CEO: Dave Gould
Company: Witness Systems (#88 on the 2000 Inc. 500), in Alpharetta, Ga.
Business: Developer and marketer of software that records and analyzes customer interactions
Deal: Went public
Goal: To raise cash for growth, particularly product expansion and international distribution

Dave Gould hasn't been with 12-year-old Witness Systems long -- he was brought in by the company's venture capitalists, Battery Ventures, based in Wellesley, Mass., just 20 months ago. (Of Witness Systems' three founders, only one, Jim Judson, is still with the company, now as a board member.) But before joining the software developer, Gould, 41, already had the sale of two companies and a bankruptcy under his belt. ("I've been through the good, the bad, and the ugly in the software business," he says.) So he had the wisdom to know that an IPO was the best way to finance the company's international expansion and the development of a new product line. "We're the leader in a very large -- about $8.5 billion -- market, so it was premature to sell," says Gould. "And to fund very rapid growth, it's much more efficient and less expensive to have an IPO than to keep going back to the VC watering hole."

Gould began preparing for the IPO the day he arrived at the $23-million company. He wanted to go public in the first quarter of 2000 and was determined to increase the company's visibility. Unlike many software companies, Witness Systems had a lot of follow-on business from the large companies that made up 90% of its sales, so it knew well ahead of time what its quarterly revenues would be. Gould wanted to do whatever he could to publicize the upcoming growth.

The company went public on February 10, 2000 ("just in time," says Gould), led by underwriters Chase H & Q, four months after it began its S-1 filing process. Its stock, which debuted on the Nasdaq national market at $20 a share, ended the day up 100%, at $40, and settled reasonably quickly in the $32-to-$35 range. Witness Systems issued about 4.3 million shares for a total offering of $172 million. The company netted $76 million.

The stock, like so many in its sector, got hammered last spring, sinking to an abysmal $6.50 the first week of April. Gould, who was on vacation sans laptop, learned about the wreckage in an airport in Puerto Rico on his return trip from St. Lucia. By July the price had revived, hitting the $23-to-$24 range, but in early August it sank again, this time to about $15. Gould remains sanguine about the fluctuations.

Nail-biting over the Nasdaq notwithstanding, the company's 250 employees are thrilled that Witness Systems went public, Gould says. "They all had options before, but they weren't worth anything. By going public, we've created liquidity for everyone in the company.

Copyright © 2000 G+J USA Publishing