6 Strategies to Win the New Initial Public Offering Game
Entrepreneurial tech giants such as Larry Page, Sergey Brin and Mark Zuckerberg have incited changes in initial public offerings (IPO). The new IPO processes have resulted in entrepreneurs setting initial prices higher, raising more money and filing for IPOs more quickly.
The New York Stock Exchange saw more than $12 billion in proceeds from IPOs in the first half of 2015 alone. While the second half may reflect different numbers it’s safe to say that tech entrepreneurs have changed the game.
But what can entrepreneurs do to instill confidence about their businesses’ futures and adapt to the changing IPO world?
1. Be confident in business plans and road maps.
One new IPO approach has been to tailor road shows to marketing and entertainment, using flashy multimedia to attract clients. Approximately 82 percent of institutional investors cite a road show’s quality as a component of their buying decisions. Investors can, however, spot the smoke and mirrors and consider quality road shows to be those where flashiness is not covering up inferiority.
Businesses don’t have to be big in order to prove they’re self-assured. Focusing on a single need is enough to build a business plan and road map.
2. Don’t hide from weaknesses or problems.
Another new trend has founders writing long and personal letters to investors regarding their hopes and worries with going public. Instead of writing about uncertainties, offer solutions to any problems moving forward.
3. Appeal to all parties as investors, and educate them.
Feed audiences concepts that are intellectually challenging and digestible. Clients need to be informed with simple messages distributed in easy-to-assimilate formats. Include information about all expansions beyond the initial business to foster long-term relationships.
4. Build customer loyalty with clear road maps and superior support.
Customer satisfaction is no longer measured through revenue. Companies can be successful even if they are not profitable as long as they have wide varieties of users who love their products.
Establishing long-term relationships through professional services, support and ongoing road map updates is part of the value included in IPO prices. Take advantage of the new fact that companies can be linked with the personalities of their founders, their abilities to execute over the long term and their reputations.
5. Focus on long-term market opportunities.
The public itself poses a potential problem in its tendency to be prone to fads. Unless secure structures are in place, executives risk losing control of their companies as the pressure mounts to move forward. Find long-term market opportunities to avoid becoming another blip.
6. Track data analytics constantly, and act on that knowledge.
The new IPO methods may offer comprehensive approaches that go beyond dry numbers. However, in order to demonstrate to potential investors that you know where your product fits in the market, have the facts to back it up.
Be careful with this knowledge. Companies are becoming subject to heavy public scrutiny, which can affect business decisions (even though data the public can’t view might serve as better decision-making tools).
Even if a business is not ready for an IPO, these six strategies are something entrepreneurs should think about as they continue developing their products until they are ready. Beyond road shows and personal relationships, the new IPO world includes more consumer-facing tech companies, as well as companies backed by venture capitalists -- and mini IPOs that are accessible to everyone.
Joining this world is becoming increasingly easier as IPOs continue to be approachable, so don’t be afraid to participate -- or even win.