One would wonder why an early listing of startups makes sense.
First, we are not talking about the deep end of the swimming pool. We are talking about the baby pool. There is advantages of being in the baby pool.
Some of the questions we will answer in the next few discussions are:
- Venture Capital deals are private agreements. Now with listing, what is the degree of privacy that listed startups may be subjected to?
- Arbitrary and mutually agreed valuations will be benchmarked with the market cap or per share value of the listed startup. So is there a regulatory threshold in these?
- The merry-go-round that normally happens in startups' successive rounds may not be possible, if the startups are listed. How much inconvenience or deterrence is listing to such a pass-the-ball approach of VCs?
- Exit of institutional investors will be through secondaries. Normally secondaries are done in a quiet manner, as they are considered anathemic to fund raise. But listed companies need to report secondaries.
- Startups will be under pressure to perform because of the high visibility. Will that be ok?
- Increased scrutiny by analysts, media and others can be a distraction. How to managed this?
- Compliance increased complexity of operations. So where comes the 'nimbleness?'
- How can one bear the additional cost of compliance, when one is looking for path to profitability?
- Dilutions to VC's and then to public. The founders' share could go down dramatically. Would the founders and VC's be ok with that?
Despite all these unanswered questions, the advantage of early listing is overwhelming. But it is upon us to list the questions that are hitherto unasked and unanswered. That is what this blog series is all about.
