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Scytl puts IPO plans on standby, will seek buyer

The Catalan company, a world leader in electronic voting, wants to remain in Barcelona, whatever the outcome

The most anticipated IPO in the Catalan technology sector is on standby. Barcelona-based Scytl, a world leader in electronic voting, has put its stock market debut on hold for the moment, as CEO Pere Vallès confirmed to this newspaper.

The company had been planning for at least three years to go public on the NASDAQ, the New York technology exchange. But Pere Vallès admits that now Scytl will likely be acquired by another company rather than go public, a goal that it had set for 2017. The Catalan giant in digital democracy believes that the likeliest scenario is that the buyer will be an investment fund, though the company could also be of interest to a big technology company.

Vallès confirmed that Scytl's plans to join the NASDAQ have cooled off because, in a sector as politically sensitive as electoral technology, the company believes that a connection to a specific country could be counterproductive. The same would happen if a giant such as Google, Facebook, or Microsoft wanted to buy it: some countries could come to view Scytl with suspicion.

Additionally, going public would mean exposing the firm in a way that, in Vallès' view, is not altogether desirable, given the information that the competition would gain on them. The NASDAQ has been in Scytl's sights from the beginning, and especially since 2014, when the company strengthened its management team with three new figures to prepare itself for this leap.

Now, however, the balance is tilting towards a sale. Though an IPO has not been completely discounted, it is not the top choice anymore.

One thing is certain: Scytl will not continue as it is now. Currently, Scytl's shareholders include eight European and international investment funds. Due to the nature of their business, investment funds normally stay with a company for between 5 and 10 years, until it grows and their stake can be sold off.

The case of Scytl, which has already earned a prominent position in the sector, will be no exception, meaning that a sale or public offering are the two main options that are being proposed. Either way, Pere Vallès argues that in any scenario the company's headquarters will have to remain in Barcelona, as the location is favorable both for attracting talent and for the lack of political suspicion that it generates in the countries where it operates.
The company does not publish its results (this is done in the Commercial Register, but in a deliberately obscure manner) due to the demands of its current investors. Although Vallès admits that Scytl still loses money, he discounted the importance of this, and noted that many technology companies take years to become profitable due to the nature of their business model.

In February Scytl received a new infusion of capital with €12 million from its current investors, which include leading venture capital firms such as the Catalan Nauta Capital, the US Vulcan Capital (from Microsoft co-founder Paul Allen), and the German software company SAP. In addition, in the last year the company's public election business has achieved a majority position in western democracies, with potent markets such as the USA, Canada, and Europe. This also means that Scytl is less dependent on developing countries, where the risk of payment default is higher.

Private sector push

At the same time, the Catalan company is exploring new business pathways to strengthen its position. Following its latest capital intake, Scytl has proposed expanding it election business into the private sector. The company is already in charge of electoral processes for some Catalan professional associations, universities such as the UNED, and political parties such as the PDECat. This segment is growing rapidly thanks to the implementation of online voting.

For over a year Scytl has also been exploiting another segment of so-called digital democracy. Scytl is an investor, together with Telefónica, in Civiti, a project with 30 million euros in investment capital focused on the business of citizen participation and consultations. This new company, which operates independently from Scytl --indeed, they don't even occupy the same premises--, has developed a cloud platform for holding popular votes for municipalities around the world, all at a much more affordable price.

Waiting for the Catalan law on electronic voting

Given that many Catalans who live abroad are unable to vote in elections due to bureaucratic problems, Parliament is processing the so-called Law on Electronic Voting for Catalan Expatriates, which will allow them to cast their vote online. As this is Scytl's core business, it's certain that the company will aim to win the contract. According to Pere Vallès, the company is waiting to see if the law is approved and if it is awarded the contract; if this comes to pass, Scytl could have its service ready to go in three months.

Scytl is the brainchild of two researchers at the Autonomous University of Barcelona (UAB), Andreu Riera and Joan Borrell. It is, therefore, one of the few Catalan cases in which the abundant research of Catalan universities was later turned into a successful business. It currently has 600 employees, half of them in Catalonia.

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