Companies
Why should I go public?
Being public is not for every entrepreneur. Many will prefer to exit by trade sale or to private equity. You generally need to have established, growing revenue streams and a predictable pathway to profitability. But for those entrepreneurs who want to grow their company independently to achieve its potential, the public markets are a great option.
General advantages of public ownership
On the public markets, you will be able to run your company, you’re not controlled by a corporate or private equity owner. Typically, there is a single class of share, meaning that you’re at the same level as your investors, not sitting at the bottom of the preference stack. Once you’re on the market, the fundraising process is predictable and fast by comparison with raising a private round, especially at the later stages. Drag and Tag clauses chain together investors with different interests and time scales, the public markets allow Angels, Founders and Employees to sell their shares for a fair price, rather than be trapped for decades.
The advantages of the Global Growth Market
The Global Growth Market is not the same as other venues. Our mission is to make the public markets work for entrepreneurs again. First off, we insist that companies that come to us are established with real growing revenues. But if you meet our eligibility criteria, we can treat you really well. Our Capital Partners will provide half of all of your primary capital needs. We also seek to make it easier to become public: no gold plating of the regulations. We’ll use technology to ease the burdens of reporting and compliance.
Things to know about life in public
Going public is an entrance not an exit for the entrepreneur. You’re taking on new investors, you might sell some stock, but the new investors are also buying into you. Some things will be different: you do have to publish numbers quickly, beef up your finance function and learn how to communicate clearly about what you do and your prospects: most entrepreneurs who go through the process feel that the discipline helps them to manage their company.
You have to get used to the fact that there’s a constantly moving valuation on the company. The share price moves in sometimes mysterious ways. You have to manage past that. Don’t fixate on the share price: a higher share price is not something you should pursue as an object in itself, rather it ensues from doing other things right.
But we should acknowledge that at least the price is real: private company valuation marks are synthetic and intermittent – it’s easy to believe that when you sell 1% of the company in your series D for $10m that you’re a unicorn, but that’s not the price that you can get for your ordinary shares, and certainly not any time soon.
Why don’t I go to NASDAQ?
To be relevant on NASDAQ or NYSE you’ll need to have a market capitalisation above $5bn or an ARR well in excess of c. $200m. The US equity market is now a ‘large cap’ game, a bad fit for many late-stage venture companies. This is the opportunity for the Global Growth Market – to be the global equity market that exists for entrepreneurs to access growth capital from investors around the world.
Removing blockers: the listing process and regulatory burden
The IPO process can be lengthy, costly and have random results. The Global Growth Market is updating it to become, as far as possible, cheaper and more predictable. The required documents are being simplified and, in some cases, eliminated. A pre-screening process will give entrepreneurs and VCs a realistic view of their readiness for IPO. A quick ‘no’ can sometimes be valuable. The cheapest option will be for companies to list without fund raising, at least initially, particularly for companies with developed capitalisation tables.
We’re also lessening the ongoing compliance burden. Reporting will be simplified through the use of technology and standard templates. Corporate governance requirements will be tailored proportionately to a company’s status and applied consistently across the market, irrespective of country of incorporation.
Come on in, it’s fine
The public markets can get a bad rap. Too expensive. Can’t do hard things. Live from quarter to quarter. Commentators complaining about compensation. That narrative overlooks the very real advantages of running a public company to entrepreneurs: one class of share, simpler fund raising, evergreen capital without artificial exit windows, and, above all, greater freedom to set the strategy and run the company than other forms of ownership.
Please get in touch and we can chat.