Exploring founder mode for your startup board: Part 4
A roundup of the best advice on building and managing your startup board for success.
We’re bringing together the best startup board advice from around the world into what will be an ever-growing compendium.
We’re sharing this advice through the typical investment and commercial stage gates of a startup, because once a startup has taken on external investment, the founders have a responsibility to shareholders other than themselves and it generally impacts on how the board must operate.
If you don’t take on external investment and bootstrap your growth, it still helps to have a board that can support you to run the company and to grow it beyond what might be in your immediate toolkit.
This time around we’re focused on the next step-change period of growth where it makes sense to raise further capital and provide liquidity to your existing shareholders by undertaking an IPO, or if the growth horizon is different or changing, entertain an exit via acquisition/merger where your company is the target. If both of these are potential options, you can run them side-by-side as a dual track process. What is a dual track process? It’s when you’re keeping both in the frame at the same time - so, gearing up for IPO, or angling to be acquired.
While these are two very different routes, having a solid management team and board will help you to achieve the (fair) value that you desire, and be able to position you better in negotiations and/or listing preparations.
We’re taking our Part 1, Part 2, and Part 3 as read, as all is still supportive here, and we won’t repeat it.
In this Part 4, we’ll go through the incremental disciplines and skills that you need to have when transitioning from a private to publicly listed company, including:
Publicly reporting and sharing information, including sensitive information and forward guidance;
Information disclosure management;
A team (and board) that understands the needs of the new environment that you’re operating in; and,
Adapting to and meeting new levels of responsibility and accountability by implementing appropriate governance structures.
Plus we share incredible resources from Andreessen Horowitz, TDM Growth Partners, and the ASX, below.
If you want to know more and build the skills you need to manage your company, board and investors successfully, our next Startup Board Course cohort kicks off on 6 November 2024: apply to join us here.
PART 4: IPO or Exit
When you’re thinking about an IPO or exit, there are many similar attributes that the company needs to demonstrate in both options, but when you’re going for an IPO, there are incremental disciplines and skills that you need to have as a company to be able to manage and engage with the market and your new disclosure requirements, and these disciplines and skills won’t typically have been (fully) part of your team and day-to-day before. When you list on any exchange, these new skills will need to become second nature (and ideally practiced before they are needed). They are:
Publicly reporting and sharing information, including sensitive information and forward guidance: You’ll need to have a process to meet and continually develop your public performance reporting across all aspects of the business including strategy, financials, risk, people/your team, sustainability measures, and other legal disclosures (which is kicked off and initially publicly established in your Prospectus), and be able to achieve this to a bullet-proof (read: high quality and accurate) standard within the periods required by the particular exchange you’ve listed on. Having meaningful and consistent reporting that resonates with the market (and makes you comparable) is key to building trust and confidence in management and the company, supporting the company to trade at fair/more than fair multiples, subject to other determinants. To get here, your internal process will need to be robust enough to achieve this, including to be able to produce meaningful forward guidance, and be able to educate the market on the drivers of this/your business. This means having governance structures to meet these new standards (see below);
Information disclosure management: Having control of, or methods to manage, what you are disclosing as a company at any level, under a market’s specific continuous disclosure regime, and being able to ensure you are adhering to it, to give all shareholders equal and timely access to information. When you’re not used to watching what you say or share, this can be a challenge;
A team (and board) that understands the needs of the new environment that you’re operating in: you’ll need people on your board and in your management and support teams that are able to meet and manage your new found public obligations and exposure, and/or be ready to take these on. For example, if your existing CFO has never worked in public markets before, or if your CFO was usually the one responsible for all ‘investor relations’ as a private company, this function is something you would want to strengthen before listing, to be able to meet your requirements and build your best practice approach to market engagement (assuming best practice is what you’re aiming for).
Adapting to and meeting new levels of responsibility and accountability by implementing appropriate governance structures: Implicit in meeting all of these new obligations above is the ability to do so, and the policies, procedures and oversight to enable the company to operate to this high standard. This is where governance comes into the highest focus, and where legislation and listing rules will dictate the bare minimums you will need to meet to help you achieve this active and responsible custodianship on behalf of shareholders.
To sum this up in the words of Andreessen Horowitz, a leading Silicon Valley-based tech investor that is willing to invest early and maintain a long-term commitment to its portfolio companies:
“If you think of companies as having a similar trajectory to human development, starting from seed stage to growth, getting to an initial public offering (IPO) is like getting a license to drive. It holds companies to a higher standard of accountability — for financial discipline, disclosure, planning and delivering to plan, and even strategic direction. Mark Zuckerberg has described how, because Facebook was held to a higher standard after going public, the company embraced mobile sooner than it would have… therefore setting it up for a stronger future.”
And from Mark Zuckerberg himself on the merits/challenges of an IPO back in 2013, a year after Facebook/Meta listed:
“I’ve been very outspoken about staying private as long as possible… I don’t think it’s that necessary to do that… I’m the person you would want to ask last to do a smooth IPO. It’s actually a valuable process. Having gone through a terrible first year has made our company a lot stronger. You have to know everything about your company. It took us to the next level and we run our company much better now.”
In this Part 4, we’re sharing resources that can help support founders interested in or taking on the IPO route with lessons learned from those who have done it before. If this is you, these resources are for you 🚀
Kicking off with Andreessen Horowitz’s “16 Things to Get IPO-Ready (or Just Build a Really Strong Business)”, written by Nicole Irvin: it’s full of practical advice, sharing how the markets will view your business, and what you’ll need to do to be valued and supported. It kicks off with this key question:
“But when should companies go public? The answer is simple: when they’re ready. In fact, to-IPO-or-not-to-IPO is not the right question; the question is how to be ready and ensure that a business is “working”. Since I spent years as an investment banker — focused specifically on taking tech companies public — I’m sharing the below list from the vantage point of what public investors look for to determine whether “it’s working”. Think of it as public investors’ wishlist for companies seeking to IPO. And regardless of desired outcome, it’s a checklist for building a robust and enduring business… and a business you can take public whenever you decide it’s time.” It’s a great read: https://a16z.com/16-things-to-get-ipo-ready-or-just-build-a-really-strong-business-2/
Then, from Andreessen Horowitz, or a16z, again, here’s “16 Things CEOs Should Do Before an IPO”, with different and priceless advice: https://a16z.com/16-things-ceos-should-do-before-an-ipo/
And bringing it back home to Australia’s long-term holders of enduring growth companies, TDM Growth Partners (TDM), who have developed a number of really helpful resources on this, particularly if you’re thinking of listing, including:
“A View from the Road: A Practical Guide for Leaders Looking to IPO”: https://tdmgrowthpartners.com/insight/a-view-from-the-road/
“Considerations for Australian Technology Companies When Assessing an IPO Location”: https://tdmgrowthpartners.com/insight/considerations-for-australian-technology-companies-when-assessing-an-ipo-location/
TDM’s Chapter on “IPO Readiness: Key Considerations For Fast-Growing Australian Businesses” from the ASX’s “Entrepreneur’s Guide: Startup | Scaleup | IPO” here: https://tdmgrowthpartners.com/insight/asx-entrepreneurs-guide-2/
Do you have wisdom to share here? Get in touch with us to be included.
Become more confident in your board and company obligations: apply to join our next Startup Board Course cohort - find out more here.
