INSUBCONTINENT EXCLUSIVE:
Harry Nelis is a partner at Accel in London
He has advised three companies through IPO in three geographies (Kayak in New York, Showroomprive in Paris and OFX in Sydney)
After their long post-financial-crisis slump, European tech IPOs are starting to rebound
Tech companies raised more money on European public markets between 2015-17 (€5.3 billion) than in the previous seven years combined
With venture capital having boomed in that time, that trend is set to continue: There is a generation of well-funded, fast-growing
technology companies now eyeing the public markets as the platform for continued rapid growth
But what needs to be done to get ready for an IPO and, crucially, what comes nextMoney raised and market opportunity alone do not make for a
public-company-in-waiting
You do not transform from a scrappy growth business into a tightly governed, transparent public company overnight
It has to be a gradual evolution, one which requires the right people, structures and mindset to be in place
Companies need to ask themselves not just if they want to pursue an IPO, but how exactly they plan to go about it, and how they will prepare
for the realities of life as a public company.Having advised three companies on their journey to an IPO, across three different geographies,
I think there should be at least two years of careful planning between deciding to seek a listing and hearing the bell ring on your market
open.You have to start with bringing in the right people
A business can grow a long way on the back of an inspirational founding team, but as an aspiring public company, you need an experienced and
high-performing management team as well
Do you have a CFO who has credibility with public market investors Does the board have enough members with independent authority; will it
meet the requirements of those institutional investors who now require a minimum quota of female directors
Ultimately it comes down to
one question: Can you start operating like a public company before you become one Your board will have to grow, not least to fulfill
necessary governance functions, from audit to compensation and nomination committees
These are important and often complex hires, which can take anything from six months to a year to put in place
It also takes a while for new board members to start working well together and gain a detailed understanding of the company.The composition
of the board is just one area where a private company has to start asking itself new questions as it prepares for a listing
Another is the financial profile of the business and the trade-off between growth and profitability
Will investors give us credit for growing, say, 80 percent year over year Should we front-load investments and associated losses, or incur
them over time when required The CEO also must think about how she is going to communicate with the market, and whether she needs others
around her to give investors the full package
A very visionary and product-focused CEO, for example, will need to be complemented by a brilliant CFO who can handle detailed questions
about the company’s finances.A company thinking about going public also needs to evolve its mindset
After an IPO, you will no longer be a tight-knit group of founders, early hires and investors who know the business intimately
The relationship you have known with your private backers is going to bear no relation to the one you will experience with public market
As a public company, you are no longer being supportively cheered on, but independently scrutinized by investors who understand the business
in less detail and are liable to react strongly to indicators whose significance they can easily misinterpret
In this environment, if you set an ambitious target, you can’t achieve only 95 percent of it and expect to be consoled and encouraged
Institutional investors are going to want to know why you didn’t exceed that target, let alone failed to meet it.Ultimately it comes down
to one question: Can you start operating like a public company before you become one The companies that succeed post-IPO are those that have
laid the foundation to make the transition from private to public as seamless as possible
There are rich rewards to be enjoyed on the public markets, but only for those who do the hard work in advance to ease into life as a public
Europe’s fast-growing tech companies should consider not just whether an IPO is the right option for them, but if they are willing to put
in the work that is necessary to make it a success.
