Wix CEO: Israel needs more IPOs and fewer ‘exits’

Israel-based website-building tool provider Wix.com fared slightly better than predicted on its first day of trading on the NASDAQ exchage.

Initially expected to raise $119 million, Wix’s IPO raised $127 million, and WIX (the company’s trading symbol) closed at $16.31. That’s 19 cents below the initial target price of $16.50, after trading as high as $16.90 with a volume of more than 11 million shares.

Based on Wednesday’s IPO figures, the company is being valuated by investors at $750 million. That whopping figure brings to mind other recent valuations of Israeli tech companies, such as Waze, purchased by Google for $966 million, and Trusteer, acquired by IBM for nearly $700 million.

One major difference between those companies and Wix, according to company CEO and and co-founder Avishai Abrahami, is that Wix was determined to remain independent — and in Israel — for as long as possible.

Wix, which provides users with a web-driven, easy to use method to build sophisticated websites, has long impressed investors with its reach. The company says its “cloud-based web development platform serves nearly 40 million users in 190 countries.”

It had $34.1 million in revenues in the first half of 2013, which was a substantial jump over the $43.7 million and $24.6 million it brought in for 2012 and 2011, respectively. Founded in 2006, Wix has 400 employees at four sites around the world, with most of them working at its Tel Aviv headquarters.

The company offers a drag and drop method to build HTML5-based websites. Users can choose templates to build upon (there are hundreds), and add basic web interface services as well as advanced apps (music, shopping forms, social media additions, etc.). Wix operates on a freemium basis, with basic (and some advanced) services free, and additional services, support, and hosting of sites available for a cost.

Among the unique features Wix offers its users is an App Market, which includes specialized modules that users can add to their sites to expand functionality. The apps allow Wix users to integrate features like e-commerce, social networking functionality, marketing, and others into their sites, without having to spend endless hours trying to tweak code in order to get it to work with existing objects and features.

In 2010, co-founder Abrahami was asked about his thoughts regarding an exit for Wix. “I don’t think about it,” he said at the time. “I don’t concentrate on building a company for an ‘exit,’ I concentrate on building one that will serve users. I like what I am doing and I do not worry about what’s down the road, and our investors feel the same way. We have great potential, and there is no reason why there cannot be large Israeli Internet companies. Wix can be worth many hundreds of millions of dollars, and remain Israel.”  Abrahami was speaking out against the preferred route for many Israeli start-ups; that of selling out to a multinational company.

In another interview, Abrahami said he had received numerous buyout offers over the years: “respectable offers from respectable companies.” But those exits would likely have entailed moving some of the company’s operations abroad. “Besides me, there are another 399 people in the company that need to be taken care of. This doesn’t mean we would never sell out, but we are not looking for that kind of exit.”

Speaking Wednesday, Abrahami was quoted by the Wall Street Journal as saying that the IPO was “not just about creating the first step or second steps of a company. We can also be good at building the company going forward. And maybe it’s time for us to think about ourselves as a country going from a start-up nation to a high-tech nation, where start-up is the first step, but companies are still built in Israel, maintained in Israel and grow from Israel.” If more Israeli companies went public instead of selling out, he said, it would be “really helpful for the Israeli industry, for the high-tech industry, and for the [Israeli] economy.”

The Wix IPO was being watched closely not just by investors, but by other Israeli companies that are considering IPOs of their own. Among them is Outbrain, which provides links to a website’s older content and to content from other sites. The purpose is twofold — to engage users in previously posted content that may have gotten “buried” on a site, and to provide a richer user experience for web surfers.

Outbrain uses cookies to determine what a user is interested in, and provides the appropriate links. When a user clicks on a promoted link, the site that hosted the link gets paid for the referral, and Outbrain takes a cut. According to the company, some 100,000 content sites, including those of CNN, The New York Times, The Wall Street Journal, and many others, use its platform.

According to reports in the Israeli media, Outbrain will seek to raise $250 million, probably on the NASDAQ. If the company succeeds, it would be the third largest IPO for an Israeli company: Cellphone service provider Partner in 1999 raised $600 million on a NASDAQ IPO valued at $2.3 billion, and in 2007, Cellcom, also a cellphone service provider, debuted on the New York Stock Exchange, with a valuation of $1.95 billion, and was able to raise $400 million.

The company is reportedly shopping around for banks or investment houses to handle the IPO, for which no date has been set. Israeli media outlets speculated that it would come in early 2014.

Outbrain has 200 employees in 15 offices worldwide, 70 of them in its Israeli R&D and data management facility. Employees outside Israel work in sales for the company.