Call them the pipeline companies.
To qualify for the Globe 100, companies must have traded stock for the full previous calendar year. But what about companies that went public between January 2011, and now?
They’re in the pipeline. In fact, they could be the future stars of the Globe 100. As they grow, they will help boost the state’s economy. Look for them on next year’s list.
The Globe gathered together three top executives from such companies: Jeremy Allaire, chief executive of Boston-based video services provider Brightcove Inc., which went public in February 2011; Robert Forrester, chief operating officer at Verastem Inc. in Cambridge, which held its initial public offering in January; and David Friend, chief executive of Boston-based online computer back-up company Carbonite Inc., which became a public company last August. They spoke with Globe 100 editor Michael Warshaw about running a newly public company in Massachusetts.
GLOBE: What’s been the most surprising difference between running a private company and a public company?
Friend: For me, personally, I have to spend a lot more time talking to investors. It’s a lot more like pitching venture capitalists than I had thought. These people aren’t all believers on Day One. You still have to get out there and tell your story, you still have to meet with fund managers and tell them why your company is the greatest thing since sliced bread - and that they should start buying your stock.
Allaire: One notable thing that I’ve seen is just in the last couple of months, there’s been a qualitative shift in the kind of access we have when reaching out to customers. The responsiveness is great - it’s higher - and that’s a very palpable difference.
Forrester: As a life sciences company, we’re going to have to have access to hundreds of millions, if not billions of dollars to move programs into the market. So for us, going public is just a financing event, a step along the road to getting to where we need to get to. We’ve managed to raise $130 million. The IPO brought in $63 million. It allows us to execute on our business model into 2016. It’s almost unheard-of for a biotech company to have that length of runway. It allows us to do the right science, the right clinical trials, the right way the first time. I think that is the real reason to do these things.
The bad news is it takes an awful lot of [investor relations] effort. Before going public, we met with over 120 institutional investors just to make sure that we could get public. It’s a constant process thereafter.
One of the biggest challenges of being a public company is managing one’s employees, because as a private company, the stock isn’t worth anything. It’s this sort of fictional number. Now you’ve got a stock price that is changing every minute, and you can find yourself getting dragged into looking at the stock price as being a barometer for how the company’s doing - which sometimes it is.
GLOBE: Do you guys struggle with this?
Friend: Yeah, I have banned putting our stock price chart on any of these big screen TVs we have around the office. Just sent an e-mail that said I don’t want to see it. It just is the wrong message.
GLOBE: But you’re all using stock as compensation and bonuses?
Allaire: Absolutely. We had a principle from Day One that every employee would have stock, stock options. [But] I try to focus my leadership team and the employee base more broadly, certainly with the mantra that you can’t focus on stock price today, tomorrow, even next quarter. You have to look out one to two years: What kind of value are you creating?
GLOBE: What about the advantages and disadvantages of being headquartered in Massachusetts?
Allaire: The labor market for engineering, software engineering, is tough, and we’re competing with Google, Microsoft, and Facebook.
Friend: If you’re coming out of a top-flight school like MIT, it’s pretty easy to be arrogant when you’ve got 25 job offers. And people from California are sending people out to recruit, here, to bring them back to California.
GLOBE: What do MIT graduate engineers make, out of the gate?
Friend: Certainly, $80,000 even $90,000 would be a reasonable starting salary. Or $100,000 a year for their first job.
Allaire: For the top, top, for the best young engineers, that is.
Forrester: I’m changing careers.
GLOBE: Do you have the same trouble, Robert?
Forrester: Yes, because Boston has become this epicenter for life sciences. Devices, drugs, all the major pharmaceutical companies are here in a huge way now.
GLOBE: What about investment? Some say Massachusetts has a reputation of being a difficult place in which to raise money.
Friend: I had trouble raising money in New England. I eventually went to the West Coast to raise money.
Friend: Because a lot of the people who are venture capitalists are ex-Digital Equipment Corp., ex-Prime Computer. They’re people who grew up in the infrastructure industry and are now VCs.
There’s a big difference between being able to evaluate a deal on its technical strengths, and being able to look at a consumer product and saying, “I think people will buy that.’’ Forget about the technology, but just what is it you’re offering? Will the dog eat the dog food? And that’s when they say, “You know what? Why don’t you guys go out there and try to sell it, and come back and we’ll look at it.’’
Allaire: But that is changing. There’s a great consumer company that got re-spun out to be a public company, TripAdvisor, which had incredible success here as a consumer business. LogMeIn, another hybrid consumer company. There are more and more consumer companies here.
There has sort of been a lament in the local tech community, which is that even the Boston-based tech companies ultimately become part of West Coast companies. The biggest companies in the world consume the smaller companies.
Forrester: In our industry, those big companies are coming here. They want the access to the science, they want access to the talent pool. It’s extraordinary to see big pharmas actually headquartering their research and development here in Boston. Hiring a lot of people.
Friend: I think your industry has kind of been the savior of Boston. We’re to some extent a shadow of what we were in the computer era. We have a good vibrant community of companies like ours here, but it’s small compared to Silicon Valley.
Forrester: It all sounds rosy and wonderful, but the number of life science and biotech venture capitalists in Boston has decreased tremendously, because it’s been a very hard 10-year period to make money in life sciences. Whereas in tech, you guys are making money hand over fist. Good science, good teams will get money, but you have to work at it.
GLOBE: Is there really a recovery going on here?
Allaire: I think there is, absolutely.
Friend: I think it’s spotty. I think that the upper end of the well-educated people are doing fine, but we sell a $59 annual subscription to mom-and-pop America. People who buy Carbonite could be a housewife doing scrapbooking somewhere in the Midwest. Those people are still very cautious about the money that they spend. They’re nervous about their economic future. So I don’t get the feeling from that segment of the population that they are feeling a lot of recovery. On the other hand, you get stuck in a massive traffic jam going in on the Mass Pike, and you certainly get the feeling there’s no lack of recovery here.
Forrester: We’re definitely seeing strong evidence that there is a recovery, but that’s very much in our little world of biotech life sciences. The demand for what we do is very much there. I mean, people are getting older, diseases need to be cured. The piece that’s been weak for the last few years has been the ability for investors to make money. And that has very much changed through things like IPOs, public stock market’s doing better, and most importantly, mergers and acquisitions.
We’ve seen an awful lot of big pharma companies, Japanese, European, US, buying little companies like ours because they need access to the best technology, the new products. I think that is really spurring interest in life sciences from an investor perspective, which leads to more growth, more companies getting started, and that’s what is really going to drive the Boston area. More companies are getting started, and that only happens when you have access to capital, and that happens when investors are making money.