Bob McCooey, a senior vice president at Nasdaq, urges entrepreneurs to see the value of going public rather than clinging to private valuations.
"For anybody who you want to do business with, that public market listing is something that is highly sought after and valued," he said during a panel at the Collision Conference in New Orleans on Wednesday afternoon.
McCooey spoke in conversation with Eric Schurenberg, president and editor-in-chief of Inc. magazine, shortly after Nasdaq posted first quarter profits. The discussion about capital markets touched on billion-dollar companies, as well as what smaller startups should keep in mind as they plan for a potential IPO.
Unsurprisingly, McCooey echoed prominent Silicon Valley venture capitalist, Bill Gurley, who has pushed in recent weeks for high-flying private tech ventures to go public. Hurley argues that such companies are spending far too freely.
"Bill will tell you some interesting things about what's going on in the Valley and the way he views the world," McCooey said.
Schurenberg asked McCooey what advice he would give to private business owners who don't yet boast massive valuations--or even any VC funding.
"We try to remind all entrepreneurs that when you become a public company, you're not selling your whole company," McCooey said. "You [the founder] are going to be there for years to come, driving the value of that company."
How Nasdaq supports private companies
McCooey outlined several ways that Nasdaq is now supporting private companies through a capital marketplace that it launched in 2014. For instance, its broker-dealers will help startups put liquidity programs into place, which can help them to land and retain competitive talent.
"That company has a better chance of landing that sought after engineer because they've already put in place a program to allow them to monetize over the next few years, in case that company does take eight years to go public," he explained. Generally speaking, he added, "small companies struggle with things like stock plan administration, cap table [capitalization table] analysis, waterfall [chart] analysis -- all of the things that are embedded in the capital markets part of the business sometimes get overlooked."
On new equity crowd-funding rules
Though many entrepreneurs are skeptical as to whether "Regulation Crowdfunding" rules will produce the intended financial impact, McCooey remains optimistic.
"Some of the government initiatives over the past few years have been very successful," he said, pointing to the Jumpstart Our Business Startups (JOBS) Act, which aimed to promote small business growth by easing financing regulations back in 2012.
"We will see how the market reacts, but in general, they [the government] have been more thoughtful in the past few years in terms of how they've focused on...all the great entrepreneurs developing the next great, revolutionary, disruptive product or service to come to market," McCooey said.
The IPO drought may be coming to an end
It's no secret that 2016 has seen a shortage of IPOs. The public market debut of SecureWorks, Dell's cyber-security business, just last week, represented the first technology IPO of the year. The company hoped to fetch between $15.50 and $17.50 for its 9 million shares, though just 8 million shares were ultimately priced at $14. SecureWorks raised $112 million.
Still, McCooey is bullish on how the market is shaping up, thanks in large part to the relative success, as he views it, of SecureWorks.
"We think that the market is slowly coming to life," he said. "The pipeline continues to be very strong."