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As an IPO n00b, I have basic question: Let's say I'm a startup founder with revenues in $10M and want to raise money. Can't I just go straight to IPO instead of

As an IPO n00b, I have basic question: Let's say I'm a startup founder with revenues in $10M and want to raise money. Can't I just go straight to IPO instead of making VC rounds? It seems you don't need to be profitable or even have to have great outlook. Meanwhile majority of IPOs are getting magically funded anyway no matter what. On the top of it you get to even keep most of the voting shares. So what are the minimum requirements to do IPO?

YjSe2GMQ 8y ago
I don't know the answers to your specific questions, but note that such late and humongous IPOs are a recent phenomena: https://steveblank.com/2019/04/10/startup-stock-options-why-a-good-deal-has-gone-bad/ https://steveblank.com/2019/04/10/startup-stock-options-why-... My guess is that $10M/yr in revenue is close to enough to IPO. It's just not popular recently.
- umeshunni 8y ago
  Some reasons why a company with $10M/year in revenue may not want to IPO: 1. Due to recent regulations (introduced after the 2000 dot-com crash), the fixed cost of going IPO (SOX compliance, putting internal controls in place, audits etc) have significantly gone up. 2. The additional scrutiny and public visibility that comes from going public is a drag on management bandwidth, employee morale and attention. 3. Private money is now plentiful and cheap, so it might actually be cheaper just to take private investors than public. 4. Public markets prefer stable, predictable companies with a known well understood strategy. Consider how often Tesla is in the public eye and how they might have benefited from staying private longer given their unpredictable business and strategy.
polishTar 8y ago
There are tons of restrictions on public companies that don't apply to companies that are still private. Too many to list, but these include disclosure requirements (10-K, 10Q, 8-K...), restrictions on who can be on the board, regular independent financial audits, SOX compliance scope, CEO+CFO certifications, shareholder proposal requirements, listing requirements+fees, etc. The restrictions are enough of a pain (especially the disclosure requirements since most companies would prefer their competitors not knowing their financial state) that it isn't uncommon to see a private company put off an IPO for a super long time.

YjSe2GMQ 8y ago

I don't know the answers to your specific questions, but note that such late and humongous IPOs are a recent phenomena: https://steveblank.com/2019/04/10/startup-stock-options-why-a-good-deal-has-gone-bad/ https://steveblank.com/2019/04/10/startup-stock-options-why-... My guess is that $10M/yr in revenue is close to enough to IPO. It's just not popular recently.

umeshunni 8y ago
Some reasons why a company with $10M/year in revenue may not want to IPO: 1. Due to recent regulations (introduced after the 2000 dot-com crash), the fixed cost of going IPO (SOX compliance, putting internal controls in place, audits etc) have significantly gone up. 2. The additional scrutiny and public visibility that comes from going public is a drag on management bandwidth, employee morale and attention. 3. Private money is now plentiful and cheap, so it might actually be cheaper just to take private investors than public. 4. Public markets prefer stable, predictable companies with a known well understood strategy. Consider how often Tesla is in the public eye and how they might have benefited from staying private longer given their unpredictable business and strategy.

polishTar 8y ago

There are tons of restrictions on public companies that don't apply to companies that are still private. Too many to list, but these include disclosure requirements (10-K, 10Q, 8-K...), restrictions on who can be on the board, regular independent financial audits, SOX compliance scope, CEO+CFO certifications, shareholder proposal requirements, listing requirements+fees, etc. The restrictions are enough of a pain (especially the disclosure requirements since most companies would prefer their competitors not knowing their financial state) that it isn't uncommon to see a private company put off an IPO for a super long time.