While there are some signs of thawing in the tech initial public offering (IPO) market—with speculation that Lyft may be testing the waters and data center operator Switch raising $531.3 million in its IPO Friday—2017 still is shaping up to be one of the most anemic years ever for tech IPOs.
Some are advocating a shift in another direction. In a recent Coins2Day commentary piece, a private company CEO opined that the disadvantages of going public—using the examples of Snap and Blue Apron—far outweigh the advantages.
As a public company CEO who endured the choppy waters of the 2016 IPO market, I understand business leaders’ hesitation about joining the stock market. But I contend that the benefits of being public far outweigh the luxury of staying private.
The decision to go through with an IPO is a complex calculus. There are many factors to consider. It adds layers of obligations, regulations, costs, and pressures to the already challenging daily grind of running a business, not to mention hundreds of hours of planning, meetings with bankers and lawyers, and travel in preparation for the biggest event in the company’s history.
Was it worth it? In our case, absolutely.
The most important aspect of being public is that it legitimizes our business. An IPO sends the signal that we’re in it for the long run, and we have the power of the public capital market behind us.
Being public forces us to open up our financials for everyone to see—prospective customers, shareholders, employees, partners, and yes, even competitors. Transparency is a good thing. Embracing this transparency and authenticity, rather than feeling fiscally constrained, yields an extraordinary level of openness and trust with prospective customers.
Curious about our margins? Take a look for yourself. We tell you how much we make per unit. Want us to sell to you for a lot less? Look at how that will impact our business. Do you want a business partner that’s hamstrung, or do you want to work with a strong, durable company that continues to invest in its business for the long term? Then please pay us fairly.
In a perfect world, customers would pay us based on the value we create for them. But for now, customers can see what our cost structures and profitability are, and that our prices are fair.
Take the quarterly reporting of company earnings. I have found this to be a positive thing for our company. It provides a structure, rhythm, and cadence to the ongoing task of monitoring the pulse of the business. I want the level of organization, teamwork, and attention to detail that quarterly reporting demands.
There’s a common perception that once you go public, the stakes are higher and therefore the pressure intensifies. I don’t see it that way. As a startup, we made a commitment to a small group of investors to do certain things and run the business in certain ways. As we grew, we made more, similar commitments to a bigger group of investors.
As a public company, you might worry that any missteps will attract a lot of negative attention. And that’s true: If you stumble, it will definitely be more public. But anybody who’s built a company to the point where it could go public has openly stumbled many times, overcome setbacks, and survived.
Anyway, it’s not as if being private totally shields you from attention: We’ve seen a lot of high-visibility private companies such as Uber garner a great deal of public scrutiny. It comes with the territory.
To be sure, going public brings a new level of responsibility and stakes to your business. But if you’re ready to push your company to achieve its full potential, an IPO might be your best option.
Rob Bernshteyn is the CEO of Coupa.
