“Since we started Inventure, we’ve dreamt of doing an IPO. For many companies, it might not be the right path – but for Merus, it definitely was.”
Merus Power is an energy company focusing on power quality and energy storage. It was founded by former Nokia Capacitor team Kari Tuomala, Jyri Öörni, Aki Leinonen and Risto Laakso, and has been up and running since 2008. Back in 2011, Inventure invested in Merus Power.
At the time, the company was just getting started and had barely any revenue – however, they had a vision. Merus Power dreamed of higher energy quality for renewable energy technologies. This, combined with a seasoned team and a market demand, made Merus a company full of potential.
“The reason we decided to invest was really the team. We didn’t know much about the market back then, but the team had a vision and were ready to work for it. The same guys are still running the show today”, Timo Tirkkonen, co-founder and partner at Inventure explains.
The market – both now and back in 2008 – is a tough one, filled with competitors. Competing against giants such as Siemens, Schneider or ABB is difficult – and even in the scale Merus Power operates in (medium-medium small solutions), the competition is fierce. According to Timo, Merus has been developing slowly but surely, and the efforts to achieve pure and clean energy seem to resonate with the customers.
In 2018 – roughly ten years after founding – the company started seeing proper growth. After years of “slowly and steadily”, the growth accelerated to a point where an IPO started to seem like a great idea. On Tuesday the 8th of June 2021, the stocks started trading – and immediately rose 20%.
Why are start-ups in Finland shying away from IPO:s?
In Finland, it is surprisingly rare that start-ups go the IPO route.
“I remember very few VC backed start-ups that decided on the IPO route.”, Timo states.
For some unknown reason, start-ups seem to shy away from going public. Which – according to Timo – seems strange but also understandable. Many times, a trade sale is a faster and easier process.
“We’ve always dreamed of listing companies. By listing, we create a bigger and more sustainable start-up community. This way, we also make sure that more jobs are created, and that the talent actually stays in Finland – which is of course ideal”.
Timo, while being humble about it, actually has a few successful IPO:s in his track record.
“This is the first IPO Inventure has done – but it certainly won’t be the last. We’re embracing different exit options, and while rare in the Finnish start-up scene, we really feel like IPO:s are a valid exit strategy. Of course, as a major shareholder, you will have a lock-up period during which you cannot sell your shares.”
This time around, Inventure didn’t sell any of their shares in the company when it went public.
“Although, I’ve never understood why selling at IPO is viewed in such a negative light. This time around we didn’t sell, since we wanted to show the founders and market, we’re still committed to the growth and success of the company.”, he explains and continues:
“The founder’s sold a small slice – which I think is good. The sometimes-persistent view that selling at IPO is considered easy cash or selling out feels weird to me – they’ve worked hard, and if they decide to sell 5-10% of their share, they’re in no way cashing out. They’re still keeping the vast majority of their shares, and they still keep on working hard. This also increases the free float, which ultimately means there are more shares tradeable”.
IPO:s in practice
A possible reason Finnish start-ups shy away from going public is that it feels complex or overly bureaucratic.
“As long as you have a sustainable business model and internal consensus on the IPO, it’s nothing to be afraid of, really.”
IPO:s do come with a handful of really good perks – to say the least.
“A few months ago, this was a small, relatively unknown company. Now Merus Power has 8000 shareholders and has reached a completely new level of publicity – which, in turn, is good for business. This kind of awareness makes recruiting go smoother, gets new customers through the door, and brings a whole new level of credibility to the company. After all – they’re now a publicly-traded force to be reckoned with”.
Before deciding to list the company publicly, it’s vital to understand what it means. While often a good call, it does bring some additional constraints and reporting obligations to the company.
“It’s critical to have your management, monitoring and reporting in good shape, so that you are ready for the IPO and the additional reporting it requires. In addition, it’s important to pick a good team of advisors. A great financial advisor, legal advisor, and pr-advisor are vital for the IPO-process to go smoothly. It is also very important to understand the legal aspects of a public company – especially when it comes to insider knowledge, what can be told, what cannot be told and to whom”.
When asked about the possible drawbacks of an IPO, Timo is very straightforward.
“An IPO changes the ownership structure quite a bit – since you might now easily have thousands of new shareholders. It also adds an extra level of reporting and follow-up – so your processes really must be in shape. Therefore, an IPO should only be done if you need the funding and don’t mind having outside shareholders – otherwise there’s really no point.
When contemplating an IPO, Timo highlights the possibility of backing out at any time.
In the case of Merus, the last internal decision of the IPO came seven days before the trading started. When asked, Timo does reveal that he has experience with canceling IPO:s at the very last minute.
“That, however, might be a story for another day”.
Fortunately, this wasn’t the case for Merus. The time to market was optimal, and so far, their energy tech seems to be intriguing share buyers.
“The process itself went smoothly and the first week of trading has been a success. It seems like all the stars are aligning for Merus.”