The business also needs to be well-functioning and instrumented. The CEO can’t be immersed in day-to-day operations. The IPO prep process is all-consuming and will draw huge gobs of attention from the senior team for at least a year ahead of the proposed offering. /12
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Are the financials IPO-worthy? It seems like an obvious question, but if a startup can’t achieve a significant multiple over its last round, later-stage investors might not even be interested in entertaining the idea. /13
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If the business is growing that fast, is it really wise to sacrifice the upside? If the company has tremendous growth opportunities in front of it and access to capital, pursuing those opportunities and re-evaluating the IPO opportunity later seems to be a better idea. /14
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Macro Considerations
The IPO window was wide open post Datadog, but WeWork slammed it shut. Now it seems fitting that all are doing the math with extra vigilance. Companies in hot verticals need to figure out if they want to be the ones to test conviction. /152 replies 2 retweets 34 likesShow this thread -
Still, bankers remain self-servingly seductive. IPO underwriters may be the best-educated, most smartly dressed used car salespeople you’ll ever meet. They’ll gloss over the flaws of your business and trumpet minor successes. It’s flattering but misleading. /16
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There may be pressure from some shareholders to move aggressively. Sometimes they’ll be offering wise counsel, but it’s important to understand their motives. Liquidity from this IPO might be the key to their raising a new fund, or buying a yacht: https://money.cnn.com/magazines/fortune/fortune_archive/1998/11/23/251427/index.htm … /17
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Even if the company gets out well (by their own definition), managing analysts during a downturn is no picnic, when all of the company’s financials are laid bare for the world (& their fiercest competitors) to see. /18
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An IPO is considered by most founders to be a massive milestone. This perception makes them susceptible to accepting the friction, misinformation and under-pricing that serves Wall Street not Main street (or even Sand Hill Road, SoHo, or Harvard Square.) /19
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If it is a go on IPO, keep reminding yourself that you are far off “home turf” and question every “given” that you are given. Not to do so is unforgivable - it is misaligned with the thoughtfulness, tenacity, smarts and courage that got you to this enviable moment. /20
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And remember: Having *built the IPO-ready business* is the massive milestone. And that is what deserves the real celebration of the founders and the teams. /End
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By that time, there are usually 100s of employees who traded off salary for equity over many years but aren’t senior enough for access to secondaries. Their aspirations are closer to home down payments than yachts. They at least deserve consideration in the thought process.
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Replying to @harjtaggar
You have absolutely nailed this
@harjtaggar - a lot of discussion of this around WeWork IPO being pulled.0 replies 0 retweets 0 likesThanks. Twitter will use this to make your timeline better. UndoUndo
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