If you’re here, chances are you already know that an initial public offering, or IPO, is a monumental step in a brand’s lifecycle. What you may have questions about, though, is how to best prepare for such a milestone. What should your IPO preparation work include?
Understanding the process of moving a brand from private to public – operationally speaking – is critical for success. With decades of experience between them, our CMO Mark Nardone and RRE Ventures General Partner Raju Rishi, a venture capital (VC) expert, have come together to impart their wisdom so that you, too, can proceed with confidence.
Whether you’re just getting started on pre-IPO funding and valuation or you’re preparing a checklist now that your public launch is greenlit, this IPO preparation resource can serve as your go-to guide for what happens next. (Seriously, bookmark it now before you forget.)
Related Read: IPO Workback Plan Template
Background: What IPOs Look Like in Today’s Landscape
Going public involves so much more than simply finding investors. The landscape for IPOs today is, to sum it up in one word, dynamic.
The very nature of a public market invites volatility. In its Q4 2024 trends report, EY suggests brands should be cautiously optimistic about IPOs – now or at any time. The current economic environment is complex, made even more so by global political activities (wars, leadership changes, etc.). Though the second half of 2024 was marked by the start of an interest rate easing cycle, recent IPO activity was met with heightened market volatility.
There will always be risks involved in seeking an IPO for your brand, but the rewards can be just as great.
Let’s consider another factor: venture capital investment. A September 2024 outlook report from Bain & Company emphasized a positive swing in VC funding, fueled by AI, healthcare, and financial services. Prior to this swing, though, venture investments were slowing down and valuations were becoming more scrutinized. Because of this, it’s important to not put all of your eggs in the VC basket by considering additional strategies to attract funding and prepare for public offerings.
When discussing excitement around the market over the next year, Rishi shared, “The thing that excites me most is that I finally see a pathway for data actually being valued.”
In the video below, he (A) implores founders to refine your target audiences to find optimal product-market fit and (B) highlights the future potential of data-centric AI applications, along with necessary considerations for adding effective AI strategies to business operations.
10 Tips to Help You Prepare for an IPO
The key to breaking through in a crowded market is brand differentiation. Here are 10 essential tips designed to help you differentiate throughout the IPO process. Follow this lead, and reap the rewards of a successful transition.
1. Align Your IPO Valuation with Market Realities
While it may seem obvious, it is critical to start by ensuring that your pre-IPO valuation reflects current market conditions. An overinflated valuation is sure to lead you to poor IPO performance and diminished investor interest, which nobody wants. Set up your team for success by performing regular market comparisons and adjusting your business value to reflect active trends.
2. Emphasize Positive Cash Flow
Once you’re confident in your valuation, showcasing your company’s strong economic performance is a key point of differentiation – and your first opportunity to grab investor attention.
No matter the market conditions, investors will always prioritize companies with solid unit economics and clear paths to profitability. Demonstrate that your business can achieve positive cash flow, even in challenging economic environments. Furthermore, you’ll want to showcase how you adopt frugal operational strategies in order to maintain financial health. If you can do that, the path to building investor confidence is easy.
3. Strengthen Unit Economics
It cannot be overstated how important strong unit economics are as a method of differentiating your brand from others and attracting potential investors. Before you pursue funding, justify your valuation by taking the time to tighten your company’s unit economics through improving margins, customer acquisition costs, and customer lifetime value.
Consideration: Use this exercise to reassess pricing models, customer acquisition strategy, and overhead expenses to optimize efficiency.
4. Prepare for a Lengthy Due Diligence Process
The process may be long, but it’s important to stay positive. Amid anticipated slow funding cycles, VC firms will likely take more time for due diligence when considering whether to invest. Be prepared to wait and to provide detailed, transparent financials, growth plans, and operational insights.
Reminder: It’s important to anticipate and address any potential weaknesses in your business before entering the due diligence phase. The more prep you’ve done, the easier the investors’ job to review.
5. Integrate AI Tools to Stand Out from Fellow Pre-IPO Brands
The name on everybody’s lips is… AI, of course. If possible, pursue paths of integrating AI into your business as a way to stand out from the IPO crowd. Whether this means employing tools for operational efficiency or that benefit the customer experience, prove that you agree with investors that AI isn’t merely a buzzword.
The key is to highlight ways you’re using AI tools to solve real problems and not just as a flash tactic.
“People are failing to consider that AI is not disruptive,” said Rishi. “The only companies that are going to make money in AI are the ones that are supporting large companies by helping them to leverage their data to create value.”
Like the general public, investors, too, are wary of brands adding AI to their pitch simply because it’s a hot topic. In sum: Do leverage AI for data analytics, automation, or scaling, but avoid over-promising on its potential impact on your business.
Related Read: Unlocking the Value of Generative AI For Business: Insights from Peter Cohan
6. Tout and Collect First-Party Data
If you’re really looking to meet a gold star standard, first-party data is essential. Why? Because proprietary data, or data that you own, is a significant differentiator that’s going to attract investors.
By demonstrating that your business controls valuable data about your customers and product – and is able to leverage that data for operations and to solve customer problems – you’ll establish inherent trust in your capabilities that investors will find hard to ignore. Find and explore ways to protect data ownership and create new data-driven revenue streams.
7. Sequence Your Growth Deliberately
Need another way to stand out? Focus on mastering a specific market or vertical before expanding – in other words, be deliberate about your plans for growth.
A strategic, step-by-step expansion plan reassures investors that your growth is manageable and profitable. Clarify to investors that your brand can dominate one area, and accompany this with a clear plan for adjacent market growth and sustainable scaling.
8. Reassess Debt and Alternative Gap Funding Options
With limited availability of debt financing, make sure that you also explore alternative funding options. These include pathways like strategic partnerships, recapitalizations, or equity-based investments, and can bridge the gap until your IPO. Be transparent with investors about your funding strategy and show how it aligns with long-term goals.
9. Get Your Leadership Team on the Same Page
Alignment among leadership may seem like a given, but it’s critical to not make assumptions. Ensure that your executive team has the expertise to lead the company through the IPO process.
Strong, credible leadership is a key component in attracting and retaining investors. Educate leadership and prepare them to shine, because investors will critically evaluate the depth and alignment of your team’s capabilities, especially in key areas like finance, operations, and legal.
Related Read: Why Employer Branding is a Must Have on the Road to IPO
10. Chart Your Post-IPO Path
We’ve reached your final chance to differentiate and hook funding: the post-IPO plan. Investors will want a clear vision of your post-IPO roadmap: What is your “why” for going public?
Noted Rishi, “The best startups have the best sequencing – they start in one, niche vertical and do that really well before layering on additional verticals.”
Develop plans for how you will continue to grow post-IPO, manage shareholder expectations, and scale effectively. In this, highlight and reemphasize your strategic approach to maintaining market relevance, revenue growth, and operational efficiency after going public.
Launch Your IPO with Help from the Experts at PAN
At PAN, our team is uniquely positioned to help you stand out and succeed. If, after reading this, you’re confident that an IPO is the way to go for your brand, and you’re prepared to do everything it takes to nail the pitch, then we want to help.
Take the Next Step – Let’s Talk!
