Going public: The pain and the pleasure
Monday, April 21, 2008/
Floating your company may be the dream for some, but several realities need to be seen in the daylight to be appreciated. BRENDAN LEWIS
By Brendan Lewis
During the dot-com era, the Holy Grail was to start a technology company, get capital, list it, then move on. But very few achieved this. In fact the few that did setup business that listed generally hung around and had some fascinating learning experiences on the way.
So on the 17 April at the Churchill Club, we ran a program called “from kitchen table to IPO“, which was a look at those experiences. We were joined by Silvio Salom of Adacel Technologies, Leon Lau of Peoplebank and Michael Abela of Mobi.
The evening was a look at what has been learnt by founders of public companies in three areas:
- The underlying strategy for going public.
- The issues around selecting advisers.
- The new skills to be acquired.
This week I wanted to pass on the main points (as noted by me) that were made by our panel around the strategy of going public:
- Know exactly when you are going to list and what you are going to do with the money. Because if you don’t your share price will tank and you will get removed.
- You are either listing to be rewarded and exiting, or to get access to capital. Decide which it is before you float. If it’s to get access to capital, make sure you leave room for going back to the market.
- The business better be prepared to grow with the capital before you list. Because you are simply not going to have time to address these operational problems effectively afterwards.
- Accounting systems, operations and governance should be tidy before the float, not afterwards. See above.
- Be prepared for a new job (CEO of a public company) to be added on top of your existing job (managing the business). The CEO’s job is a completely new set of tasks which may take you years to master.
- Be prepared for at least 400 new shareholders holding you personally accountable for the share price. They will ring you!
- Be prepared to no longer control your business. It’s no longer your shop. You effectively need to have 20% to 30% equity to control what’s going on.
- Think carefully about how you want to list. A small market capitalisation (say less than $100 million) means low liquidity for shareholders (not many buyers or sellers) which translates to an inability to raise further capital. Analysts and brokers will not be interested in you either.
Brendan Lewis is a serial technology entrepreneur having founded : Ideas Lighting, Carradale Media, Edion, Verve IT, The Churchill Club, Flinders Pacific and L2i Technology Advisory. He has set up businesses for others in Romania, Indonesia and Vietnam. Qualified in IT and Accounting, he has also spent time running an Advertising agency and as a Cavalry Officer with the Australian Army Reserve.
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