Five tips that can help unicorns prepare for an IPO long before the opening bell
So, how can unicorn companies improve the likelihood that their choice of pursing an IPO is as successful as possible, regardless of reason? Here are five tips.
1. Start early and think strategically
Even though the median age of a unicorn at the time of its IPO is 8 to 10 years, many companies begin to think about their IPO strategy 3 years after founding. It’s never too early to think about transaction optionality at every point in the company’s evolution. In the early days, many companies are relying on friends and family, then an angel investor and then venture capital. However, once you reach the next level of funding, private equity, the company has reached a place where investors will want to see a return on their investment. The earlier a unicorn starts laying the foundation for the possibility of an acquisition or IPO, the better.
2. Stay flexible
It’s important to stay flexible when it comes to transaction options and timing, especially in unpredictable and more volatile markets. Getting IPO-ready 12 to 24 months pre-IPO, while multi-tracking to prepare for all options, allows the company to choose the time and approach that will net the company maximum advantage.
3. Invest in infrastructure, people and processes
It’s possibly one of the least sexy parts of building a business, but at a certain point, unicorns have to invest in infrastructure, people and processes to achieve IPO readiness and provide transaction optionality.
Founders often have alpha personalities, which propels them to operate at a speed at which few can keep up. Having the right people and processes in place will help the company, and the people who support it, maintain the pace the leader sets.
4. Hire the right advisors
Having the right people inside is critical, but a strong unicorn company also needs a network of advisors to help the company stay on track. Bankers, auditors, IPO-readiness advisors, lawyers and PR consultants can offer much-needed advice at pivotal points in the lead up to and follow-through of an IPO.
5. Consider enticing key investors for reference selling
Reputation and trust are everything, before, during and after an IPO. Welcoming a special type of investor can lend credibility to the unicorn, especially in the early years.
A unicorn company starts with the passion and dream of its founder. Through confidence, perseverance, determination and money, that dream grows from a home office, basement or garage, into a US$1b reality. Speed, timing, money, passion and a host of other drivers play a role in determining which funding route a unicorn company chooses. Regardless of the reason for pursuing an IPO, whether economic or personal, it’s never too early to prepare for the pivotal milestone founders dream of from day-one.