Exiting Through an Initial Public Offering
There's nothing really fair about initial public offerings.
For the owners of plenty of really great entrepreneurial ventures -- I'd go so far as to say for most of them -- there isn't a snowball's chance in hell that they'll be able to cash in some or all of their equity stakes by taking their companies public. This window of opportunity is simply too narrow for most privately held corporations to squeeze through. The dot-com mania of the late 1990s, extreme though it was, epitomized a reality that most small business experts know all too well: The only likely candidates for an IPO are those companies on a short list of hot industries -- a list that shifts according to the whims of the stock market -- and those that seem destined to grow fairly quickly to $100 million or more in revenues.
Regardless of what fantasies you may have had back in those early start-up days, by the time that you reach Stage Three of operations, you should be capable of assessing your real chances for carrying out this type of exit strategy. After having tracked the financial paths of entrepreneurs for more than a decade, I'm convinced that there are basically only two routes that will get you to an IPO:
If you find yourself in either of these two situations, this action plan should help you carry out a successful exit through an initial public offering:
Believe it or not, this part of your planning process is fairly simple, in part because if you truly are a likely candidate, you've got a team of advisers and professional investors already in place, ones who understand what's necessary to bring these deals to a profitable conclusion. That's the good news and the bad news. With this type of transaction, as opposed to exits through a sale to an individual or a corporate buyer, you won't be able to dictate this process.