Taking a company public is one of the most professionally and personally rewarding opportunities for a business leader, particularly in high growth tech and software industries(opens in new tab). It can also be fraught with risk, pain and even public humiliation if mishandled—a quick browse through the business pages makes that perfectly clear. Tech IPOs can be soaring successes, with the right planning. Here are six action items that will help make your debut on the global equity markets a success.
- Improving systems, processes, and controls. Regulatory requirements prohibit your company from changing financials system(opens in new tab) for the duration of the IPO process and for at least the first year thereafter. Your public company will need a solution, field-tested and proven for high-tech industries, that gives all key stakeholders appropriate, instantaneous and real-time access to enterprise data and instills confidence in every single employee and stakeholder.
- Upgrading your financial organization. There is absolutely no substitute for experience, and relevant experience should be a key priority. Many companies will bolster financial management with a controller or CFO with public credentials, but the challenges of the software and high-tech fields are unique. Those from old-guard, slow-growth industries can quickly be overwhelmed.
- Preparing for rigorous reporting and compliance requirements. Entire books and SEC manuals have been written on the processes you need to adopt—there is no room to recap them here. But I urge you to learn and master them as early in your IPO planning process as possible. The sooner your company begins to behave like a public company, the easier the transition will be.
- Establishing corporate governance. Regulators and investors demand that your business be coordinated, transparent, and consistent like never before. Private companies can afford to operate boards with loose policies and a casual atmosphere. In the public equity markets, governance is not optional, and each director and C-level executive must understand exactly how they relate to one another.
- Establishing good investor relations and communications. Solid IR may not be as sexy as a flashy PR campaign, but can be even more valuable. Most companies already have outside directors from early-stage investors and other key influencers, but going public means opening your company to all comers. For many firms that means adjusting to the reality that significant stakeholders will not be long-time colleagues and collaborators. Good investor relations can't directly sell product or secure Global 50 contracts, but they can help keep your company from making news for all the wrong reasons.
- Developing risk management capabilities. The IPO process can be a true eye-opener, as auditors second-guess a lifetime of corporate decisions. Public companies must develop a disciplined, consistent approach to categorizing and disclosing actual and potential risks, and develop trusted voices within management and ownership that will keep risks from clouding decision-making or derailing worthwhile ventures.
Of course knowing these six keys is just the starting point. To learn more about taking your high-tech company public, join our C-level panel on August 22(opens in new tab) for an hour-long discussion of real-world, proven solutions for software IPOs as we will expand on each of these topics in greater detail. NetSuite COO Jim McGeever, who took our company public when he served as CFO, will be joined by SolarWinds CFO Michael Berry and LogMeIn CFO Jim Kelliher.