Thinking about an Initial Public Offering (IPO)? Here are some observations about the IPO environment which you might find helpful. But they are observations relevant to all sorts of fundraising, not just an IPO.
People Invest in People. You will pitch your technology, the business plan, forecasts, results to date and a whole range of other material which will always be relevant to the business you want to list. None of that is to be underestimated. But at the end of the day, if your audience don’t find you credible then it is unlikely they will invest, no matter how credible your technology or business might appear to be.
No Time is Ever the Right Time to Raise Funds. According to every financial and listing expert you encounter no period of the year is the right time to raise money. It’s too early. Too late. To close to Christmas. To far from Christmas. Too close to holidays. Near the anniversary of the 1929, 1987, 1989 crashes and so on. If their advice is correct no company would ever list. True, there are times of the year in which investors incline to an IPO but, if your story is a good one the auspicious investment month for your investors is when you say it is. If your story is solid, and investors have confidence in you, settle on a timetable and stick to it.
Your Timetable is The Only Urgent One. That timetable will be informed by the degree of urgency associated with the need for cash. And in your mind it is a timetable more urgent than that of an investor. Be careful to have a timetable that is relevant to your business and which does not convey a sense of unnatural urgency. That, and any desperation you convey is only likely to deter investors.
Everyone is Your New Friend. A less polite way to express this is “There will be a lot of snouts in your trough’. As you set about raising those millions be aware that there may be all sorts of advisors who will be keen to get in on the action. In some cases they may even appear after the IPO and insist that this or that business introduction is now worth a fee. Settle your team of advisors early and understand exactly what commitments you have made to them before you settle on the amount of money you need to raise.
They Have Heard it All Before. It is tempting to describe your business in the context of conservative practices, sensible processes and careful deliberation at every step. Sure, we all want to believe that, but the truth is your business growth has been also built on some active risk management. Even this IPO idea carries some risk with it. Don’t describe your story in terms that cover up the intuitive and instinctive. Investors have heard all that language before, and are very immune to it. They would rather hear the raw story, and are not averse to the occasional “I don’t know”. Oh, and by the way, you do have competitors – anyone who tries to say they don’t only encourages even the average investor to assess a lack of homework on your part.
The IPO is Only The Beginning. Like having a child you are never just a bit pregnant when you IPO. It’s an all or nothing thing. And once that child is born it requires a whole lot of careful attention and nurturing. If you think that things will calm down once the IPO is behind you then perhaps you need to talk to those who have been down the road before. Make plans now, and get ready for intimate connections with the investor market, brokers, underwriters, and your friendly regulatory and statutory bodies.
The Invisible Qualities Matter. The statutory bodies are more focused on these than they once were. And investors take confidence from them. So should you. Matters such as good governance, transparent business behaviour, compliance and ethical behavior. If you don’t want these sorts of issues to be under the microscope you need to rethink your investment strategy. And possibly even your business strategy.
Not all of Your Team Will Have a Stomach for an IPO. When you start walking your enterprise down the path to an IPO make sure everyone is strapped in, and are completely supportive. Do they share the vision? Do they have the character and personality to endure the preparatory work, the roadshows, the criticism, the endless enquiries, and the hard work required to ensure your business is investor ready? If not, find team members who are.
Assume all Shareholders are Decent. It can be tempting to think your investors are hostile creatures, parasitic and without the best interests of your business at heart. In fact you may even hear that sort of talk from advisors and brokers long charred by their time in the investment field. The fact of the matter is that your prospective investors want the business to do well. They want to be co-owners and as such desire the enterprise to prosper. Take a positive view of your audience with you when you head out on your roadshow. Sure, there are some that spit and spark, fulminating away in the back of the briefing room while you pitch their colleagues. Ignore them – there is every chance they are only there to see if you rattle easily.
An IPO is NOT the Worst Thing in the World. Your desire to IPO will be questioned every time you turn around, especially by colleagues, fellow industry, and possibly even your advisors. However often those who are nervous of an IPO have not had any experience delivering one. An IPO is manageable by even the smallest company if the exercise is treated with careful diligence, attention to detail and good project planning. It is not rocket science. It’s just you, speaking honestly about the prospects of the company, and working hard to realize them. Simple really.
Members of Four Bells have listed companies on the ASX, NASDAQ, NYSE, the LSE and have experience with Singapore and New Zealand bourses. Contact the team if you are contemplating an IPO to see if we can help.