What Is an Initial Public Offering (IPO) Exit Strategy?

A publicly traded company is a formerly private company whose stocks were sold to the public, otherwise known as an IPO.

Companies that sell to the public do so to create capital and brand visibility but also to provide liquidity for early investors and employees.

Remember: 

• Pros: Capital, brand awareness, and talent.
• Cons: Scrutiny, expectations and giving up authority.

Ask yourself these questions before you board the IPO bandwagon:

1. Are you prepared financially? IPOs require a track record of financial performance and are expensive.
2. Can you handle the scrutiny? Once public, you’ll face public regulations and financial reporting requirements.
3. Is your team ready? Do you have the expertise to handle the legal, financial, and communications for the IPO process?
4. What’s your long-term vision? Does an IPO align with your strategy, goals, and vision?

The SaaS trends in your market do play a role in this process but you must also understand the current landscape when opting for an IPO.

1. Market Volatility: Fluctuations in the market affect IPO valuations and investor sentiment.
2. Sector-Specific Trends: Understand investor interest in your SaaS niche.
3. Regulatory Changes: Stay current with regulations that affect the IPO process.

Building a financial track record and team early in the game is helpful. 

Investors are looking for consistency, profitability, customer retention, and solid opportunities in a company.

Once you have gone public, you’ll need to set new expectations and challenges.

• Investor Relations: Regular communication with shareholders and analysts is key.
• Quarterly Reporting: Increased financial reporting to address scrutiny that comes with going public.
• Market Pressure: Financial goals seem to get shorter once you’ve gone public.
• Strategic Planning: Maintaining your vision and strategy becomes even more crucial.