Tech companies can think of an IPO as being like a graduation
ceremony, the beginning of a new chapter, but also the result of
a lot of hard work in the past.
If the IPO journey seems overwhelming, remember that
roughly 90% of tech companies that embark on the process
ultimately succeed in going public, and more than 60% of
these newly listed companies see positive share price
performances in the first six months after their IPO.
So how can tech companies prepare the groundwork for a
successful IPO? First,
as with almost all IPOs, the way to build trust and confidence
with investors is by having experienced leadership team in
place and build a strong business plan and equity story.
Having the right anchor or cornerstone investors can also
be helpful and send a quality signal
pre- or during the IPO,
plus anchor [unintelligible].
Make sure that you have all operational functions and
processes that a public company needs, including IT reporting
processes, ad hoc capabilities, governance structures, and
investor relations team,
of course.
Then craft a compelling equity story that describes the market
opportunity, what sets the company really apart and gives
it unique competitive advantage, and how the proceeds of the IPO
will be used to finance growth and create value.
Take the time to get the equity story right, since this will
underpin the other IPO materials, including roadshow
materials and the IPO prospectus almost as a single source of
truth. For young tech startups in particular, potential IPO
investors would typically want to see evidence of revenue
growth and growth potential, as well as a clear path to future
profitability.
Make sure to substantiate equity story claims with appropriate
proof points.
For biotech firms, that typically means highlighting the
progress and success in your clinical approval phases.
For tech companies, it would include demonstrating a minimum
viable product and its road to market.
For platform companies, drill down on unit economics and
scalability.
And for technological disruptors, it's key to showcase
the business model innovation and what it means for the
incumbents. By studying hard and doing the right homework ahead
of your graduation,
tech startups can change the odds of their own IPO success.