When should a company go public?

Sources:

Choosing the right time for a company to go public is a critical decision influenced by several factors, focusing mainly on the company's readiness rather than market conditions. Here are key takeaways from experts on when a company should consider going public:

  1. Company Readiness Over Market Timing: The ideal timing for an IPO should be based on the company's development and readiness, which includes maturity of the business, readiness of the team, and the unique value proposition of the business relative to existing public companies. A company should go public when it’s well-prepared to meet the expectations and demands of public investors, rather than trying to time the market 1.

  2. Experiencing Strong Growth: A company should consider going public when it is experiencing strong growth, especially if it’s growing at a rate significantly higher than others in its sector. This growth rate positions the company uniquely in the market, making it attractive to investors 2.

  3. Financial Metrics Alignment: Going public is advisable when a company has reached significant financial metrics, such as around $50 million in revenue and is capable of doubling it. This indicates a stable financial foundation suitable for the scrutiny and transparency required in public markets 2.

  4. Market Opportunities: Specific market conditions, such as those seen during the pandemic where local services like Nextdoor saw a surge in use, can also dictate the ideal timing for an IPO. Such conditions can provide a strategic opportunity to capitalize on the increased market interest and visibility 3.

    IPO Timing Insights

    JD and Jeff discuss the importance of timing IPOs based on business readiness, not market conditions. They emphasize the value of being perceived as a growth stock to attract investors. The conversation highlights the significance of delivering consistent growth results for tech companies going public.

    The a16z Podcast

    a16z Podcast | The Curious Case of the OpenTable IPO
    1
    2
    3
    4
  5. Long-term Vision and Stability: Companies should have a long-term strategy and a robust operational structure that can sustain the rigors of being a publicly traded company. The decision to go public should be aligned with long-term growth plans and market positioning strategies 4.

Consultation with financial experts, attention to market trends, and a robust internal assessment are crucial in making this decision. The timing largely depends on the company's readiness and strategic objectives rather than just external market conditions.

RELATED QUESTIONS