Let’s go IPOing!
This topic popped up recently in a discussion with a very upcoming Fintech. They actually wanted to know a bit more about IPO and when and how to consider it. But before you even put it on your funding-strategy agenda, I suggest you cover all four of the S’s.
The Four S’s to be done before hitting the IPO phase:
Yes, I know; size matters. That’s a common joke in today’s business world. So, if you are thinking about an IPO, I strongly suggest considering your size at all levels. Not only should your company be of proper size, but also, your team, markets you already cover, and markets you want to conquer. Also, your turnover should be of proper size: profitability or even more importantly, potential. And I shall not forget: the size of the amount to be raised in the public offering.
Your company should also be of substance. It should be very easy to explain what you are doing, and what you want to do. Everyone, including simple Dicks, Harrys and Sallys should see at first glimpse what is of substance in your company, i.e. what is potential. I know we always want to sell to sophisticated investors who will be able to understand untold potential, or even, see hidden potential that we –inside the company– are missing. I’m sorry to say this, but that would mean you do not know your business if someone else can see the hidden potential and you cannot show it on the first page of the prospectus to lure them in.
You should be very clear on the strategy after an IPO; meaning, you should know exactly what you are doing with every single penny raised. To be on the safe side, I would not think about a celebration party after a successful IPO. I would prefer to know how you plan to use the funds raised to make more money; not only for yourself, but also for those who invested their funds in you. Yes, investors do expect dividends and growth; and yes, they expect them quickly. Some investors would prefer to have extremely fast growth, while others would prefer more structured growth. Your strategy will define which type of investor will believe in your stocks.
In reality, you can call this point vision; but, I like to call it “story.” You will need a real story for the PR, news, TV coverage, social media, etc. You will have to create press buzz and make your own stocks appealing. Everyone should know about you since you are reaching the widest pool of investors at this time. All of them should be wooed to invest in your company and trust in your and your team’s abilities to deliver promises.
So, in conclusion, before even considering an IPO, you should grow and get to the proper place in the world of business. If you fail to prepare, then prepare to fail.
Where to do an IPO
You can do an IPO at any stock exchange that you think is fit to float your type of company; however, tech companies with growth potential still have a tendency to go to the “Motherships,” such as: NYSE, LSE or FSE.
But, if you are looking towards London, for example, I would not rule out AIM. It is really suitable for growth companies, not just for global ones, and they do have more than 11 percent of their companies listed as tech companies.
In some of my future blogs, I will discuss basic mechanisms and related costs of IPO structure; and, I will try to focus on more affordable options. Please note: I am not suggesting that this is the route you should take. It has to be carefully evaluated and tailored to your business, growth ideas and strategy. This serves only for informational purposes and as a benchmark for any future processes you might want to pursue.