Face book was valued at $ ~ 80 bn when
it went public in 2012. Today, it is
valued at over US$ 680 bn. Value is
unlocked by 8X in 8 years.
Every entrepreneur/founder of a
startup has the ultimate dream – to unlock the value of his enterprise. But there is another big side of it. The driving force behind this task of going
PUBLIC is not just to make humongous wealth but also to make everyone believe
in the power of IDEA, and the power of converting an idea into a REALITY. A true startup entrepreneur puts more value to
his idea than the wealth as it has an element of innovation. Innovation has to be there to be called any venture a startup (otherwise it will be
called as a new business) in true sense. Going public also means making public as a
part of the IDEA, wealth creation is incidental.
Going public involves selling your
vision (IDEA) and future results (WEALTH).
Going Public is a critical business
Strategy. It’s a major strategic move by
a startup. There are direct advantages
to go public or to be publicly traded like –
1. Raising money for business
2. Unlocking the value of the enterprise
3. Providing liquidity to investors and employees
4. Attracting good talent
5. Creating
valuable currency (tradable equity) for M&A and expansion
6. Social
impacting advantages
7. Making IDEA
public
The entrepreneur/founder should find
the answer of the few critical questions to make this decision:
·
How the business matrix looks like?
·
Gross margins?
·
Growth plan?
·
Road map?
·
What is the story..
If there is
a right matrix, then start preparing for an IPO. The internal process takes (not talking of
Regulatory approvals) anywhere 12-18 months.
Several aspects to look at are:
- Corporate Governance
- Communication – internal and ext
- Transparency
- Predictability
- Quality board
- Auditors
- Legal team
- KMPs
You also need to consider to protect
yourself, your IP, your vision, your dream… few options to be explored:
- think of issuing some performance-based convertibles or similar instruments as you expect a quantum jump in your startup post IPO;
- consider of issuing Differential Voting rights equity/securities
- In case you don’t want to raise money, explore the possibility of direct listing, without an IPO
Few Cautions –
·
Posting
IPO, raising large money sometimes becomes difficult due to certain regulatory
requirements like takeover, open offer guidelines
·
Compliance
and disclosure
·
Failure
of companies in the same space impact a lot as the perception of Investors change
·
When you are a startup there is much more understanding if you
miss a benchmark. People know your story when you are a startup, but when you
go public there is much less sympathy. "There is very little understanding
of WHY, there is just punishment".
“I knew that
if I failed I wouldn’t regret that, but I knew the one thing I might regret is
not trying.” –Jeff Bezos,
Amazon Founder and CEO
