Having gone through an IPO (cofounder DigitalOcean), it honestly wasn't a set back internally. The majority of the burden is on the finance team, having your finances in order and audited is a huge benefit to the business, the rest of it is around internal process control, some are perfunctory, others are good investment of time.
The rest of the work is done with the bankers as they draft the S-1 along with information provided by the management team.
In terms of pitching the bankers, ours was during Covid so there was no travel, it was all done remotely, and given the large financing event that the IPO was, the amount of time invested vs the capital raised was certainly worth it.
IPOs open up liquidity for shareholders, early employees, also provides new avenues for the business to create financing for various activities as you are now seen as a premier partner with all of the major banks. Honestly worth the effort, so long as you continue to run the business with a long term mindset and don't give in too much to the quarterly pressure it's a huge plus.
Besides the obvious benefits to shareholders and early employees it also does open up a significant amount of opportunities when it comes to M&A, if are strategic with that, it can dramatically change the outcomes for your business.
Second that here, I was an engineer at DO when the IPO work was happening and I was either working on features to customers as usual or audit features we would eventually need anyway. It wasn't the experience I expected at all after multiple people said it was going to be super complicated, the company would stop and stuff like that.
The work was mostly building audit trails with "who, what, when, and why" for the actions people were taking in specific parts of our systems (wasn't even required for everyone/everything). From what I saw most of the bad experiences people seem to have had is because there is no clear understanding from the auditors what is needed or people inside the business go way overboard with what is actually required.
We were always very clear with who were the teams that HAD to follow all audit processes and those where it wasn't required so while some places in the business had to do a lot of work (like finance/billing and platform teams) I doubt most product teams had to do much work other than changing some config files or adding some extra logging here and there.
It did help we already had a pretty strong audit trail culture for most operations internally, so most people would either produce extra events or add more fields to existing events instead of having to build a completely new solution to do it.
out of interest, did you consider a SPAC at any point and if so, what were the reasons for/against?
For people (like me) with a very negative perception of SPACs (a vehicle through which a company that can’t go public the “proper” way goes public) it would be very interesting to hear whether you weighed up the relative benefits of IPO vs. SPAC, or if it was obvious to you that an IPO was the right way to go from the start.
The only reason we would consider a SPAC is to decrease time, but you do take a reputation hit. You also aren't building relationships with banks, which is very positive, again because it provides future financing needs which could be very useful during acquisitions.
Also, while the IPO process does take about a year, from start to finish, give or take a quarter, the conversation about an IPO starts well in advance. I think the the first time we met with Goldman Sachs was probably in 2017 or 2018 (don't quote me) to discuss IPO planning, and the company went public in 2021.
So while it does take longer through a traditional IPO, the conversation starts much, much earlier, and because it's a year long process, that's part of the planning as well, so it doesn't really come up as a year delay in the roadmap.
So we were already well in to our planning phase as the whole SPAC craze was hitting, and so there were only downsides to it, not real benefit or saving a quarter or two in terms of timing.
I would be the wrong person to ask about that, as I tried to stay as far away from the details of that along with the low level details around finance. But basically as a public company there a bunch of regulations around a bunch of internal processes, think of it like having a process for how to create emails, or get rid of emails, or have communications, or do various number of internal things, or how you treat customer data.
It is a bit annoying, but ultimately reviewing how those systems are operated in the business and documenting them, while tedious, is a good idea because it allows you to review your security measures and you can use it as a catalyst to make changes and invest in areas that often get neglected in the product market fit/growth phase of a business.
So instead of looking at it as a burden, it becomes an opportunity to just improve internal controls.
Thank you for your reply. Could you give an example of what kind of process is being documented? Is it something like "how to process a customer refund"?
I've worked in places where there were a lot of internal document for different workflows. Each workflow is supported by a set of features of a in-house developed tool. The same set of documents is used for on-boarding new joiners and auditing. Are these the set of documents you referring to?
If there is a tool that serve as a "no-code editor for internal processes", do you think it is serving any particular pain points?
The rest of the work is done with the bankers as they draft the S-1 along with information provided by the management team.
In terms of pitching the bankers, ours was during Covid so there was no travel, it was all done remotely, and given the large financing event that the IPO was, the amount of time invested vs the capital raised was certainly worth it.
IPOs open up liquidity for shareholders, early employees, also provides new avenues for the business to create financing for various activities as you are now seen as a premier partner with all of the major banks. Honestly worth the effort, so long as you continue to run the business with a long term mindset and don't give in too much to the quarterly pressure it's a huge plus.
Besides the obvious benefits to shareholders and early employees it also does open up a significant amount of opportunities when it comes to M&A, if are strategic with that, it can dramatically change the outcomes for your business.