Mistakes to Avoid When Pitching Investors

It is your business goal to pitch investors to buy your brand. Many businessmen have different theories to pitch them in the right way. Selling your product forcefully can upset or irritate your valuable leads. You must be very much aware of the right way to pitch investors. You can try out different terms and types of pitches to reduce the chances of mistakes that usually businessmen do while pitching to investors.

In this article, you will be guided on such mistakes with some amazing tips and tricks. You can not take a chance to miss any of your leads. Ignorance is not the solution but over-pitching to investors is also wrong. Sometimes the overflow of information becomes the most common reason for sales failure. Entrepreneurs need to do a study to check out what are common mistakes and how they can prevent them in the future. Only then a successful investor pitching is possible with 100% results. So let us proceed to the main attractions of this article to discuss mistakes to avoid when pitching investors.

Mistakes that you should Avoid When Pitching Investors:

Your sales targets may put a lot of pressure on you. That should not reflect on the sales pitch. Otherwise, you will lose the lead and its references as well. Being human is our way of talking and body language reflects what is running inside our mind. But a real entrepreneur must-have skills to express diplomatically. Your script needs to be short, crisp, and clear. Only then your targeted audience will enjoy buying your product or services. Once you have successfully closed the deal, you can later ask for more references or pitch for another purchase.

Taking decisions in a hurry will always lead to a loss only. Below are some silly mistakes done by entrepreneurs while pitching to investors:

1) Desperate behavior:

Every entrepreneur should follow pitching ideas to investors. Finding a fresh lead may generate desperately in you. But this is the time to control yourself. You can show it to your investor. How happy you are to see the lead let your investor also feel the same. He is also here to invest in your services or product. Being desperate to sell your product presents your need and sounds unattractive. In such conditions, your investor may feel pressure to invest forcefully and will move on with other attractive entrepreneurs. So despite smelling desperate, be attractive and informative for your investors.

2) Lacking preparations:

Investors do preparations for the questions they need to ask. Because they are investing their hard-earned money in your brand they would like to clear many aspects. Also, they would like to know why they should go with your services. This means how your product or service is better than others. If you are not prepared for these questions then you may face an embarrassing situation in the meeting session. Even you will lose the chance to pitch your investor. Confidence comes with knowledge. To gather useful information about your brand and prepare some examples to explain your statements. Keep your face confident and do a mirror practice to enhance your confidence level. Your preparations automatically teach you how to pitch investors?

3) Following a script senselessly:

Many new investors learn with their experiences. You follow a script to pitch to investors in your early days. But, some of them make it a habit despite improving. They don’t answer the investor and remain sticky on their script. Even sometimes they don’t give proper time to investors so that they can ask questions. Your investor is showing interest in the brand but still, he wants to know many things about it. You are the source to pass on that information in the form of answers to his questions. Listening to your investors and replying accordingly with satisfying answers may clear all doubts. Also, it helps in building trust and long-term relationships.

4) Straight forward reaction for negotiations:

Many competitors are available in the market with the best offers and deals. Also, it is the right of investors to ask for negotiations. Ignoring that part may cause you to lose a genuine deal. Make sure you have made up your mind to avoid mistakes when pitching investors. Else you will repeatedly do all these mistakes and face failure. As an entrepreneur, your failure belongs to the failure of your brand and services. That may lead the business to a big loss. Listen to what negotiations your investor needs. Check for affordability. After that, offer what your budget and company policy allows. Explained some extra benefits which matter more than negotiations. Suppose it is about an electronic product and your company offers Free AMC for 2 years, or a replacement guarantee for 3 months will work enough. Show such offers to satisfy your investor despite rejecting his negotiation proposal. This is the biggest rock in the path to convincing your investors to invest in your business.

5) Shut down causing pushings:

Are you in a hurry to sell your product? But your investment may be looking for future investment. Maybe he plans to buy it next month. Ushing investors too much can divert his mind to not buy or choose another brand. So before pitching your ideas to investors try to understand what he wants. In case of future buying interest, assist your investor with the desired information and stay in touch. Give a reminder call or SMS at a preferred time.

6) No revisions:

Humans can make mistakes and it is natural. Take your mistake as a lesson. Work on the matter you failed earlier. Do as much revision as you can. It will prevent you from future failure. This revision will clear your mind about how to pitch investors in the right manner. If you will not learn from your mistakes and keep doing such dumb things then you can not see your future as an entrepreneur.

7) Taking criticism as a personal attack:

There are many competitive brands and services available in the market. In such conditions, criticism is a normal thing. Prepare yourself to defend your brand with solid and genuine answers. Being associated with a brand sometimes entrepreneurs take the criticism personally and they start behaving rudely to the investor. It doesn’t suit the personality of an entrepreneur. Always ask for feedback and try to recover from a negative review.

8) Hiding your enthusiasm:

If you are an entrepreneur you need to hold some passion for your work. Dull responses will never let you win. Behave like a representative who will show all about the brand to its investors. Nobody would like to deal with an impassioned intrapreneur.

9) Wrong presentation of need:

You are working for your company and you both need profits. It is common to offer benefits to attract investors. Offering beyond the level may not only affect your profits but, also affect the trust of investors. They will feel like you are in need to sell and they are not needed to buy. Making false promises will also affect your relationship building, which is an important key to running a business in the long term.

10) Wrong angle approach:

If you want to convince investors to invest in your business then a right angle approach is a must. You need to be very focused on your listening abilities for effective investor pitches. Understand what your customer wants to know and where he wants to invest. After that pitch at the exact place. It will save your time and energy. Also, it will impress the investor to bring more references and prefer future purchases.

Conclusion:

The job of an entrepreneur is quite tough. That is the reason you do the biggest part of the business. Properly doing your job is your responsibility. Do the work on the above-mentioned mistakes in a guided manner. Soon, you will reach your career goals. Also, you can get the assistance of some experts. Many reputed companies provide expert entrepreneurs to enhance your sales. Get desired sales output with the right steps of investor pitches.

Investor relations firms are an integral part of how a particular public company works. They essentially collect, prepare, and report the necessary data by communicating extensively with the CEOs, lawyers, and accounts team. An investor relations firm should not only have great communication skills but should also be knowledgeable about the legal and financial terms and conditions of a company. Hence, the need for a competent investor relations firm is crucial. Again, finding the suitable one is quite difficult due to the huge list of options available. Since different companies operate differently and look into selected matters, you need to choose the company very carefully and consider all your requirements.

To help you go past this dilemma, we have listed the top 20 investor relations companies in 2021 along with their core operating features. You can choose from this list according to your requirements.

1) Gem Comm:

Counted amongst the top international investor relations agencies, Gem Comm controls its operations from Singapore. They particularly specialize in investor relations, public relations, branding, marketing, and other crucial strategy building for clients across Asia, the US, and Oceania. Gem Comm understands how important communication is for businesses to grow and retain their relationships with clients, customers, stakeholders, investors, etc. Gem Comm with a strategic and proactive approach to communication helps them seize opportunities The firm also specializes in solving stakeholder issues and advice directly to boost the growth and development of their client company. The company has a 100% track record in helping clients achieve their goals. To accomplish this, they create and implement PR & media content, improve thought leadership & content marketing, and mitigate crisis and issues.

2) Berkeley Communications:

Berkeley Communications are one of the best international investor relations companies that have their headquarters based in the United Kingdom and several offices throughout Europe. They operate with clients across Asia, North, and Latin America. They help companies drive through the market and boost sales as a primary aim. Berkeley Communications also operates as a public relations firm when required. They perform extensive research and analysis of the market and competitor companies to help their client achieve new heights. They mainly deal in industries including IT, telecommunications, and e-commerce.

3) KCSA Strategic Communications:

KCSA Strategic Communications acts both as an investor relations firm as well as a public relations firm and operates directly from the United States. They develop market-class strategic plans; help to increase market visibility, boost sales and communication for their clients. They also undertake social media management for their customers and devise strategies for maximum reach through social media platforms.

4) ICR:

ICR mainly is an advertising company based across various states of the United States including New York, San Francisco, Los Angeles, and Boston. It is one of the oldest operating companies established in 1998. They work for their clients in a manner where they design their client’s websites in compliance with the terms and conditions listed for publicly held companies. They build a web platform for their clients and promote it. Side-by-side, they perform analytics and data management for their client companies and helps them meet their sales targets. They help companies that belong to the real estate, financial services, and energy sectors.

5) PINKSTON:

Another United States-based company, Pinkston Group is a notable advertising and public relations company founded in 2001. They mainly deal in public relations but also have expanded into providing digital strategy services and broadcasting services. Though a company of few heads, they are specialized in handling complex clients and have achieved worthy success since its inception. They help their customers with extensive reach through media and also help in communications within the market. They prefer to work directly with the CEOs and hence they can provide high-class and furnished results. They help non-profit organizations along with companies in the IT, telecommunication, medical, financial, and business services sectors.

6) BlueChip Communication:

BlueChip Communication is a marketing and public relations agency based in Sydney, Australia. They specialize in solving complex marketing issues faced by their clients. They deal with both small firms and large companies. They are also known for providing excellent content-creating solutions. They mainly work with companies that are part of the real estate, legal, and financial services sectors. They also provide extensive digital marketing services according to the needs of the client. They like to work with data where they analyze market possibilities, provide insights, and accordingly suggest solutions.

7) REQ:

REQ is a digital marketing and management solutions company based across several places in the United States including Washington DC, New York, Virginia, Boston, San Diego, and Las Vegas. They are pioneers in using marketing insights to bring brand awareness, reputation, and business results for their clients. They use modern technology and analytics to deal with companies in the IT, energy and resources, medical, retail, consumer goods, hospitality, and real estate industries. They serve internationally and have achieved various accolades. They build extensive digital marketing strategies for their clients and help them boost sales and increase their overall brand reach.

8) Elevate Communication:

Elevate Communication is a public relations and communications company founded in 2007 and is headquartered in Brisbane, Australia. They also deal in creative and strategic development services for companies across various industries including financial, medical, telecommunications, real estate, retail, and many more sectors. Elevate Communication excel in creating powerful social media marketing strategies to keep their clients highlighted on the social platform, building strong brand recognition for them. They also provide web development services whereby they optimize the client’s website for maximum reach.

9) June Communications:

June Communications, established in 2015 is a communications and marketing firm based in Bucharest, Romania. They deal in various services including public relations strategies, marketing solutions, digital strategies alongside content marketing services. They usually do not deal with large companies due to their employee capacity but have helped several small and medium companies gain success over the years. They use powerful strategies to help their clients communicate and build sales. They also provide solutions that help their clients leave a mark on the market. They mainly deal with companies that are in the consumer services, IT, medical, financial services, and business services sectors.

10) Red Fan Communications:

Red Fan Communications is a popular company dealing in public relations, branding, digital marketing strategy and consultancy. It was established in 2008 and has its headquarters in Austin, Texas, the United States ever since. Due to their employee capacity, they mainly focus on small and medium-scale companies and provide them with world-class marketing solutions. They deal with companies that are a part of the medical, education, IT, financial services, energy, legal and business services industries. They also assist in creating media content to keep their client on top for constant brand recognition.

11) OTC PR Group:

The OTC PR Group is a public relations consultant helping small capital companies to interact with the shareholder base. They are completely based in Florida, United States. They use the newest technology to communicate with and propagate the potential financial condition alongside the corporate vision of their clients to investors and stakeholders for the development of business and promote the same to the media for brand recognition. They also deal with digital marketing and portfolio management and devise a certain set of targets for the right investment.

12) BDC Consulting:

BDC Consulting is a small company that was founded in 2011 and operates from Minsk, Belarus. They mainly deal in marketing services and consultancy and work with medium-scale companies. Apart from their core services, they also provide SEO services, public relations and marketing strategy development. They focus on companies within the financial services and e-commerce industry. Alongside providing SEO solutions, they also manage content creation and social media management services for various companies. They use insights and extensive metrics to glide through the market and increase their client’s brand awareness.

13) NEFF:

NEFF is a multi-operational company operating from Philadelphia, United States. They deal in operations like public relations, branding, social media management, website designing and optimization, web development, media strategy services, advertising solutions, photography, and videography. They operate across various sectors including education, real estate, sports, financial services, and more. They use special technologies, integrated strategies, and personalized marketing solutions to build and facilitate relationships between your brand and target audience.

14) Trizcom PR:

Trizcom PR is one of the best public relations and investor relations consulting firms based in Dallas, United States. Established in 2008, they are a team of very few employees, known for their best outputs. Apart from core public relations, they deal in social media marketing, SEO optimization, content marketing services, and digital strategy services for major companies. They have helped several big and small companies with their website optimization and elevating their social media presence and general media presence. Their broad spectrum of services extends across various industries like education, real estate, and financial services.

15) Bebop Asia:

Bebop Asia is one of the leading public relations firms in Asia based in Singapore and was established in 2010. It constitutes a small team of professionals that deal in content development for SEO, link earning, on-site development activities, mobile optimization services, media management alongside public relations services. They aim to help their clients get recognition throughout the Asian market and help them with enhanced brand exposure.

16) Swyft:

Swyft is a multinational marketing and public relations agency that was founded in 2010 and is based in the United States across Austin, Denver, and Houston and in Antwerp, Belgium. They deal in core public relations services, content marketing, and web designing services. Through their content development campaigns for their clients, they help brands gain maximum social exposure and high website visits. They mainly target companies in the real estate, financial service, marketing and sales, and legal sectors.

17) Oggadoon PR and Digital Marketing:

As the name suggests, Oggadoon is a public relations and digital marketing assistant firm that was formed in 2012 with its headquarters at Bristol and another branch in London, United Kingdom. They are known for their high-end digital marketing services and assist in content marketing and social media marketing. The firm mainly deals with small and medium-scale companies, managing their media exposure alongside building communication within the market. Their expertise is within the business sector, energy, real estate, IT, telecommunication, media and medical industries.

18) PRLab:

PRLab is a public relations company based in Amsterdam, the Netherlands and has been operating since 2018. Besides their core public relations services, they also serve small and medium-scale companies with avant-garde content marketing solutions. Their target industry mainly lies in business and financial services, e-commerce, manufacturing, retail, and IT. They arrange for outreach campaigns, handle content research and generation, and promote brands through social media marketing.

19) ZCorp PR and Digital:

ZCorp PR and Digital is a public relations and digital marketing services company with its presence in Melbourne, Australia and Florida, United States. They serve a lot of departments including SEO development, pay-per-click solutions for client websites, digital strategy making among others. Apart from that, they provide automation solutions too.

20) Tribe China:

Tribe China is a core Public Relations Company headquartered in Shanghai, China. Apart from its core public relations services, the company also deals in solutions related to social media marketing and content marketing. Their digital content marketing strategies have helped a lot of brands with the desired promotion and limelight. They mainly deal with companies in the IT, energy, consumer products, and retail sectors. They also serve certain domestic non-profit organizations, helping them to engage with the masses while creating overall brand exposure for them.

It’s time to identify your requirements and collaborate with the most suitable firm from the above list.

IPO or Initial Public Offering is generally the process of taking a company public. With an IPO, a private company offers its shares to public investors. But what is the actual process of going public? There are many questions that pop up in our minds when we talk about IPO. From what is the IPO process to how does an IPO works, every question creates confusion among beginners.
Generally, it is the process of going public for new investments for a private company. But there are many other processes included in the IPO timeline. Here we will talk about all these steps. Whether you are a beginner-level investor or you are looking for new investments for your private company, IPO is a must-to-know thing for you. You need to know all the IPO process steps. This post is a complete guide for the IPO process. From becoming familiar with the IPO process to filing for IPO, everything will be covered.

What Is An IPO?

The very first question that comes to mind is what is an IPO. Basically, we say that the IPO stands for Initial Public Offering. Before an IPO a company is private and not open for direct public investments. In other words, we can say that before an IPO, a company is not listed on any stock exchange. The only investors a private company has are angel investors, board members, family relations, etc. But with the IPO, the company became open for public investments.

The meaning of IPO is always the same for everyone, but the purpose can be different. As a private company, an IPO is an event when your company goes public. After that, your private company becomes public and will be listed on the stock exchange. Before it gets listed on any stock exchange, the initial shares are sold in an IPO. That is why it is known as Initial Public Offering (IPO). So basically, for companies, an IPO is the process and event to get public funding or investments.
For an investor, an IPO is an investment opportunity that gives him/her a chance to invest in the initial shares, securities, bonds of a private company that is just a few steps away from going public.

What Is An IPO Process?

The Initial Public Offering process is a long and confusing process, there are many steps involved. It is the preparation of going public before an IPO by a private company. There are much legal documentation, regulatory permissions, underwritings, etc. All these processes can confuse anyone. But here we will explain all the steps to help you know how do IPOs work.
The process is completely different when a private company is filing for IPO as compared to getting angel investments. To get angel investments, companies need to pitch the investors. But the case is different here with an IPO filing process. Here the private company has to find an investment bank as an underwriter. After that, different types of agreements and engagement letters are written for legal proceedings. Everything is explained clearly in the below-mentioned sections of this post.

Why Do Companies Decide To Go Through The Process of IPO?

There are several reasons behind going public. But the major and most common reason is getting new investments and raising funds. This is one of the most common reasons why companies decide to go through the process of IPO. Along with raising funds, there are many more reasons that push a company owner towards taking a company public. Before you know how to go public with the exact process of going public, you need to know the actual reason. Following are some of the common reasons why companies go public with investment IPO.

● Raising Funds:

As we have mentioned, one of the most common reasons behind going public is to raise funds for the company. All the private companies run with the help of the owner or co-founder’s savings. After that, these companies earn good capital with profits. That is all that they have, and sometimes they do have angel investors. But to raise a huge amount of funds, an Initial public offering is the best option. Here you will get investments in your company from retail investors.

● Company Image:

Company image or reputation is very important for success. No matter if you want to attract customers or new investors for your company, the reputation, brand value and authenticity you have, is always one of the important factors. So when you go public from a private company, your company gets a brand reputation built among customers and investors too.

● Safe Funding:

There are many other ways to get funding for your company. The companies can directly approach new angel investors. Also, there are chances that big enterprises will invest in private companies. Bank loans are also a good option. But when it comes to safe funding, the IPO or public listing is always the best option. There are no risks involved and no high debt interests are there to pay for a company.

● More Control:

Are you losing control over the management decisions of your company due to many angel investors? Then public funding can save you from this. Before you know what is the IPO process, you need to know what is the major benefit of an IPO. The major benefit is that you never lose control, even if you are getting a huge amount of funding through crowdfunding. Because there will be small and retail investors that will add a huge amount to your company capital through their small investments. So there will be more investments and fewer decision-makers.

● Transparency:

Transparency is always important when running a business. You must have to be transparent in front of the regulatory authorities, investors, public and customers. Does your private company have a transparent system in terms of funding, investments, revenue and capital? Being a public company, there will be more transparency, which will positively impact the overall reputation of the company.

● Financial Stability:

Financial stability is what all companies are looking for. No matter how much revenue a company is generating through its channels, if there is no financial stability, there will be no more growth. To win the confidence and trust of the investors and customers, your company needs to be a financially stable organization. Crowdfunding or stock exchange listing gives financial stability to your company. That is why an investment IPO is an important thing to consider.

● Liquidity:

Liquidity is also the major factor that you need to consider while filing for an IPO. It is important to know how to make your company public, but also it is important to know how initial public offering stocks can help you get the liquidity in your funds. Getting capital gained from crowdfunding will allow you to utilize the funds in any way to grow the company.

How Long Does It Take To Complete The IPO Process?

IPO process steps can take time to complete. But the question is how much time does it take to complete the whole process? The time taken is never the same for all the companies. It depends upon the size of the company and the way they choose to go public. There are different options available in the different stages of IPO. So all these options will decide the exact time that will be taken to complete the IPO process.
Usually, the minimum time that will be required will be six months. There will be a minimum of six months time that will take to complete the IPO process. But when it comes to maximum time then it can be from 9 months to a year. So on average from six months to a year is required to complete the whole process of going public. IPO timeline contains many complex steps so that it takes almost a year to go public and get successfully listed on the stock exchange.

What Do Companies Do Before An IPO?

Beginners may ask how does a company go public. There are many other questions asked related to IPO documents and IPO investments. To start the IPO procedure companies have to fulfil all the IPO requirements. After completing all the requirements, the process to file for an IPO will start.
There are basically many tasks performed by a company while it is preparing to go live. Before we talk about all the procedures and steps involved, we will talk about some of the major changes that a company makes in-house. There are many things that change when a company decides to go live.
Firstly, the senior management and executive-level officers get replaced and new hirings are carried. The management has completely changed. Sometimes a few companies also change the policies of the company. These are the policies that directly or indirectly impact the investors, public funding, revenue model and company reputation. However, these steps are not necessary to perform for any company. But still, almost every company changes a few things in their organizational structure, policies, etc.

What Are the Specific Steps that A Company Takes in The IPO Process?

Now let’s get to the point, what is the IPO process? There are many steps involved that can confuse anyone who is not familiar with the complete process of going public. That is why we have clearly mentioned all the IPO process steps. These steps are performed by all the companies that want to go public necessarily. There are no ways to skip these steps as they are related to legal documentation, policies, etc.

Step 1: Select an Investment Bank/underwriters:

Underwriting services are required while a company is filing for an IPO. Underwriters are also known as investment banks. A company that wants to go public, needs to find an investment bank for it. That investment bank will help the company in the underwriting process. There are many aspects that a company considers while choosing an investment bank as underwriters for the IPO process.

Step 2: IPO Due Diligence and regulatory filings:

The investment bank chosen by the issuing company is like a middle man between the IPO investors and the company. The investment bank will take care of all the underwriting on the behalf of the issuing company. There will be many things involved and the nature or mode of investment is chosen according to different agreements. These agreements will decide how an investment bank will work along with the company. It will decide whether the bank will be a broker or just an underwriter. Following are some important regulator filings and due diligence.

● Firm Commitment:

This is the first type of agreement or arrangement between the investment bank and the issuing company. In this type of agreement, the investment bank acts as a responsible authority providing the guarantee of a particular amount of funds to be raised. The investment bank will buy the initial public offering stocks from the company and will sell them to the investors and assure the company that it will raise a particular amount of funds for the company.

● Best Efforts Agreement:

Here in this type of agreement the investment bank just acts as an underwriter and does not guarantee any particular amount for fundraising. The company is solely responsible for the funds raised according to this agreement. Here the company just acts like a broker and sells the shares to the IPO investors on the behalf of the issuing company.

● Syndicate of Underwriters:

Sometimes investment banks are not sure about the safety of an IPO. In such cases, a bank never wants to take the whole responsibility and the risk of an IPO. So there will be multiple banks involved in an IPO with the help of a syndicate of underwriters. However, there will be a lead investment bank in this process of going public. And a strategic agreement is made between all the banks and they sell allocated securities, bonds and stocks to the investors.

● Engagement Letter:

An engagement letter is also an important letter in the list of IPO documents. The engagement letter clearly mentions the gross spread and the reimbursement cost terms between the investment bank and the issuing company. The engagement letter ensures that all the costs borne by the investment bank will be reimbursed. Also, it decides the gross spread, which is the margin between the buying price and the selling price of a stock for the bank.

● Letter of Intent:

A letter of intent is basically an agreement that makes it possible for both parties (issuing company and investment bank or underwriter) to commit to supporting each other. The bank commits that it will enter the underwriting process of the IPO of the company. From the company’s side, the commitment is to provide all the required information to the underwriter. The over-allotment option is also described in the letter of intent of an IPO.

● Red Herring Document:

The Red Herring document can be described as a marketing prospectus that clearly mentions the status of the company and the offering share price for the investors or buyers. This prospectus is used as marketing material in roadshows.

● Underwriting Agreement:

After the letter of intent, it comes to the situation where the offering price is decided in the legal proceedings or documentations. The underwriting agreement helps here. The underwriting agreement will decide and bind the underwriter to buy the shares at the described offer price.

● Registration Statement:

The registration statement is a kind of document that helps the investors to decide whether the issuing company is financially stable or not. Also, the behavior and status of the management are also described in this statement. The financial statements, status, progress and forecasting is involved here. The registration statement is divided into two parts, the first one is the prospectus that is for the investors and the private filings have the information that is provided to the SEC or any other regulatory authority.

Step 3: The IPO Roadshow:

The IPO roadshow is similar to any other general roadshow. But here the issuing company and the investment bank or underwriter shows their financial status, offer price and all the things important to know for a new investor. The roadshow is not basically a roadshow, but it is a collective meeting, seminars, webinars, conferences, etc. These events are known as the IPO roadshow. The presentations are given in front of the investors, retail buyers, institutions, etc. to attract them towards the upcoming IPO.

Step 4: IPO Pricing:

After getting the approval of the IPO from the regulatory authority such as the SEC, the company and the investment bank will decide upon the offer price of the share units. Also, the issuing company and the bank decide the number of units or shares to be sold in the upcoming date. All of these prices are decided on an effective date.

Step 5: Going Public:

After everything is decided and approved by the regulatory authorities, the IPO will go public on a specific date. The investors will buy the shares from the investment bank for the specified issuing company.

Step 6: IPO Stabilization:

The stabilization is carried after the shares are publicly sold in the market. The investment bank or the underwriter will purchase the shares to stabilize the whole market for the stock.

Step 7: Transition to Market Competition:

Now the final step is to transition the stock to the market competition from the IPO. This process starts almost 25 days after the completion of the process of going public.

When Does A Company Go Public?

In the USA the Securities And Exchange Commission has set the eligibility in two parts for the companies. The first one comes under the “Emerging Growth Companies”. A company can apply for IPO under this section if it has an annual gross revenue of less than $1.07 billion. The second eligibility criteria are “Smaller Reporting Companies”. A company comes under this criteria if it has a public float of less than $250 million or annual gross revenue of less than $100 million.
After getting eligible under the different clauses and sections decided by the SEC, the companies can go public anytime when they feel it is the right time to raise funds.

What Are The Pros And Cons Of Taking Your Business Public?

If we count on pros, then the list is way longer than the cons. But still, there are some significant cons of the Initial public offerings. Following are some of the common cons and pros of Initial public offerings.

Pros:

● Safety is an important thing and fundraising through IPO is the safest mode as compared to bank loans.
● The reputation of the company becomes more positive and stronger in the market.
● Crowdfunding can help you get more funds along with losing less control over your company.
● It brings transparency to your company’s revenue model, investments, capital and policies.

Cons:

● The cost of taking a company public is very high.
● There are many steps involved that can make a beginner confused while filing for an IPO.
● It usually takes a long time to get your IPO approved by the SEC.

What Parties Participate in the IPO Process?

Firstly, the issuing company is the major party in the IPO process. After that, the investment bank or underwriter is involved. The regulatory authorities such as SEC in the USA and SEBI in India, are involved. Along with this if we talk about the investors then there are both kinds of investors involved in the IPO process. Institutional investors are also interested in IPOs as well as the retail investors putting their money in such investment opportunities.

Metrics for Judging a Successful IPO process:

Several factors or metrics are used and analyzed by the investors to evaluate the success rate of the IPO process of a company going public. The major two factors are mentioned below.

Market Capitalization:

Firstly, market capitalization is important to consider. It usually takes a month after the IPO when you can easily evaluate the company value with the help of market capitalization. You just need to keep an eye on the market capitalization of the issuing company along with its competitors in the market. Market capitalization will help you know whether a company is conducting a successful IPO for the investors or not.

Market Pricing:

Here again, market capitalization is the important metric to consider. The difference between the initial offer price and market price after 30 days of IPO is very significant. If it is less than 20%, then the IPO can be considered a good and successful investment opportunity. Otherwise, if it is more than 20% then it is not considered a successful IPO.

Conclusion:

IPO or Initial Public Offering helps the private companies go public and get more fundings with the help of crowdfunding. Before being a public company, the private companies had angel investors, personal funding, bank loans, and many other sources of funding. But the safest mode of getting funds in a big amount is to get your private company to go public.
Being public means that your company will be listed on the stock exchange. To do that the company has to know how to file an IPO. After that, the company will file the IPO with the help of an investment bank or underwriters. After that, all the IPO steps are performed and then the company gets approval from the SEC. Before the IPO, the IPO roadshows are conducted to attract new investors. After that, the retail investors and the institutional investors take part in the IPO and buy stocks of that company at the offer price.