By Jonathan Shechter, Founding Partner
Watch Jonathan’s NYSE interview clip on LinkedIn
A CFO at a pre-IPO company recently asked me how I know when a company is really ready to go public. It reminded me of an interview I gave at the NYSE about ten years ago. A lot has changed in the markets since then, but I still come back to the same fundamentals.
1. Enough runway to negotiate from strength
A company that needs the money next month negotiates differently from a company that can walk away. Having enough cash runway is what lets management negotiate terms, timing and structure from a position of strength rather than necessity.
2. Clear milestones and a valuation you can support
Know the milestones you are trying to hit and the valuation the business can actually support. Investors will test both, and a story that holds up under questions is worth more than an ambitious number that does not.
3. Being ready when investors start asking questions
Readiness is not only about the market window. It is about whether the company can answer the questions that come with going public. That includes:
- corporate structure and governance
- financial and other disclosure
- capitalization and existing agreements
- regulatory requirements
- shareholder considerations
- the company’s ability to operate under the obligations that come with being public
Getting listed is not the finish line
Getting listed is the beginning of operating as a public company. That is why a good financing process starts well before the first investor conversation, and why the companies that prepare early tend to have more options, including alternatives to a traditional IPO.
Related reading: Corporate Governance Is Just a Fancy Word for Paper Trail.
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This article is provided for informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship.