Taking a company public is a dream of many entrepreneurs. 2021 set a record for company IPOs — over 1000 — more than double the 2020 total. The process of taking a company public can be stressful and requires extensive leadership skills. And once public, the necessary skill set must expand and adapt. Like each stage in a business’s evolution, leading a public company requires a different set of skills compared to a private company.
Last year, I took the company I co-founded, PubMatic, public. As I reflect on the anniversary of our IPO, hindsight has imparted valuable wisdom and taught me important lessons along the way.
Set expectations mindfully
Once public, a company must engage a new set of stakeholders, mainly new retail and institutional investors. Unlike private investors, this audience holds certain expectations and often doesn’t have direct communication with company leadership. Establishing and executing reasonable expectations with the goal of exceeding them often have the residual effect of creating long-term trust and goodwill with these investors.
Going public means understanding and accepting that investor expectations will never recede, nor should they. Instead of fearing or dismissing public expectations, feed off them in a symbiotic relationship that will ensure long-term success across the board.
Prioritize authenticity in corporate culture
Rather than radically shifting to align with prevailing winds, corporate culture should remain reflective of the company’s DNA once public. A clear bridge between the company’s culture pre-IPO and post-IPO reflects strongly in the public markets. To be authentic is to “do in the traditional or original way, or in a way that faithfully resembles an original.” It signals to the market that the company has discovered a successful model and, ultimately, is a predictable business. Pivots and adjustments may be necessary as the business evolves, but those changes shouldn’t alter the company’s identity.
Authenticity should be apparent in every aspect of the business, including how the company communicates with the public. This includes decision-making, product investment, hiring and expanding, expectation setting and execution. When you openly advocate a corporate-culture philosophy based on authenticity, investors are more inclined to feel confident in a company’s success and therefore more secure in their financial stake.
Make profitability an immediate cornerstone
Profitability, once a cornerstone of entering the public markets, has been eroded by mountains of private capital, low interest rates and behemoth goals. Companies often enter the public market without achieving profitability and instead maintain heavy losses. Some companies can overcome this — such as Amazon — but it’s always more desirable and convincing to investors to establish financial security and profitability before an IPO.
Consistently delivering a profit-driven, robust performance invariably results in a company fostering favor with potential investors. A company’s stock price is driven in large part by earnings, both current and future. When a company IPOs without profitability, investors must estimate future cash flows, which leads to more uncertainty. Conversely, a company that IPOs with established positive cash flow provides the public markets a more concrete roadmap for the future, alleviating investor uncertainty.
Another obvious benefit is that success draws successful people. The more investors recognize your commitment to profitability, the more they will want to jump on the bandwagon in the early days following a public market debut.
Practice presentation skills
As a public company, leaders will be tasked with presenting to new audiences on a public stage. Private company leaders must prepare to transition to an entirely new role as a public face of the company, in addition to maintaining a daily leadership role among employees. From quarterly earnings calls to media interviews and investor meetings, going public requires leaders to engage extensively with others who may not have the perspective that an insider would have regarding the business.
Developing strong presentation and media-communications skills is vital to conveying a company’s philosophy, message and goals to the public. Investing in this skill far in advance of a public market debut will strategically benefit you as a leader and the company in general. Even the most personable and confident leaders can benefit from guidance and training in this area to improve and refine the ability to succinctly answer questions and communicate key points. Virtually everyone has some anxiety about public speaking. Confronting that anxiety head-on as a necessary business challenge is the first step in becoming an effective public advocate for your company.
At the end of the day, a successful private-to-public transition depends heavily on enlightened leadership qualities and skill sets mindfully developed throughout the process. Although many unprofitable, poorly managed private enterprises graduate to the public markets, enduring success is far more likely when leaders set expectations judiciously, cultivate a progressive corporate culture, establish sustained profitability and diligently prepare to effectively present the company in public venues. Granted, unanticipated variables will emerge along the way, but true leaders quickly and consistently adjust to these challenges, establishing confidence and trust among employees and investors, ensuring long-term success for all.