Advice for the Class of '25 from a Fortune-5 CFO

Preparing for an IPO is something about which an insane number of people purport to have expertise. Never mind that they’ve never, you know, done it successfully themselves.

IPO “thought leadership” in this country is monopolized by VCs and their advisors. To be sure, some of their advice is terrific.

But many VCs define a “great IPO” differently than executives and long-term public company investors. VCs are, of course, long-term investors. However, their multiyear holding periods typically occur when the company is private. When a portfolio company goes public, the goal is often to liquidate and distribute the spoils to limited partners sooner versus later.

In other words, VCs and their consiglieri understandably have a certain aperture through which they view IPO greatness. And no one should be surprised that their “thought leadership” is geared, in part, towards achieving the same.

But if you define a “great IPO” as one that sets the stage for long-term public company success, consider overweighting advice from officers and directors who’ve actually done it*. Preferably more than once.

It perhaps goes without saying that there are far fewer of them.

I once spoke at length with the CFO of a now trillion-dollar company who joined the board of a fast-growing private company to help architect their IPO. Like all real experts, he spoke simply and with unforgettable gravitas.

“For companies that do a great job preparing to be publicly traded, the only difference in the operation of their business post-IPO is the ticker symbol attached to their name.”

What he meant was that the best way to ensure post-IPO success is to act, feel, and look like a public company while still private.

As a condition of joining the board, he demanded they do three things for several quarters before their planned offering.

• Close each quarter in the timeframe you will be required to when you’re public. Be smart: if you miss one of your first few filing deadlines post-IPO, it’s very nearly game over.

• Issue mock earnings press releases. This way you can find out what it’s like to work with your internal/external communications people, you can iron out the format you expect to use, you can tell which service providers take the longest to revert with their comments, and you can begin developing a working cadence with your board members.

• Undertake mock earnings calls, complete with prepared remarks and, most importantly, extemporaneous Q&A. Tape each iteration and compare them to the leading public company in your industry.

Incidentally, this private company went on to become an enormously successful public company that was acquired for ~ 20x its IPO price.

“Doing an IPO is a monumental pain in the ass, Adam. Why would you then want to follow it up by doing a series of mission critical things for the very first time when everyone is watching and keeping score?”

He’s right.

Imagine if more companies listened.

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*Though it wasn't the focus of this short piece, there are also a small number of highly experienced IPO advisory boutiques in the U.S. that create enormous value.

[Editors note: This piece was originally disseminated to the 1000s of global executives who read my bi-monthly, buy-side perspectives on nuanced boardroom issues and... other stuff. You can subscribe here for free.]

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Adam J. Epstein is a former institutional investor. He advises growth companies about storytelling through his firm, Third Creek Advisors, LLC.?Mr. Epstein is a key contributor to Nasdaq’s Amplify small-cap content initiative, a mentor at the Nasdaq Entrepreneurial Center, and an editorial advisory board member at Small-Cap Institute.?He is the author of The Perfect Corporate Board: A Handbook for Mastering the Unique Challenges of Small-Cap Companies (New York: McGraw-Hill, 2012). In June 2017,?The Perfect Corporate Board?was the #1 ranked corporate governance book on Amazon.com.