IPO: A means to an end
Friday, May 4, 2007
b>ENTREPRENEUR VIEW
TAIWAN entrepreneurs have learned early on how to capitalise on the China market's growth opportunities while managing the risks associated with operating, setting up a business, and raising funds in China's fluid business environment.
Taiwanese entrepreneur Roger Kung has successfully settled into all three roles: A few years ago, he was President of Motorola's Personal Communications (Asia Pacific) division, a role that earned him the nickname of "father of the Linux smart phone" among industry insiders. He went on to set up E28 Limited (www.e28.com), a Shanghai-based Linux-run smart phone manufacturer. Thinking about going public sometime in the next three years, Roger Kung considers listing on a China exchange a real alternative to a New York or Hong Kong listing. Although the US and Hong Kong exchanges offer attractive fundraising and regulatory capabilities, E28 as a China-based company may decide to explore a China IPO, despite the relative lack of maturity of the local IPO scene.
Linux is one of the major types of operating systems that are used in mobile phones. Mr Kung has bet on Linux for its low-cost, high-flexibility, customisable user interface. According to government statistics, in 2004 Linux-based smartphones held a 48 per cent market share in China.
E28 has led the wave of Linux-based smartphones in China as well as overseas. It had sold out over 100,000 Linux-based smartphones by the end of 2004. Based on its average handset price of RMB 3,000 (US$370), E28's 2004 revenue was estimated at RMB 200-400 million (US$24-48 million).
As E28 targets future growth segments, Roger Kung pointed out that firm partnerships that bring in financial support have been crucial for E28's success. Despite tapping into an emerging technology platform with its Linux-based offering, E28 has managed to attract partners who fully understand its business and share its vision of the future.
INSEAD InnovAsia: What is your advice to new entrepreneurs who are thinking about an IPO?
Roger Kung: An IPO is a means to an end. It should be seen for what it is, ie a vehicle for fundraising - not a shortcut to becoming rich. Companies must avoid impatience in executing IPOs. They should wait until their core competence and business model have matured. Once a company goes public, its strategy will be influenced by external factors such as public shareholders. In other words, an IPO is not the goal but a process that must serve the company's long-term interest.
Nasdaq still holds sway
However, though many Asian entrepreneurs are increasingly considering listing their companies on Asian exchanges, some still prefer the prestige and maturity of Nasdaq. One such entrepreneur is Ma Yun, CEO of Chinese start-up eFriendsNet, who is determined to list his social networking company on Nasdaq.
Ma sees Nasdaq as "the most active and popular stock market in the world, and one that concentrates on high-tech sectors and Internet-based companies". Like some other respondents in this study, Ma feels that a Nasdaq listing provides credibility as an international technology company. Entrepreneurs like Ma seek to leverage the ideas and relationships cultivated by Nasdaq, as well as the financial opportunities the exchange offers, in terms of exposure to international investors and other high-tech companies.
TAIWAN entrepreneurs have learned early on how to capitalise on the China market's growth opportunities while managing the risks associated with operating, setting up a business, and raising funds in China's fluid business environment.
Taiwanese entrepreneur Roger Kung has successfully settled into all three roles: A few years ago, he was President of Motorola's Personal Communications (Asia Pacific) division, a role that earned him the nickname of "father of the Linux smart phone" among industry insiders. He went on to set up E28 Limited (www.e28.com), a Shanghai-based Linux-run smart phone manufacturer. Thinking about going public sometime in the next three years, Roger Kung considers listing on a China exchange a real alternative to a New York or Hong Kong listing. Although the US and Hong Kong exchanges offer attractive fundraising and regulatory capabilities, E28 as a China-based company may decide to explore a China IPO, despite the relative lack of maturity of the local IPO scene.
Linux is one of the major types of operating systems that are used in mobile phones. Mr Kung has bet on Linux for its low-cost, high-flexibility, customisable user interface. According to government statistics, in 2004 Linux-based smartphones held a 48 per cent market share in China.
E28 has led the wave of Linux-based smartphones in China as well as overseas. It had sold out over 100,000 Linux-based smartphones by the end of 2004. Based on its average handset price of RMB 3,000 (US$370), E28's 2004 revenue was estimated at RMB 200-400 million (US$24-48 million).
As E28 targets future growth segments, Roger Kung pointed out that firm partnerships that bring in financial support have been crucial for E28's success. Despite tapping into an emerging technology platform with its Linux-based offering, E28 has managed to attract partners who fully understand its business and share its vision of the future.
INSEAD InnovAsia: What is your advice to new entrepreneurs who are thinking about an IPO?
Roger Kung: An IPO is a means to an end. It should be seen for what it is, ie a vehicle for fundraising - not a shortcut to becoming rich. Companies must avoid impatience in executing IPOs. They should wait until their core competence and business model have matured. Once a company goes public, its strategy will be influenced by external factors such as public shareholders. In other words, an IPO is not the goal but a process that must serve the company's long-term interest.
Nasdaq still holds sway
However, though many Asian entrepreneurs are increasingly considering listing their companies on Asian exchanges, some still prefer the prestige and maturity of Nasdaq. One such entrepreneur is Ma Yun, CEO of Chinese start-up eFriendsNet, who is determined to list his social networking company on Nasdaq.
Ma sees Nasdaq as "the most active and popular stock market in the world, and one that concentrates on high-tech sectors and Internet-based companies". Like some other respondents in this study, Ma feels that a Nasdaq listing provides credibility as an international technology company. Entrepreneurs like Ma seek to leverage the ideas and relationships cultivated by Nasdaq, as well as the financial opportunities the exchange offers, in terms of exposure to international investors and other high-tech companies.
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