Israeli technology company WalkMe (Nasdaq: WKME) completed the pricing of its IPO on Nasdaq yesterday, raising $287 million at a valuation of $2.6 billion - although the company's share price fell 7.1% on its first day trading on Wall Street.
WalkMe was founded in 2011 by CEO Dan Adika, president Rephael Sweary, and Eyal Cohen, who has since left the company. Its product is software that simplifies the use of complex enterprise programs. Talking to "Globes", Sweary recalls how it all began, and describes the company's solution, and its next milestone.
"We started with a simple idea of helping people use websites, an idea that came from the mother of one of the founders, who was having difficulty using her bank's site. The original idea was to produce a sort of GPS that works on a website, just as you can use GPS anywhere in the world, enter an address and get there, the same thing, but on a website. Customers saw the results, and asked whether we could help with internal systems. As soon as we went into the enterprises we realized there was no information on where people were experiencing difficulties with their internal systems, and we developed very sophisticated analytics.
"From there we started to develop and grow rapidly. So while it would be very easy to say that we had a big idea from the start, the truth is that the idea was born out of listening to customers and understanding their needs."
Sweary explains that WalkMe in effect gives users a sort of GPS that helps them perform tasks, and it gives management transparency on what's happening in the programs and the ability to respond, within one system.
Who are your competitors?
"WalkMe's biggest competitor is the status quo. That is to say, the way enterprises work at present, with training or an explanatory video. The question when you come to an enterprise is whether to use the old methods or a new system. A second group of competitors is the software producers who, in the wake of WalkMe's success, offer training, but only on their own programs. In fact, that even strengthens us, because enterprises see that what we offer is not good only for one application, and the software producers don't provide analytics.
"A third group of competitors is imitators of our concept, but a large enterprise usually seeks a solution that covers mobile, desktop, and web, and that includes analytics, and each of the imitators lacks one or other of these components. As a general solution, we're the only ones."
All this means that you have to educate the market.
"Absolutely. After four years of work, Gartner became persuaded that what we do was a new category. They came out with a forecast that 70% of enterprises would use systems like ours - which at the moment we're the only ones who can provide - by the end of 2025. As far as the percentage penetration today is concerned, it's hard to know. In the past, Gartner estimated 3%, and since then the market has grown a great deal, but it's still in its infancy and there's huge potential. At present, nine of the world's ten biggest companies use us, but not all of our systems. There is room to expand within each existing customer as well, and massive potential to expand in the market."
WalkMe has several very large customers, not something to be taken for granted for a startup. "Our solution has a big effect, and when you see the impact, it's hard to ignore. So even if customers weren't looking for a solution like this at the beginning, when they saw the effect they understood, and that's what enables us to approach more large companies, certainly in a world undergoing substantial digital transformation."
How did the coronavirus pandemic affect you?
"One the one hand, in the first three months the big projects were frozen and everyone sat on the fence. There were investments in smaller projects. After that, everyone realized that the world hadn't stopped going round, that the situation wouldn't change quickly, and they went back to investing. I'm very proud of the plan we implemented in the pandemic. As soon as the uncertainty began we focused on preserving cash instead of growth, and within a quarter we switched to a positive operating cash flow, because we cut expenditure on winning new customers."
Afterwards, investment in marketing was restored, and operating cash flow went back to being negative. "Demand for our products stayed very resilient despite the crisis, and as soon as we went back to investing, everything grew."
When do you expect to post a net profit?
"The company can switch to profitability as soon as it wants to, but we presented with a very big opportunity, and so we are investing smartly to increase our ability to sell and to reach markets."
What were the potential investors' fears, and what were the main questions they asked you in the roadshow before the IPO?
"Not fears, but the hardest thing for financial institutions to understand when you represent a new category is to what to compare the company, how to estimate its value. We really had to explain the problem, who was hurting from it, and how WalkMe solves it. That was the main difficulty, and also the main joy, because it's a tremendous pleasure to see the reaction when they grasp the potential. We didn’t go for an IPO for the money - it would have been simpler to raise funds on the private market - but to achieve greater awareness and understanding of our industry, and to turn it into a marketing event."
How do you explain the large number of technology flotations from Israel on Wall Street these days?
"Israel is blessed with very good software companies. Today, investment in technology is overtaking physical investment. When a company wants to improve something, the chances are that it will invest in software and not in another machine, so there are many companies in the market. Success leads to success, the big funds operate in Israel, and companies are managing to raise a lot of money, not like in the past, and that enables them to grow fast. Since marketing can be virtual, we no longer have the disadvantage we had in the past of being far from the customer. It's amazing to see what's happening in the Israeli economy, and I'm proud of it."
What's WalkMe's next milestone?
"To reach a situation in which companies budget for the solution from the start and look for the solution in the category we invented. Today, companies come to us when they have a specific problem, and after they see the value, they grow with us. The aspiration is that they should come when they already know the value."
How did you feel personally after the process?
"First of all, there's a great deal of pride. Secondly, there's a great deal of responsibility: we brought in many investors and we have to take care that they will profit, and conduct ourselves responsibly. The third thing is the opportunity. We have a huge opportunity before us, for the employees and for the people who work with our systems."
Are WalkMe's employees gaining from the IPO, do they hold options?
""Yes. All the employees are part of the options program. That's the thing I'm most proud of. The employers gave the company everything."
Published by Globes, Israel business news - en.globes.co.il - on June 17, 2021
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