Preparation Makes Perfect: Tips for Navigating the IPO Process and Investor Relations

More than ever, it’s important for companies to lay the foundation and properly prepare for the IPO process at an early stage of their development.

Facebook’s IPO fiasco may have taken some of the air out of many founders and CEOs’ dreams of monumental IPO success, but that doesn’t mean tech companies should be abandoning their own plans and preparations for going public.

On the contrary, with the market potentially primed to be more skeptical and unforgiving, it’s more imperative than ever for companies to lay a solid groundwork for a potential IPO early on. Those companies that are able to ensure their business practices are buttoned up and that the appropriate financial reporting systems are in place well in advance of the IPO process will find themselves with a distinct advantage when it comes time to dive in.

In two separate video series, Tom Johansmeyer of ISO and Sharon Merrill president and partner Maureen Wolff sat down with OpenView to discuss how young startup and expansion-stage companies can navigate the IPO process and investor relations to build toward a bright future.

1) Tips for Tech Companies Eyeing a Future IPO

One of the biggest hurdles companies face when formally preparing for an IPO is that their past practices may create issues relating to compliance. When filing for an IPO, a company’s procedures will always be heavily scrutinized. If they don’t meet strict standards, they can expect significant interruptions in the IPO process, Tom Johansmeyer explains.

“If you’re not even thinking about moving toward the IPO market, well, start acting today as though that’s your plan,” Johansmeyer says. “The good practices to implement in order to become more viable as a public company will also help you when you’re being evaluated as an acquisition target.

“You need to start thinking about getting the right board of directors together, getting an experienced [chief financial officer] into that spot so that you can firm up your financials and your governance practices, and implementing the controls that a public company would be expected to have.”

2) Top Signs a Company is NOT Ready to Go Public

A company doesn’t have to be perfect (what company is?) in order to go public, but there are particular warning signs that can pollute a potential IPO. Every internal process should be scrutinized before making the move.

In this video, Johansmeyer underscores how important it is for a company’s internal operations to be streamlined and free of inefficient or even questionable practices. The key to remember is that, when hitting the public market, you’re not just selling the company internally; there will be many outside eyes focused keenly on your business.

“If you’re doubting it, you should think about why,” Johansmeyer says. “If your revenue isn’t really reliable, if you haven’t diversified revenue streams out, if your earnings are lagging where you think they could be, these are some signs that you have to take care of some things at home first.”

3) Best Practices to Cement Prior to Your S-1 Filing

The IPO process entails a lot of planning. It begins very early on, as many practices from yesteryear will inevitably be looked at and scrutinized. Maureen Wolff, President and Partner at Sharon Merrill Associates has some advice for company leaders prepping for an S-1: As always, start early.

“Before you file your S-1 it’s a good idea to start thinking and acting like a public company,” Wolff says. “When you look at the companies that are the most successful, they’re usually the ones that grasp the idea of making a long-term transformation to be a public company, which really affects every aspect of corporate life.”

As far as takeaways, Wolff suggests leaders consider what their companies embody and the images they exude. Often, companies don’t start seriously thinking about both the details and the bigger picture until they’re too close to a filing. The ones that prepare early on can vastly improve their chances of having a successful IPO, says Wolff.

“Once you get close to filing your s-1, you can only behave the way you’ve been behaving all along,” Wolff stresses.

4) Your Itinerary Following an S-1 Filing

Following an S-1 filing, it’s paramount to begin a substantial investor relations blitz.

Whether you’re going to do it in-house or hire one of the many firms around to handle your investor relations, you’ll need a team to supplement your S-1 filing, says Wolff.

The benefit of this is clear, she explains. Imagine your webmaster oversleeping on a day when you’re supposed to have a vital press release online to coincide with some major company news. An investor relations team would ensure a scenario like that would never happen. And that’s the standard that has to be set when you’re dealing with investor relations.

“The first thing you should do is make sure you have an IR website,” Wolff says. “There are a lot of cost-effective IR providers out there that can help you host that section of your website to make sure that all the information that investors are going to be looking for are there, such as SEC filings and your news releases.”

An IR provider, Wolff adds, can ensure the consistent web updates needed to keep investors informed on the company’s most recent activity.

Additional reading:

The (Not So) Great Escape

Far too many companies consider an IPO to be their exit strategy when in fact it’s anything but. Find out why that type of thinking makes Marketo CEO Phil Fernandez cringe, and get more insight and advice for what preparing for an IPO should actually look like by reading this post: “Got IPO Fever? Why It’s Not an Exit Strategy and How You Should Prepare for It“.

Straight from the Investment Bankers’ Mouths

If the videos above weren’t motivation enough, this roundtable featuring insights from some of the top investment banking firms in the business provides even more tips on what startup and expansion-stage companies should be doing NOW to prepare for a M&A/IPO.

Editor’s note: This article has been adapted from separate video series on the IPO process and investor relations recorded with Tom Johansmeyer, Director of Marketing, Claims and Crime Analytics at ISO and Maureen Wolff, President and Partner at investor relations firm Sharon Merrill Associates.

Share Your Thoughts