2016/02/29

Exclusive: Stock image & design business firm 123RF looks to list as founder mulls exit

Chicago-headquatered stock image and design business, 123RF, is seeking an initial public offering (IPO) targeted within the next 12 to 18 months.

Founder Andy Sitt, a Malaysian, who is now beginning to draw some limelight onto his company, as he seeks to raise the profile of 123RF among funds and investors.

"We're at that stage where we have to think of the next stage of the company and I believe that the next stage would be some form of exit. So (profiling the company) is more towards building it for a potential IPO," Sitt told DEALSTREETASIA.

Several stock exchanges have approached 123RF, attempting to woo it to list in their markets. Among them are the Australian Securities Exchange, Singapore Exchange and the latest to court 123RF, Tokyo Stock Exchange, he said.

Sitt believed that successful tech IPOs in the recent past, and the growing marketplace industry have piqued the interest of these exchanges to welcome companies like 123RF to list.

"We are looking at the prospect of (an IPO) in the next 12 to 18 months, but as for which market to list in, it all depends on timing," Sitt said.

He noted that while the goal to IPO is there, there is no rush for the company to go public, especially under current poor market sentiment for IPOs.

"We are a self-sustaining business, we want to be ready to IPO, not IPO for the sake of it," he said.

Asked if he was interested in exiting the business entirely, Sitt said: "There is no rush for me to do a complete sale (of the company) but it depends on the situation."

On the IPO's estimated size, he said it would have to depend on the market and timing.

"If you asked me 12 months ago, I would have been more optimistic when all of my competitors were doing so well, even though it's hard to compare what we do to each other," he quipped.

While the company does not have any specific target for the funds to raise, Sitt pointed out that how 123RF is positioned will be crucial.

"If we value ourselves as a stock images company, compared with if we look at ourselves as an ecosystem, it will be different. Does the market like us as an ecosystem, or will they consider that we have no focus and trying to do too many things at one time? Personally, I think ecosystem is the way to go, but if we IPO too early, the market may not like that we seem not focused," he commented.

Sitt opined that with 15 years of experience in the creative industry, he knows that the market will change and he would rather be leading the change and coping with it.

"We always believe disrupting ourselves, because by doing so we disrupt others."

Additionally, Sitt is also mulling the potentail separate listing of Payless Images, another of Sitt's businss in the same industry.

He said there were considerations of listing the group as a consolidated business, or listing certain businesses independently, which have not been finalised yet.

Bootstrapping 15 years

Sitt, together with his wife Stephanie, grew the business from scratch, bootstrapping since the company was set up in 2009. Both are the sole owners of the company.

All in all, Sitt estimates 123RF has bootstrapped with "tens of millions of US dollars" in total, rolling the business with its own revenue.

The 15-year-old company churns an eight-digit annual revenue in US dollars, with 70 per cent of it coming from the US and Europe.

Its stock images platform receives over 100,000 new content daily and has over 16 million unique visitors per month.

Little known as a Malaysian-founded business, 123RF has always branded itself as a American company to reach more audience who would have otherwise doubted the company based on its home base.

While venture capital was nearly non-existent in the Malaysian market those days, Sitt noted that the business had grew organically and through its subscription model, there was always cashflow to run the business.

"When you come from funding your own company, you learn not to spend so much money on advertising. You come from a background where the control of money is very important, you have to make sure that the return on investment is always more than 100 per cent," he said.

That said, Sitt did ponder on the alternative scenario where if 123RF had been VC-funded, it could have become a bigger business, but he believed that running the company on his own terms was ultimately a more fruitful experience.

"Having the ability to control the fate of your own company was something I liked very much, because then I can control what I do, and I believe that can help me build something bigger and better," he said.

The company, which started out selling stock images, is also transforming into a design and creative platform as it works to build an ecosystem for the industry.

It recently launched Stock Unlimited, and will be rolling out Designs.net, a platform for designers to create.

Sitt said there are some acquisitions and ventures in the pipeline to help build the creative ecosystem that 123RF will morph into eventually.

'When we learn, we must teach; when we earn, we must give'

Aside from growing 123RF and starting new related ventures, Sitt is also an angel investor, who focuses mostly on investments in the creative industry.

His venture investment arm is Inmaginator, part of Inmagine, which is part of Sitt's stock images business.

Sitt revealed that he is looking at a few potential investees in Southeast Asia, in particular in Vietnam.

"We try to invest in companies which we feel we can assist," he said.

Inmaginator's portfolio has no Malaysian startups to-date, which Sitt attributes to the narrow focus in the cases he came across.

"A lot of Malaysian companies target Malaysia only, frankly I do not want to invest in companies that focus purely on Malaysia, and I do not know the market well enough, I can't help them," he shared.

Sitt said he advises his investees based on what he has learned from his years of being an entrepreneur in the creativity industry but never stops them from trying the things that they think is right because Sitt believed that the entrepreneurs ultimately know their business best.