IPO – How to Grab This Holy Grail

In the first year of my most recent job, I finally managed to get an IPO done. I had been close a couple of times in the past, but in each of them the market took a dive right when we were close to launching. One time the 2008/2009 financial crisis hit and the window slammed shut. The next time the leading company in the space suddenly imploded and almost instantly went into a hard bankruptcy. The market as a whole was still open, but there was zero investor appetite for the type of company I was trying to get over the finish line (yield co).

We had done all the work in each case with the S-1 done and the banks lined up, but if the market is not taking deals, no one cares about all the work you did. That is my first caution about doing an IPO, a lot is not under your control.

I want to expand that idea to the career of being a CFO.  There is really no guarantee that an IPO will happen. I have been approached many, many times by recruiters looking for a CFO for a pre-IPO company. Many are said to be 3 to 5 years out. Others within 2. Over the years it has to be 30 to 40 different approaches. 2 companies actually made it public and I worked for both. One after I left and then the window opened again and the one I just left and I succeeded at taking it IPO.

IPOs are pretty rare and never a sure thing. Even the company I succeeded at had tried once before and had the bad luck of immediately following Facebook and that initial attempt failed.. The market reaction to Facebook’s IPO created real hesitation for anything adjacent. As much as it is exciting and potentially pretty lucrative, be thoughtful before accepting a job where a lot of the attraction is the IPO. The further away the expected IPO is, the lower the chance it will happen when it is expected. Usually you are not taking pure start-up risk if the company is seriously considering an IPO, but it is riskier than average, so can you recover from failure? Remember that the consequences of failing typically fall most heavily on the CFO, even if the real issue is not financial.

Why Do an IPO?

Earlier in my career I went to a CFO interview for a pre-IPO opportunity and ran into a founder CEO who did not want to do one and wanted to argue with me about it. Once I got past the annoyance of the disconnect between the recruiter’s pitch and the job the hiring manager had, the discussion basically boiled down to the company was cash positive and had no barriers to growth because of a lack of capital. Ultimately that company stalled a little and got bought out by a larger public company and the CEO / Founder was let go, but at the time, it was doing well and we had a hard to and fro about the pros and cons of being public vs. private.

For me, it only makes sense for a company to go public if the weighting of these five factors clearly points in that direction. This is not a checklist exercise—circumstances vary, and the Board and management team must deliberately weight each factor to determine whether being public truly strengthens the company.:

1. The company needs access to permanent scalable capital
2. Shareholders, including early employees, need liquidity that the private market cannot provide
3. The company requires acquisition currency
4. The extra credibility, brand augmentation and market positioning is a big positive
5. It is needed for talent attraction and retention

There are real downsides to being public, including a potential lack of flexibility because you now need to meet external expectations and in a way that there is no hiding from timing and execution. You also need a robust financial reporting system and a strong forecasting ability. Your ongoing audit, legal and insurance expenses will jump in a pretty significant manner.

So if you are part of the management team and looking at it or interviewing to join to be part of the process, you can sum up the choice into one question, “Does being public make the company strategically stronger five years from now – net of cost, distraction, and loss of flexibility?” Or, in my case having lived off and on in Silicon Valley for several decades and not done an IPO “Do you want to take the chance and just do it so you join many others here in the experience?”

Years ago and still embedded into some foreign stock exchanges is the profitability criteria. However, there are so many unprofitable and earlier stage companies that have gone public (common in drug development and many tech companies) that profitability is often just a valuation footnote.

How do You do an IPO?

There are actually quite a few ways you can get public in the USA, and these are some of the main ones:

1. Traditional Underwritten IPO – One (usually many more) investment banks take a risk position and then bring the company public.
2. Direct listing – The company lists their shares directly on an exchange.
3. Reverse Merger (may be a de-SPAC) – Merge with an already public company in a way that results in you controlling it. Has become much more of a tailored transaction using SPACs.
4. ADR/ADS – Package up foreign shares in a compliant instrument and list on a USA exchange.
5. Stumble into it – have enough shareholders that you qualify under SEC rules. Could be Reg A+ or Reg D.
6. Spin-offs from already public company.

I don’t want to try and make a comprehensive document of all the different ways to do it. There are much better sources via law firms that explain the legal mechanics in detail. Instead I will concentrate and discuss the ones I know the most because of personal experience, and the one I was successful at was a traditional IPO.

To start with, I will make a sweeping statement: in almost all situations, a traditional IPO is best.

Being underwritten by banks and going through the full SEC registration process forces a level of rigor that most private companies simply have not needed before. Drafting and refining the S-1 is not just a disclosure exercise; it is an operational stress test. Financial reporting, controls, forecasting discipline, risk articulation, and internal processes all get examined, challenged, and tightened. Companies that survive this process emerge far better prepared to operate in the public markets than those that try to shortcut it.

Equally important is the role of the banking syndicate itself. The lead and co-managing banks bring together investment banking, equity capital markets (ECM), research, sales, and trading into a coordinated effort. The ECM team, in particular, has deep, current knowledge of the IPO investor universe—who is allocating capital, what themes are working, what valuations are realistic, and how demand is actually forming across different types of funds. This is not theoretical insight; it is informed daily by live deal flow and constant feedback from institutional investors.

That knowledge is critical in shaping the equity story and preparing management for the roadshow. The banking team helps refine the narrative, pressure-tests messaging, and ensures that management can clearly and consistently articulate strategy, growth drivers, risks, and capital allocation priorities. The roadshow itself is not just a marketing exercise; it is a real-time discovery process. Investor reactions feed back into pricing, sizing, and allocation decisions, all with the goal of creating a stable, high-quality shareholder base from day one.

One additional advantage that should not be overlooked is ongoing analyst coverage. As part of a traditional IPO, the underwriting banks initiate research coverage after the quiet period, providing the market with a structured, independent framework for understanding the company’s strategy, financial model, and long-term prospects. This coverage helps educate a broader investor base, supports liquidity over time, and creates an ongoing dialogue between the company and the market—something that is difficult to replicate without a full underwriting syndicate.

Finally, a traditional IPO provides a tool that alternatives simply do not: stabilization. In volatile markets—or when sentiment shifts unexpectedly—the underwriters have the ability to support trading in the early days after the offering. This is not about propping up a weak company; it is about managing technical pressure and ensuring an orderly market while the investor base settles. That option alone can materially reduce downside risk in the most critical period of a company’s life as a public entity.

Taken together, underwriting discipline, rigorous preparation, informed investor access, ongoing analyst coverage and the availability of stabilization create a framework that maximizes the odds of a successful transition to the public markets. In most cases, that structure is not a burden—it is a competitive advantage. You need to pay for it via underwriting fees, but I think you get more than what you pay for.

I will explain my views on the other methods of going public in my next post and then have one more post to weave in my experience to what typically happens in an IPO.