developed the World’s first Telehealth solution for physiotherapy. It raised its last round - from private investors - in July of 2015 and recently announced its Nasdaq First North IPO plans.