Inrix, a provider of road traffic and other data, will likely go public later this year and could raise up to $100 million. The IPO from the Microsoft spinoff is highly anticipated and will showcase the potential of what’s known as big data, involving the collection and rapid analysis of large amounts of information. Other big data firms like Splunk have soared in their IPOs.
Inrix collects data from 100 million vehicles traveling around two million miles of roads across the globe. The traffic data—which come from road sensors and GPS-equipped vehicles and mobile devices—are analyzed and sold to clients ranging from local and national governments to hedge funds. Inrix is now tracking data in China, Russia, Brazil and other emerging markets.
But the capital markets are riddled with examples of IPOs gone awry, like Facebook, Groupon and Zynga. Those public listings were trumpeted by the media and anxiously awaited by investors. All of them have seen their shares fall after their market debut. And they have become cautionary tales of ambitious valuations, timing missteps and other pitfalls of going public.
Inrix CEO Bryan Mistele comes from a public company background, having worked at Microsoft and Ford before co-founding Inrix in 2004. He recently spoke with Quartz about the US company’s path to an IPO and where it is headed.
Quartz: Where does Inrix go from here, and how does raising capital from the public markets help Inrix reach those goals?
Bryan Mistele: We think the space we are in presents a north of $20 billion global opportunity. There are not a lot of players in this space. So there is a lot we can do. We are looking at geographic expansion. We will be in over 40 countries by the end of this year and over 50 next year. And places like China, Brazil and Russia have the worst traffic so there is a lot we can do with that. We also want to expand our applications and analytics. We’ve developed an app that allows the media, TV broadcasters, to give traffic reports in a quicker and easier way. We’re also working on global packaging solutions. Searching for parking can cause traffic. So data on what parking garages near you have spaces left and the cost of parking there are hugely helpful pieces of information. We want to invest in other driver-related services, like what’s the weather like where you are driving to and what are the gas prices in that area.
Q: There have been some disappointing IPOs in recent years. But the markets seem to be promising now, with IPOs pricing at the high end of the range or companies increasing the size of their offerings just before they go public. What is your takeaway from those examples?
Mistele: There have definitely been some big bangs and big disappointments. I think the companies in big data, like Splunk, that take data and analyze it across different channels, those IPOs have done extremely well. They are real businesses with long-term customers. They aren’t companies that are up one quarter and then miss on their earnings the next quarter. So it looks like a good time for us to go out there.
Q: What are the lessons learned so far about the lead up to going public?
Mistele: I’ve learned to not buy a big company right before the start of this process [Inrix acquired European traffic data company ITIS Holdings for $60 million in 2011]. ITIS doesn’t report their figures under US Generally Accepted Accounting Principles (GAAP). So we had to redo all the figures and it was pretty complicated and time consuming. Of course we’re glad we bought the company. But we’re also a small company that did a big acquisition for us, and it was a lot more work than we expected.
Q: Some companies still seem to be unprepared for the level of scrutiny they are under once they go public. Have you done anything to prepare yourself for that?
Mistele: I learned that before you go public, you should practice being a public company. Get on a quarterly calendar. Do the 10Q [US regulatory filing]and give them to board members even though no one else is going to see them because you are not public yet. File your reports on time.
Q: What about lessons from frothy valuations of companies before they go public? Are you feeling more conservative about that?
Mistele: From past examples, I think maximizing valuations in an IPO is not a good thing. [Microsoft CEO] Steve Ballmer once told me that the only time your stock price really matters is when you are selling your company. So I think it’s best to have a reasonable valuation and then show consistent growth results every quarter. It doesn’t have to be flashy to show you have a positive story to tell.