RTC #15: Are you IPO ready?

Why today’s issue is valuable to you 💎

1. Headlines: The “1-5-15 Framework” for the perfect pitch, three fundraising pitch decks used by the most famous unicorns, the latest tech trend reports incl. AI, Metaverse and Healthcare, AI industry shake-ups, and more!

2. Today’s (Expert) Deep Dive: IPO explained, learn why companies go public and how to prepare for an IPO, the ultimate IPO case study for an emerging and growth company, and you will get the answer if there will be an IPO window in 2024, and whether you better list in the US or Europe 

I truly love working with founders and entrepreneurs at any point on their “Road-To-Capital”. I opened up a limited amount of hours each week for advising.

Headlines 📢

• On today’s topic

  • Reddit’s IPO delivers for new and old shareholders alike

  • Astera Labs shares jump over 70% in stellar Nasdaq debut

• Fundraising pitch decks used by the most famous unicorns 🦄

  • Facebook

  • Canva

  • LinkedIn

• Busy week for AI

  • Microsoft hires Inflection AI founders to run new consumer AI division (after Microsoft led a $1.3bn funding round in Inflection AI last year)

  • Stability AI CEO resigns: “You’re ‘not going to beat centralized AI with more centralized AI”

• Going to pitch? Follow the “1-5-15 Framework”
  
  

  

• The key trends shaping the sustainable investing space in 2024 and beyond

• Using ChatGPT to analyze a startup's tech stack

• Tech Trends Reports 2024

  • Artificial Intelligence

  • Metaverse

  • Healthcare & Medicine

  • Energy & Climate

• Y Combinator is raising $2 billion in new capital across three funds

🤿 Deep Dive: IPO Explained

All the big tech companies did it and “went public”, feels like the entire VC world is currently talking about the next “IPO Window” and when it finally opens, Reddit did it last week…

Yes, you can have a great EXIT when selling your company to a strategic acquirer - no doubt! But how does this compare to ringing the bell at the New York Stock Exchange on the day of your first listing (not saying that I actually know how this feels 😊)?

The IPO is crossing the border from private to public – it's not just about raising capital (or a liquidity event for existing investors); it's the big league, where transparency, shareholder value, and growth intersect. On the Road-To-Capital, hitting the IPO milestone feels like graduating with honors validated by the ultimate vote of trust: the public investment.

Are you IPO ready?

Let's start with the fundamentals…

• IPO = Initial Public Offering

• An Initial Public Offering is the process by which a private company becomes publicly traded on a stock exchange, offering its shares to public investors

And why do companies go public (main reasons)?

• Raise Capital: Going public allows a company to raise significant capital.

• Liquidity: Provide early investors and company founders the opportunity to cash in on their investments. It also offers employee stock option plan (ESOP) holders the chance to sell their shares.

• Acquisitions: Public companies can use their shares as a currency for acquisitions, making it easier to grow and expand by acquiring other companies.

• Public Profile and Credibility: Raise the company profile for future growth

How to prepare for an IPO?

In one sentence: it is pretty comprehensive - as you are playing now in the Champions League, the public markets 👇

These are the IPO basics.

For next-level expert insights, Armin joined me today: Thank you!

Heading the team at UBS responsible for IPO and pre-IPO financings in Germany/Austria, he just knows….

And in a few minutes, you will know as well:

• If a company needs to be profitable to be “IPO-ready”

• Which IPO represents the perfect case study for an emerging and high-growth company aiming to go public

• If there will be an “IPO Window 2024” and what companies will benefit from it (see below the current trend from my LinkedIn poll, place your vote before you know the answer)

• And last but not least the big question is “Where to list?”: home market, USA vs Europe, and what factors you need to consider for an informed decision

👉 Curtain up for Road-To-Capital exclusive expert insights you don't find in any textbook

👉 Route-To-IPO: (High) Growth and Profitability

RTC: “How can companies balance the need for rapid growth with the financial discipline required for a successful IPO? Does a company need to be profitable to be “IPO-ready”?

Armin: “There has been a clear trend in the capital markets for companies to stay private for longer. There are several reasons for that. When it comes to rapid growth, the public markets with quarterly earnings, and research following are less forgiving for not meeting expectations which will drive volatility in the stock price which can be a big distractor in executing this very rapid growth strategy and as such is a factor in considering the timing of the IPO.

On profitability: it depends somewhat on the market conditions but in a higher rate environment where we find ourselves now profitability has become relatively more important. As a minimum a clear path to profitability is critical and with clear I would qualify that the business model needs to be such that this is pretty much predictable otherwise it is either binary or results in valuation discounts.”

👉 IPO Preparation – Case Study

RTC: “What IPO do you believe was particularly well-executed and highlight the one/two key takeaways for emerging startups and growth companies considering their IPO journey?"

Armin: “Given the focus on emerging and growth companies, perhaps some that are not yet profitable, I would highlight the Delivery Hero IPO process which had an excellent management team that was able to articulate the journey extremely well in particular on a) by breaking down the various geographies which were in various stages of maturity and b) explaining the market place model well.”

👉 IPO Window 2024

RTC: “Do you foresee an “IPO Window 2024” and what specific qualities or metrics will distinguish successful IPO candidates this year?”

Armin: “Yes, I do think that the IPO market is open and we have seen already that companies are using the 2024 window. I do, however, still see a selective market and the focus on profitable growth, sound business models, and aftermarket liquidity are some of the key factors for institutional investors”

👉 Listing location – Home market, Europe vs. US

RTC: “Given that we see at times, companies listed in the US that are based in Europe, should the base case for a growth company be its home market, another European listing location, or the US?”

Armin: "This is a very good question and quite topical given the dearth of issuance in Europe (but frankly also in the US). In short and in my opinion, US listings without any or any significant US operations of the underlying business are not really advisable potentially only in the biotech space. I would, however, say that it is worth considering several relevant factors like liquidity, aftermarket, valuation, research coverage, IPO sizes relative to market cap, i.e. free float, index inclusion, documentation and regulatory requirements at IPO and beyond, costs, and fees, to make an informed decision.”

📖 Infographic of the week

Boards are getting bigger in European startups (please write me if you know of a startup with 7 (!) board members)

📅 Calendar of main VC events in the upcoming weeks

“Networking is a lot like nutrition and fitness: we know what to do, the hard part is making it a top priority”

April
• Venture West 2024 | San Francisco, US | Apr 3-4
• Energy Tech Summit | Bilbao, Spain | Apr 10-11
• 0100 Conference Europe 2024 | Amsterdam, The Netherlands | Apr 16-18
• TechChill | Riga, Latvia | Apr 17-19
• eMerge Americas | Miami, US | Apr 18-19
• Startup Grind Global Conference 2024 | San Francisco, US | Apr 23-24
• VC Platform- Global Summit ‘24 | New York, UK | Apr 24-26
• TechCrunch Early Stage 2024 | Boston, US | Apr 25

May
• Private Debt Investor Europe Summit | London, UK | May 7-8
• Emerging Founders | Warsaw, Poland | May 7
• EU-Startups Summit | La Valletta, Malta | May 9-10
• Impact’24 | Poznan, Poland | May 15-16
• Mashup | Malmo, Sweden | May 15-16
• Tech.eu Summit | London, UK | May 16-17
• Finovate Spring | San Francisco, US | May 21-23
• Infoshare | Gdańsk, Poland | May 22-23
• Viva Technology | Paris, France | May 22-25

👉 Get the full list of events in 2024 here

This was it for today.

If you find Road-To-Capital valuable, pls share it with your friends 🙏

Our awesome mugs and legendary hoodies are waiting for you!

See you next Tuesday,
Stephan 👋

Issue #15 | 26 March 2024