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When it’s the right time to go IPO?

November 12, 2013 • STARTUPS

When it comes the time for a startup to decide an eventual IPO, one thing is sure…  IPOs are not for everyone! And as Adam Epstein, founder of Third Creek Advisors, a San Francisco company that advises the boards of pre-IPO and small-cap companies, says “being a public company is only right for a tiny fraction of companies”! 

Tangney, on the other hand, the chief executive officer of Doximity ( a company he describes as a LinkedIn (LNKD) for physicians), advices the entrepreneurs who dream to strike it rich through an IPO to think it over. According to his words, bankers and lawyers are the only ones who get rich on the day your company goes public!

Even if all these aspects and opinions are not very far from reality, they can surely put a hold in the development. But all these scenarios can be eliminated if before it goes IPO, a startup follows the steps that fast-growth companies can take in their early days that will smooth the way for an exit, whether that is an acquisition or an IPO.  And here are some of them….

Don’t be complicated: Is what your company does or produces easy for investors to understand? If what you’re doing is mind-bogglingly complex, investors will tune out early. In other words keep it simple!!

Get a CFO or Big Four auditor on your company’s board: A former CFO or Big Four auditor on a startup’s board helps when marketing your IPO to have some diversity in industry expertise, race, and gender on your board. You see, pre-IPO companies that don’t add these skill sets to their boards can’t control easily the increasingly austere challenges that exist in a small-cap market…

Follow corporate administration. Don’t under appreciate the board meetings utility for your company, even if it’s a startup, it’s still a company that is going public and wants to attract investors.

Organize your formal documentations early. Your financial records will be put under a microscope in the due-diligence process. So, you should organize all your formal data soon rather than re-create it later; this is going to take much more time and expenses…

Treat your customers like partners: During your company’s development, you going to spend plenty of time with bankers and people from Wall Street who will distract you with strategy and ideas. Listen to them but do what it takes to stay tuned with core customers and treat them like partners. They hold the key to your  development …

Make a legal outlay. Companies that do IPOs are typically formed as Delaware C corporations. The process can cost about $10,000 – a lot of money for a startup. But making that outlay can save a lot down the road if you plan to make your company more than a lifestyle business…

Be consistent with your finance. If you are going IPO you need to have presentable financial reports. Eventually this is something you will have to do…

Tags

ADAM EPSTEIN, BIG FOUR, DOXIMITY, IPO, STARTUP, THIRD CREEK ADVISORS
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