Setting your Sights on an IPO

Selling securities on a public exchange through an IPO (initial public offering) is a powerful attractor to many new startup founders. Our culture tends to celebrate IPOs as a sign of standard business “success” and this specific milestone definitely carries a certain weight as many companies never last long enough to even consider an IPO.

But not all companies are well advised to pursue this goal, and the rewards involved in the process may not take the shape some founders envision.

Here are a few reasons to consider taking your company public (or at least moving in this direction):

Raising capital

The biggest benefit of an IPO is the ability to access the public markets for capital. If you intend to scale your company to compete with other publicly traded corporations, you absolutely should consider going public.

Liquidity for founders / investors

Another benefit of an IPO is the ability to provide liquidity to founders and investors. Note, though, that many founders and early-stage stockholders will be subject to mandatory lockup provisions prior to the IPO.

Displaying market maturity.

An IPO will boost the company’s profile and set you apart from your competitors, if for no other reason than the difficulty and length of the process. Making a public offering typically means your internal controls are above reproach and you’ve passed every test put to you by compliance auditors.

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Going Public: Key Steps

This is by no means a comprehensive checklist, but here are some of the initial steps you’ll need to take after you decide to follow this path:

Find banks who will back you

You’ll need to reach out to institutional investors (banks) who will consider sponsoring your goal. If these banks agree to participate, you’ll sit down with their representatives and create a due diligence checklist together.

File with the SEC

You’ll need to complete a variety of filings with the SEC and provide robust sets of disclosures. These disclosures are a necessary step if you want the public to trust you and believe in your future success.

Preparing for opening trades

Your bank will help you in preparing for the opening trade.

The road to an IPO is long and winding, but the first step is the most important: determining whether or not this decision is right for you.