OVHCloud – Yann Leca (IPO Stories, Ep. 2)

Transcript

Gautier: Yann, thank you very much for joining us today on the show. You’ve led the IPO of OVH back in 2021, October ’21. The IPO successfully raised, I think, over €400 million at a valuation of €3.5 billion. It was at the time one of the most expected IPO on Euronext Paris. Can you please first tell us a bit more about OVH, please?

Yann Leca: Of course. First of all, Gautier and Per, thank you very much for having me this morning. I’m Yann Leca. I was the CFO of OVHcloud between January ’19 and October ’22. OVHcloud is a French company which is today the largest European cloud company. Revenue, as published ended August ’22, 788 million of revenue, 308 million of EBITDA. It was founded in ’99, so 23 years ago, by a visionary engineer by the name of Octave Klaba, who is very well known in France. Octave still owns 70% of the company today, obviously. Even though it’s a company that has always grown profitably and mostly organically, it’s a company that opened its capital twice, actually the first time in October 2016 when KTR and TowerBrook joined and became 20% shareholders, and the Klaba family still retained 80% at that time. The second time, which was at the time of the IPO which we led in October ’21, so a bit more than a year ago, when a total amount of IPO was €450 million of which 250 were raised and 100 million were actually a secondary amount.

Gautier: Okay, perfect. Obviously, the decision at the time was to IPO and become a public company, although you had, as you said, a strong ownership structure with a family behind and two very strong private investors, KKR and TowerBrook. Why the IPO rationale then?

Yann: It’s a good question, because we really until the moment we made the decision, had a very important debate between raising equity privately or publicly. That was really a topic which did trigger a lot of considerations. We finally decided to go for an IPO based on two fundamental grounds. First of all, of course, we decided to raise funds. We didn’t have to raise funds. At the growth rate, we enjoyed at that time, around 15%, but we decided it was time for the company to accelerate its growth. This is why we decided to raise additional funds.

There was a purpose to raise fund which was very clearly identified. We could have done privately, but we decided to go public, because we also thought that to accelerate the growth, it was important to enhance the company’s brand awareness, and I would say standing on the market, good standing, reputation, and to make sure that we were no longer seen as the little French company which has grown rapidly, but much more as an established company with a certain status. Definitely in hindsight, by the way, because we’re now almost a year and a half behind, it’s definitely helped.

The combination of those two factors were the decision-making points. I must say as well, but that has to do with timing, of course, the fact that the markets- we believed that the markets were and were going to continue to be open for an IPO, because you can have all the considerations I said before, if the markets are closed, they are closed.

Gautier: Those are the elements you don’t necessarily have total control on and we’ll come back to that. When you took the job, you say in January 2019, you were not sure if the company will IPO, but the mandate you had as a CFO was to prepare the company for a potential IPO, right?

Yann: Yes, that’s exactly right. First of all, you can never be sure that you’re going to IPO the business until the bell has rung. That’s the case of a private transaction as well. It would’ve been very out of place to believe that in January ’19, I joined for the IPO. You can always say so in hindsight, after the fact, but you are never sure. It’s a matter of the readiness of the market, the readiness of the company. Indeed, when I joined, which was January ’19, you could not say that the company was ready for an IPO. That was because of a number of reasons.

First of all, and that may be the one reason that we could single out as a critical benefit of the IPO, there was no alignment yet when I joined around what the company strategy actually was and even no real alignment around what strategy actually means. It’s probably not uncommon to see this in founder-led companies, because the strategy of a founder-led company, especially when it’s relatively small, which OVHcloud was for a long period of its time, is really what the founder believes is necessary and must be done.

That’s basically it. Until a moment when potential investors or other people around start to ask, “What is actually your strategy?” With Octave, what the answer was, and there was of course a strategy, but it was mostly a product strategy rather than a market strategy or a strategy to achieve a goal. We first had to internally align with what we mean by strategy. It’s important to define what we mean by that before trying to figure out what it actually is. That took a bit of time, because first of all, we had a business to run. You don’t spend the weeks just discussing that particular point.

At that point in time, we did get some help. There was a small company which we used also for the IPO to define our equity story. The leader of that company first had very private sessions with Octave and one of our board members to discuss with Octave what is actually commonly meant by strategy and what the strategy actually was. That was laid out on paper gradually. Gradually, Michel, our CEO, and myself got into the picture. This alignment, I would say, took a good six months, but- sessions once or twice a month.

In January ’20, we finally put together- signed-off on a piece of paper, 10 to 15 pages I remember, which was our equity story and which laid out the foundations of our strategy. It was extremely useful and I would say still is foundational for OVHcloud. It really started a new era in the company’s development. Of course, you have all the rest. You’re only IPO ready when you have, I would say, a transparent structure, when you have corporate governance in place, when you have robust financial control, when you have a transparent external reporting, and when you have your CSR in order, corporate and social responsibility. All those topics which are part of a good IPO readiness plan.

Gautier: Basically, the management actually changed right before the IPO. You mentioned that you started this process of defining the equity story well ahead with Octave and the family. Who was involved? Were you as well involved, and the CEO? What that done before you actually joined the company? How early was that done?

Yann: No. It was actually done after I joined the company. We really started in the summer of 2019 when the discussions about which way to go, IPO or private, started to really emerge and the discussions about what the next step of development of the company was going to be. When we determined together that it would be great to accelerate and we found out that we needed additional funds to accelerate from 15% to north of 20%, then the discussions to go for an IPO emerged. Actually, all the work that has been done for an IPO could have been recycled until the very last moment into a private sale, because getting ready for an IPO is fundamentally making the company better, and if it’s better for an IPO, it’s also better for a private sale.

Yes, we were involved, to get back to your precise question. Michel Paulin, the CEO who joined the company in September ’18, and myself joined four months later, January ’19. We were both involved from the get-go in the early discussions, which of course did involve some of the board members, obviously KKR and TowerBrook, and also the board member who became our key reference board member, Bernard Gault. Those discussions were first around the strategy, like I said.

Gautier: You refer to some of the IPO work streams, but as you say, those could be very relevant as well if the company was to sell privately, right? In a dual track process. Can you just remind us what are those main IPO work streams which you think are very important for getting the company ready just to be listed, depending again on the market conditions.

Yann: Yes, of course. Well, let me start with where we started. You need to have an equity story. The equity story basically, if you define it just a few words, you need to be able to explain to anyone why your customers are going to buy more tomorrow than today and you need to be able to explain to anyone why your competitors are not going to eat your lunch. If you answer those two questions in a convincing manner, you can say you have the fundamentals of an equity story, and then you develop a strategy to get there, to get to what your goal is. Once you have equity story and strategy, then you have to develop a business plan, which is basically the money version and the KPI version of your strategy.

You express your strategy in key business drivers and in money, and it has to fly, otherwise you can at this stage still question your strategy. Once you have this business plan, and you have to develop three different models. One is with operational KPIs. One is with financial fundamentals, how you’re going to fund your strategy. Another one is tax model, which is by legality.

Once you have all of this, you have to develop an operational plan. This operational plan answers the question, how you’re going to reach your goals, who you are going to employ, and how you are going to execute your strategy and how you are going to be organized as well to execute your strategy. Once you have all of that- and we really did that. I can still remember the precise dates when each and every of those steps were achieved, because every time we had a board meeting to have a full presentation and discuss the content, then you can start- you’re ready to have annual budgets, and to report, and so on.

That’s what you need to achieve, but you have a number of enablers to achieve that. To have the enablers you need, obviously you need to have a robust financial control. You need to work on your internal control. You need to produce your financial statements on a monthly basis under IFRS. You need to do so very quickly, to be able to do so within a few days every single month. You need to have the necessary KPIs in place. You need to have the right IT environment and security. Of course you know in the cloud company, cybersecurity is critical not only to support the company, but as a core business element. In order to have that, you need the right financial organization in place within the company. You need to know how you’re going to be organized.

We’re a global company, so who works where, who does what, have the right cadences in place, the right timetables and so forth and so on, and it needs to be transparent and complete.

By the way, I talked about KPIs, but you need to be ready to report externally as well non-financial reports on HR and CSR and so on, because it’s going to be part of your financial statements anyway. It’s quite important to have all of that in place at the moment you press the button to start formally your IPO process, which I would define as appointing your banks, this is really D-day, and you need to be sure that you can actually execute and you must have done so already in advance.

The best way to check you’re able to do so is just to do it, to execute all those reporting cycles without much room for material mistakes. You need to have a bit of time to do so. You also have to put together the right structure. You need to know where you’re going to IPO your business, whether it’s going to be in France, in Europe, or elsewhere, because the rules are different and before you press the button and appoint the banks, you need to have an idea where you’re going to go, and you need to put together your corporate governance, which can also take time, by the way, especially in the tech industry.

It is unfortunately still today a very male-related industry. Actually, too few women are engineers, particularly in France obviously, and there are rules. You need to have a certain proportion of women at the board, and we were not the only company with that topic to address. There is a competition, a fierce competition to attract the right, highly competent, female board members, and it can take time to bring them on board.

Gautier: There’s a lot of good things you mentioned I’d like to come back to. Listing location, governance, and appointment of your advisors. Yann remind us, did you have an experience with public companies or listed companies before, because you obviously had a lot to do, right? Were you totally advised by advisors on all those steps or you had a previous PLC experience?

Yann: I had never IPO’d a company before, but I had the background which combined with relevant and great advisors, made everything actually very smooth as it can be. As smooth as possible, I would say. It’s very intense, but I must say it was relatively smooth overall. I had been head of financial control and then CFO of two different listed companies, but in subgroups. I was exposed to the pressure of having to report. I remember in ’96, I had to report at 9:00 AM Holland Time time. Our shareholder at the time was listed in Amsterdam and their head office was in Holland If you reported at 9:30, you got a phone call from chief CFO of the listed entity, and it was not fun. It was very well known in the group.

The discipline was extremely strict, and I had this- that contact. Before, I was part of a listed group as well, and then I had a very long ride with LBOs. I was very used to raising debt. I did raise a lot of different types of debt. The largest transaction I led was raising high yield bonds for an amount of 2 billion in 2015. That was an experience, which apart from the really public and communication side was in terms of formalism, was as close as it can be to an IPO.

Gautier: No, because obviously, marketing a transaction to the capital market. This would be debt capital market, but you had an experience with investors, right?

Yann: I had a lot of experience with investors from that angle. Definitely.

Gautier: Do you think it’s a prerequisite or a condition for a CFO today who is listening to us that he has a prior company, they potentially want to IPO it, to have such experience or you can go around it, again having the right advisors. What’s your view on that?

Yann: I think it’s always better to have been exposed to some investors, whether debt or equity investors. There’s obviously significant difference between the two. One type of investor being risk-oriented, the other one being equity story-oriented. There is a fundamental difference, but having the experience of marketing your company, being capable of discussing strategy, business model, competition is a prerequisite.

You don’t have to have the experience per se, but if you had the experience, at least you have proven yourself as being able to talk about your company and to market it. The CFO has a very interesting position in an IPO and also in putting together a leverage buyout, which is really- makes you on the one hand, a person to market the company, but also a per person representing orthodoxy and being completely aware from a legal and– You are going to be the one speaking to the markets or to the investors, private or private, about the company’s performance day one. There is no way you can be led solely by enthusiasm. You need enthusiasm, but you need a certain level of balance and to be measured. It’s a very interesting position to be in.

Gautier: What about the role of the founder here? Obviously, as you said, Octave and his family have kept 70%. They founded the business back in 1999. Nonetheless, he actually decided to step away as a CEO, obviously keeping a very important operation role I think as a head of strategy. He stepped away. Did you think that’s related to him or that’s a question for every founder or should they continue as a CEO post-IPO? What’s your view? Why is it important to take into account? Was it driven by the market feedback or what happened there?

Yann: Actually, that’s a very interesting question. The change actually occurred in September 2018, so three years ahead of the IPO. What was very impressive with Octave is that he really always sees the long term and the very long term. He thinks 10, 20 years ahead. I’ve never seen him make short-term decisions, and that’s fundamental. Throughout the summer 2018, he understood that in order to bring OVHcloud to the next step, he needed a professional CEO to establish the basis for future growth.

That’s actually what we’ve done with Michel from 2018 to 2021. It’s really building the company’s foundations, putting together an ERP, having a management structure in place, an executive committee, and so on, a professional board as well. All of that was done, because Octave saw the long-term interest of the company. He stepped down as a CEO. He also realized, by the way, that he didn’t really like it.

What he liked, and I believe definitely still likes, is to be inspirational, to look forward and understand what the next destruction is going to be. Octave is definitely technically very advanced and very well ahead of the curve. He chose a governance which actually brings the best of both worlds, because he’s not operational, but he is involved in product discussions. He feeds the company through the executive committee or otherwise with facts, with considerations without any operational involvement, which means in practical terms, he never tells people what they have to do. That’s the job of the CEO.

He feeds the company with new ideas, with feedbacks, with customer feedbacks, because since he’s the founder you still have long-term customers coming to him, sharing their impressions. You don’t get flowers every day. He shares that, but he does not interfere in the company’s day-to-day management. That breakdown, I think, was really what the company needed. Yes, I do think to answer your question, at every moment in time, a founder needs to make the decision or to ask himself or herself whether he or she is still the right person to lead the company on a day-to-day basis.

Gautier: Obviously, so he kept his shareholding. He was not ready to leave the company. He’s staying, he’s a contouring shoulder, but he felt that Michel and yourself would be a better team at the time to lead the company as a public company for the long term, right?

Yann: Yes, and to put together the right executive committee around Michel.

Gautier: How do you think about the listing location then, because obviously, that’s always a debate, especially among tech companies in Europe. Should we list in the US? Should we list in Europe? Obviously, the assumption is that in the US, you have a more sophisticated investor base when it comes to tech. You have more liquidity, potentially better evaluations, but that’s up for the debate. Octave, being a founder in the tech community, did he look at the US? Was is it an important consideration at the time? What was your conclusion on that?

Yann: The answer, surprising as it may be, is that it’s always been obvious that if we were to IPO the business, it would be in Paris. The reason for that is that this was not an IPO of sellers. It was an IPO for the company to raise funds. Maximizing at all costs or to the detriment of any other consideration, maximizing the IPO price was not and was never in the picture. It’s also to the credit of KKR and TowerBrook who also understood that the IPO of the business was put together in order to fund the business and was a long-term view. Today, both KKR and TowerBrook are still shareholders. They have a lower shareholding than what they have pre-IPO, but they were always extremely supportive of what we did. I’ve heard of other cases where there is less alignment and where you have a group of selling shareholders who want to maximize no matter what, because they’re going to exit. That’s not always in favor of the company, because like I said a number of times, the IPO is not the finish line, it’s the starting line. As a management in particular, as a management team, you need to understand that it’s going to be the beginning of a new life and you’re going to be accountable to the market and also accountable for the price at which it was initially IPO.

Gautier: I think as well that obviously you mentioned KKR and TowerBrook, but they have a lot of experience with IPOs. We tend to see them quite often here in Europe. I think they’re well familiar with the European IPO market. I think as well, sometimes you have VC fans or US fans who are not that familiar with European markets. I think they probably have a tendency to look for a listing in the whole market, even if it’s a European issuer, right? I think it also depends on whoever you share as pre-IPO and that plays a role in the discussions.

Yann: That’s right. I would like to add that for us, it was obvious that it would be Paris, because not only is OVHcloud a French company, but it also has something very strong to say in Europe being at the heart and having a strategy which does include fundamental pieces such as data sovereignty in Europe and also sustainability.

If you just simply consider data sovereignty in the conversation between the three main geopolitical areas which are the US, Europe, and China, OVHcloud having taken the lead of the data sovereignty conversation for Europe with many authorities and also on the market, it would have been a very strange signal to go and IPO the business in the US, because the alternative is the US. Of course, a lot of French founders have this attraction reach a billion, and get listed in the US. You hear that a lot when you speak to founders in the tech industry, but you really have to think what’s going to happen next.

If you become a very, very far away provincial company for the US investor market, you’re not necessarily in a great place and people tend to forget you. At least there’s a very significant risk when you are completely diluted in terms of attention among thousands of other companies.

Gautier: Sure. 3,000 in the NASDAQ. You’re competing a lot against those companies, right?

Yann: Yes. I would like to add as well that even though I did not IPO 20 businesses in Europe, I was very positively impressed with how professional the players were, whether it be Euronext, but also the AMF, Autorité des Marchés Financiers, who is known for being very strict, but whom I found a lot of business friendlier than I could have expected. In a way, that’s a way to support an IPO in Europe.

I did find the pool of investors very professional and actually very deep, because we did address investors from the entire world. I’d never felt that being in Europe was an issue and that anyone was dragging their feet, because it was going to be an IPO of Paris. We’ve seen overall more than 100 investors together with Michel. Michel and I, sometimes myself only, sometimes Michel in a rare number of times together with Octave, but it was just a few times. They were from all over the world, all over the world, from Asia, from Europe, from the US, from the UK. I never felt we had an investor pool that was going to be insufficient.

Gautier: US investors really typically have global mandates and they can invest in European companies if they want to. I think the other rare one is not that true. To be fair, if European company, building a shadow base locally and still attracting US investors, if that’s an objective, it’s very possible listing in Europe. As you said, I think it’s a long-term game. You might attract a lot of interest around your IPO, but what really happens it’s next, after the IPO, when you need to tap again the equity market and how visible you really are to the investors.

Yann: That’s right.

Gautier: You mentioned the advisors, and I think that was a very important step in your process, and you had a lot of experience with some of those advisors or so. It sounds like for you, it was a very natural decision to choose your advisors and taking the people you’ve been working in the past with. Can you just maybe tell us about the selection process of the advisors, what is important, what is the key takeaway here?

Yann: Of course, first of all, selecting the advisors for an IPO, the form of this decision belongs to the board. It’s important to have a formal process with RFPs and to make sure that you maximize your chances to have the best possible advisors. It did turn out that all the advisors that we used were advisors that I had been working with sometimes for decades. None of them actually for less than 10 years. You need to go for the people who are simply the best. You can’t be pennywise and pound foolish there. You have to go for the best people, because they are going to make a huge difference when more difficult or more important decisions need to be made.

You could probably group the advisors into three different groups, the ones that you’re going to have as advisors throughout the process. Very early on I mentioned this little boutique firm founded by former investment bank people. They advise us from the very, very beginning, actually even before the beginning if I dare say, to work on the strategy and the equity story. Then we used an advisory bank. Then also a financial advisor to put together the business plan, actually not to put together, but to help us put it together. Because this is something you do. It’s company led, and you need strong support, both from a framework standpoint, methodology standpoint, and also sometimes also execution to support it. Because it’s a lot of work in addition to simply running the company.

That’s the first group, the advisors that that are going to go with you hand in hand throughout the process. I must add as well the lawyers which we chose early on, they advised us also on many topics including corporate, governance structure and so on. We really had the best people. I would like to add something. It’s not only the best professionally or intellectually, but what I found of critical importance throughout this process is having great individuals. Hardworking, low ego, capable of understanding the bigger picture, never forgetting it. Even though everyone is super engaged day and night, you need to be able to at the same time see the bigger picture and continuously work for the greater good and for the ultimate goal.

Not everybody is capable of doing so. Even the greatest professionals, some of them have more ego than others. Some of them are ready to compromise more than others. We actually built an ecosystem of advisors who each of them was capable of working with– It’s just like embarking on the sailing ship, which is not a very big sailing ship–

Gautier: You have to get along for sure.

Yann: No, exactly. If you just take your best friends, it may not be enough or the best sailors. You really need to think of people who are compatible with each other. That’s what actually happened. Again, in the background and in the lead, Octave, KKR, TowerBrook, playing this role as well. It did work very well. The first group of advisors, then of course you have more transaction specific advisors. People for the strategy review, the people for financial communication. Then in the background as well, but playing in the different field, you have your auditors, and you have to bear in mind that in your relationship with auditors, there is a before you made the decision to go public, and after you made that decision.

They become extremely demanding, even more than before, because also the scope of what they have to do immediately changes. Of course, I understand that it was completely understandable. They actually did contribute to the IPO rather than slow us down or giving us more work. They did also give us more work, but they did contribute by putting themselves into it. An amazing engagement which played a great role.

Gautier: Obviously a lot of attention, a lot of advisors to help you getting the company IPO ready and then to execute the IPO, but what happens after the IPO? Can you share a bit of your experience as a public company in term of the main difference for the company itself? Obviously, you mentioned public scrutiny, but there’s some other implications once you listed and you experienced on that.

Yann: Yes. Well, you are a different company, because you’ve gone through the process. Not only the formal IPO process, but the year or year and a half before that. If I just speak for OVHcloud between summer of ’19, when we had the first discussions whether or not to go for an IPO, and the moment we were public, it took two years. During those two years, you become a different company. You have a different governance, you have different organization, a lot of things are different. You actually become a much better company, because you have a formal execution plan for everything you’re going to do, and you start living that publicly. On the one hand as a CFO, you have different things to do and more to do in a way, from a reporting standpoint.

Also from a governance standpoint, you need also to make sure that your corporate governance is exactly what it should be at all times. I would like to quote, making sure that you have everything in place, whether it be internal audit function, delegation of authorities, make sure that the remuneration of your CEO is what it should be, but also connecting. Very important, you need to have an investor relations function, which we put in place six months before the IPO. You have constant interaction. It’s not a quarterly life. It’s not that you have to report quarterly to the market. You are in constant daily contact with investors.

There’s always something to do, and not only preparing the next quarter, but also you get to talk to investors who actually want to ask you questions about your corporate governance, about your social responsibility, about decarbonation, about many other topics that they actually study. There are plenty of themes. There are also conferences that you get invited to, put together by various banks where you have an opportunity to meet some of your existing base, but also future investors. It’s a constant marketing job, which doesn’t really exist when you are held privately and you meet new people all the time.

It’s great, because they ask you, of course, 80% of the questions are the same, but it doesn’t make them less relevant. You constantly get new questions, different questions. If you take them seriously and professionally as you should, it continues to make you a better company. That was a very different way. Also the board, it’s a larger board. You have more independent board members. It’s more formal, but it comes with a package.

Gautier: When you communicated to the market, obviously you had quarterly numbers. You have to bet the market, but as you said, it’s a day-to-day communication. Did you feel at some point that the market was not really understanding what you’re trying to say to the market at the time of results, that the market were a bit unfair with you? Obviously ’21 and this year, again, was quite volatile and tech companies have been- a lot under pressure. When it comes to OVH, it seems you have delivered on your plan, but nonetheless investors maybe have not given you fair credit. Do you think there’s some lessons learned on your communication or what could have been done better?

Yann: All of that. Yes, there are lessons learned, but of course on the face of it, you can see sometimes the market evolution or the evolution of your share price as unfair. The first thing you need to avoid is to take it personally, because that’s not going to help, and it’s hardly ever personal. The evolution of your share price can depend on factors which are completely foreign to your company. It can be, for instance, that there is a global de-rating of the tech industry. It’s a way that you need to to ride, and you need to be prepared for that. We were prepared for that, because we knew when we IPO the company, it was at the very end of a cycle.

In the last weeks, we felt it very clearly that we were coming to the end of a cycle, but you also need to be ready about the fact that you are one among many, and that your share price doesn’t solely depend on the performance of your company. Which is why you can’t drive the company with your eyes, day-to-day on the share price. You need to have your eyes on the horizon, on the long-term interest of the company. Again, both Octave and Michel understood that very, very clearly, which brought us protection I would say, against this famous phrase, against the dictatorship of the quarter, so to speak.

I feel that companies are under that dictatorship only when they look very short term at their interest. You need to be capable to explain your strategy and where you’re going for the long term. Of course, sometimes markets listen, and sometimes they listen less. You need to be very consistent delivering helps. There are also lessons learned. I remember when we delivered our third quarter results, which were completely on track, and we even increased our guidance for the rest of the year. We went minus 5%.

Gautier: On the day of the announcement of your results.

Yann: On the day of the announcement.

Gautier: That’s sounds a bit harsh.

Yann: It was harsh. For us, that minus 5% were recovered later and we understood why it happened. The two reasons why it happened were that first of all, we made a mistake with the timing of the announcement. It was June 30 and it’s the last day of a quarter. You have a lot of technical events on the markets, which did result in some of that. That’s a technical mistake.

Gautier: You mean balancing of funds or indices? All right. Okay.

Yann: Absolutely. That’s one. The other thing is because we were closing the year in August, we came fast in June ahead of midyear announcements, which came at towards the end of July. We were the first to tell the markets there might be in some corners of our business, some slowdown. Even though it was very minor and it was very small, we were probably not sufficiently prepared to use the exact words to describe very precisely what was going on, which is actually not much.

Since we were the only ones still above the IPO price, and we were the only ones which had not derated and the said the rest of the tech industry had derated. We had quite some guns pointed at us. Quite some analysts were expecting us to say something and they really pushed very hard on that. What came out afterwards was over-exaggerated versus what we actually wanted to say. It was a trap in a way.

We could have seen it. We saw it coming, but we could have been better prepared, I would say to counter that prompt. If you look in hindsight today, you look at the evolution of the share price, OVHcloud is give or take minus 20% versus its IPO price. If you exclude the Ga firm, which also sells devices to billions of people. We are ahead. We are aligned with Microsoft and we’re definitely ahead of the other Gafirm.

We are definitely way ahead of the other IPOs in ’21, and OVHcloud is also ahead of industry comparables. The performance remains a lot better, but yes, it’s true. You can feel it as unfair. One thing I’d like to add, you need to manage your employees very, very carefully regarding the share price, because it’s impossible to expect of your employees that they have naturally the kind of understanding or sophistication. They feel it very dearly and they feel it personally. As you know, it was a great success in October ’21. 97%, if I remember well, of employees actually subscribed to the IPO in an employee-specific event right after the IPO.

It means that you’re talking to your shareholder base when you’re talking to your employees as well. I can assure you, they do ask questions and they ask the right questions and you should not expect them to be specialists. The first question they ask is, which is natural is it, what does it mean for the company? Does it mean that we’re going to have less ability to invest? Does it mean that the company is not going well? All the basic questions and you need to communicate internally. It’s very important.

You do so through the CEO, you do so through the CFO, I was involved, I recorded several short videos to explain, and I was asked by Michel and by the communication team to do so, and by the HR teams, just a minute and a half to explain that it’s not related to the company, that the company is doing great. That there are events in the world that actually result in this evolution that we are doing better than our peers and that the company is very well funded and that everybody’s safe and that we should just carry on and execute.

Gautier: No, it’s interesting, and back to your comment that being public put much more light and scrutiny on you at the end of the day, even for the employees, because it force you to communicate even more. It’s good, but the risk as well is to be code by the markets every day basically and try to justify yourself, your strategy. Did you think there’s a risk of the market-leading measurement to be very short-term and take the wrong decisions or try to anticipate too much how the market will react to any news and there is the risk of that?

Yann: There is always this risk, I think around. I don’t think my particular example with OVHcloud is completely relevant or is the most exposed to this kind of risk, simply because with Octave and his family retaining 70% of the company, we were not really exposed to this. I can understand that it may feel very different when you have a controlling shareholder colonel, which is very small.

When you’re actually 100% exposed to interests, which are not always aligned with the long-term interest of the company, that may happen. Again, your best protection is performance. Your best protection is having your strategy and executing it relentlessly and being sure that you, that everybody understands it.

Gautier: Quickly, I’d like to touch upon some ESG consideration, because you mentioned you had a few investors and after the IPO asking a very good question on your sustainability impact and USG strategy, and I think of Leca, at the time of your listing, you are already a bit different from that perspective. Obviously, you mentioned the point of data sovereignty and hence also why the location in Europe.

I think you also have differentiating technology to minimize your environmental impact. You actually came at the time of the IPO was quite concrete targets in terms of emissions water usage. Was it a well-defined strategy ahead of the IPO again, in your preparation, or that came during the process as you heard more and more investors expecting you to be better from that perspective? Can you share a bit, you thought process around those ESG considerations?

Yann: Of course. Regarding the, particularly the carbon footprint and also the social awareness of the company, I must say OVHcloud was very good at those issues, but not good at communicating them, because we had never really had to communicate them. We were very good simply because those themes were there when the company was founded, which obviously helps, because you don’t have to put lipstick on a pig. It’s very important that the company OVHcloud with its water cooling system actually needed a lot less energy does actually need a lot less energy than the standard air conditioning systems.

Also, consumed seven or eight times less water than the standard air conditioning system. The company was founded in Hubei in one of the cities, which is in a city which is one of the poorest in France, and became a very, very prominent employer of the company hired lots of people with no qualifications and actually trained them. I would say the social angle is also extremely present at OVHcloud, but all of that is something we never had to actually communicate. What we did to prepare the IPO is we asked for an ESG rating.

We put that together and we were advised by our advisory bank. We chose actually an ESG rating company, and we performed the entire exercise, which actually forced us to gather and make sure that we had all the right KPIs in place and to report on them on a regular basis. It ended up actually creating a job in the company, which is, by the way, taken care of by the same person as the one who takes care of strategy. It became strategy and ESG was a small team focusing on those matters.

Gautier: It made a difference. At the IPO, you felt that you reached out to more investors on that basis.

Yann: Yes, because we were prepared to answer those questions and we had KPIs in place and, obviously, it is something which is never finished. It’s something which you continuously need to improve, but we did make the commitments that were made eyes wide open. It was not greenwashing at all.

We knew what we were talking about, because it’s just part of the company’s DNA. Now, I must add to this that I was personally impressed by how much of a common and constant theme it was, was all possible investors, whether small or large American, Asian, European, wherever they came from, there was always an ESG conversation. It was not a tick-the-box conversation. It was really something deep, something real. It gave me a little bit of faith as well in the role of investors for the greater good of the planet. It was, for me, definitely a discovery that the great capital can also play, or actually that– It was not a discovery, but the confirmation that the great capital can also play a very important role in making our presence on this planet better.

Gautier: You didn’t issue a sustainability report before the IPO. We’re starting to see more and more private companies doing such, but that wasn’t at the time a discussion.

Yann: No, we did not issue it, because before the IPO, we didn’t reach the necessary corporate governance criteria, because we put in place the board that they affect MEDDEV compliance board on the day of the IPO. Because of that, our rating wasn’t for pure technical reasons, pre-IPO, not what it became afterwards, but definitely, there should be, in my view, very soon, a publication of CSR report.

Gautier: Okay. I think we’re coming to an end. Yann, I have a few final questions for you. Obviously, you’ve been one of the successful IPO back in ’21. You’ve done a great job. You’ve done things with a lot of experience and good advisors around you, but either any advice would have liked to receive before the IPO that could probably have made a difference that you wish you knew at the time?

Yann: That I wish I knew. I wouldn’t say so, I think you can never start changing your organization and improving it too soon. What actually does make a difference, and not only by the way to IPO your business is how good the people you have around you and in your teams are, and hiring the right people in the market, which is extremely competitive, and which remains competitive, is critical.

It does 80% of the job, and you can never spend too much time doing that. It’s at least a piece of advice, which I would dare share with anyone in general, but definitely, it’s even more important when you put together, when you prepare the company for an IPO. Have the right people as early as possible and focus on that. It’s going to help you anyway.

Gautier: Okay. That’s good advice. Thank you. Another one as well. We haven’t mentioned that, but you up for the next challenge. You recently joined Exotec. Another very promising tech, French company as well, potentially listing one day, who knows. If you were to IPO Exotec, anything again, you will do differently or you just apply the same recipe at OVH?

Yann: Each IPO is different. Each company is different. Exotec is a much, much younger company. Some of them is in common. I would certainly seek to use, for any other company, the same group of advisors as I used, because I think they can do different types of IPOs, but I would definitely make sure– I think that the one thing that I would seek and which does make a difference, is make sure that everyone is aligned on the purpose of the IPO.

I don’t think that all companies have the luxury of having a complete alignment as the one that we had, or that the one that we actually built with a OVHcloud along alignment of all stakeholders, private, capital, founders, management, in the end, the banks as well. Everybody was aligned. It’s part of the job of the CFO to make sure that this alignment is continuously kept, no loose hands.

If there is an issue around alignment, whether it be timing, share price, execution, or otherwise, it needs to be clarified. If as a CFO, you can’t do it yourself, then you need to know when to raise the attention of your CEO and of your founder and so on to make sure that the solution is quickly found.

Gautier: Yes, so you’re in the middle of the pack.

Yann: You have to coordinate and not only to coordinate execution, you have to coordinate alignment. It’s an interesting part of the job obviously, but that’s something I would also share as a piece of advice.

Gautier: Now I get. It’s a lot to coordinate and on top of that, you have the market timing, which you don’t really control, but you have to be ready when the market opens to get everyone signing out. Any fun facts you can share with us during your IPO process, road shows, or interaction with public investors that you remember and take over with you at OVH?

Yann: Yes. Look, two days before the IPO- really two days before the IPO, we had an outage. It was in the morning, Paris time. Both, Michel and I were together and we looked at each other’s little, how can this on earth? How can this–

Gautier: The gods are not with you.

Yann: It was just an attempt by the technical teams to reinforce, because when you get an IPO on your tech company, you get more attacks from the outside, because you get more when there’s more attention and people who do this things actually, since they’re going to have a greater impact which is true actually. We quickly found what was going on and cured it very quickly.

We were actually helped by the fact that Facebook themselves had the same issue a week before, and it took them five times more time than we actually took to find and cure the issue. Just manual, actually human error, but we obviously had to explain that to a number of investors. We proactively contacted some of them, some others did find alpha numbers very quickly.

We organized some calls, and what I remember is meetings with two long-term investors, or so they had introduced themselves. They had completely opposite behaviors. One of them said, “It’s so embarrassing, because my IT guy told me not to go with OVHcloud, because he had a couple of issues in the past, and now I’m so embarrassed. What can I tell him? In the end, I don’t think we’re going to–“

Gautier: Join.

Yann: Those people were introducing themselves as long-term investors. The other one said, they called proactively, and they said, “We know tech. We know those things happen. We’ve seen you sorted out very quickly. Communicate in the right way. Don’t worry. We are with you. We understand your business. We’re here for the long term and the long term doesn’t have to stop at the first incident. By the way, make sure it doesn’t happen again, but we are with you.”

Of course, the second type was very smart, because this was the support we expected. They bought themselves with an open communication link with us literally forever, but they had the right attitude.

Gautier: No, I think it is quite telling, and you always have people telling you the long term, but it’s sounds to be a relative definition. Even will try to look good and please you, but eventually, I think over time you’ll see who are these shoulders and they not be necessarily the same at IPO. It’s interesting to hear your thoughts on that.

Yann, thank you very much for taking the time. It was a pleasure. We did cover a lot of topics, so highly appreciate. Thank you, again for sharing all of that with us today. It was a pleasure to have you.

Yann: My pleasure. Thank you very much for your time.