4 Steps to Prepare for an IPO


Prepare for an IPO

The first quarter of 2014 has experienced the largest number of IPOs in the past decade, compared to first-quarter data from previous years. With the JOBS Act in place and an improved economy, the accelerated pace is not expected to slow down.

If you are building a company today, you may want to consider whether or not an IPO is right for your company. Keep in mind: the average duration from first financing round to IPO is seven years.

Here is a quick guideline to assist with your planning.

  1. Preparation Phase – 6 to 12 months 

During this stage, you want to hire a CFO with IPO experience. In fact, of the 37 companies that have filed public offerings in 2014, nearly 54 percent hired a CFO with experience bringing private companies public.

Your battle-tested CFO will be instrumental in updating your financial reporting to conform to Sarbanes Oxley and crafting the financial section of your S-1, the formal document that is filed with the Securities Exchange Commission (SEC).

The selection of a lead underwriter and, if needed, accounting firm should be completed by this stage.

  1. Organizational Meeting – 1 to 5 days 

Your organizational meeting may be brief if all parties can agree on the terms of the offering and the timeline for the IPO. It is wise to use your preparation phase to get your management team, investors and board to reach a consensus.

  1. File S-1 – 3 to 4 months to draft, 1 to 2 months for SEC approval

Most early-stage companies are allowed to file confidentially as an “emerging growth company” under the JOBS Act, which allows the company to receive their first review from the SEC prior to disclosing the filing publicly. The main criteria for a confidential filing is: 1) revenue of less than $1 billion in the last fiscal year and 2) no sales of common equity prior to Dec. 8, 2011.

Your company should be prepared to review and respond to all SEC comments over the next few months. This is where having an experienced CFO will aid the process.

  1. Road Show – 2 weeks 

Once your company has obtained FINRA clearance, you are ready to conduct nationwide presentations to showcase your investment opportunity. Your underwriters manage this stage, but you should expect to set aside time to meet with investors.

The most important element of preparing for an IPO is recruiting the right people. You can begin that process today. Ensure the staff you bring on today has what it takes to be part of a high-growth team.

This post originally appeared on Atelier Advisors. Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs. All AlleyWatch readers are automatically eligible for a 50% discount on either of the courses using the preceding links.

Image credit: CC by herval


About the author: Lili Balfour

Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator and host of Finance for Entrepreneurs, author of Master the Finance Game, and host of the Finance for Entrepreneurs broadcast on Spreecast.

After spending fifteen years in investment management and investment banking, she decided to develop a firm to cater to the specific needs of early-stage companies. At Atelier Advisors, Lili advises leading brands across industries: from tech to consumer goods. In the past, she has advised over 100 brands, including:

Bag, Borrow, or Steal, Visual IQ, Alpha Theory, Derivix, Practice Fusion, Peeled Snacks, Sustainable Minds, Firescope, Chix 6, Duchess Marden, Erin Fetherston, Eckart Tolle, and Stuart Skorman (founder of Reel.com, Elephant Pharmacy, Hungry Minds, and Clerk Dogs (sold to Netflix)).

While advising companies at Atelier Advisors, she observed a common theme – -brilliant founders avoided finance. She began writing about entrepreneurial finance to solve this problem.

As a native of Silicon Valley and a first generation Mexican American, Lili understands the importance of imparting wisdom learned in Silicon Valley to the rest of the world. Her goal is to teach the entire planet about entrepreneurial finance.

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