The Path to IPO: How CFOs Can Prep for a Public Debut

by Justin Cowan

Here are a few ways to improve your chances of success ahead of a public debut.

© Nuthawut Somsuk/iStock/Getty Images Plus

The role of the finance leader continues to evolve and with it a greater list of responsibilities and influence throughout the organization. This especially rings true for CFOs that are taking their company public. With 573 IPOs so far in 2021 (and counting), the market is primed for entry, and the CFO plays one of the most integral roles in this process.

As a finance leader, whether you find yourself prepping for an IPO, direct listing or special purpose acquisition (SPAC), here are a few ways to improve your chances of success ahead of a public debut.

Get Your ‘House’ in Order

It goes without saying that having a strong and comprehensive financial foundation in advance of a public debut is not something you can compromise on. IPOs, direct listings and SPACs require both historical and real-time access to financial and operational data in order to satisfy investors, inform decision making, and act as a guide for sustainable business strategies.

Companies looking to go public must be prepared to provide three years of audited financial data, meaning systems have to be capable of providing that. Investors and underwriters will want to see solid debt-to equity ratios, sufficient market capitalization and predictable revenue and earnings streams.

Take ON24 for example, a digital experience cloud platform, and one of the several anticipated tech IPO’s in 2021. Ahead of its IPO, the company was already leaning on Oracle NetSuite to automate financials and quickly scale business operations as demand for virtual events on the platform powered over 250,000 live digital experiences in 2020. Having a financial software suite in place played an important role in supporting the company as it went public earlier this year and set CFO, Steve Vattuone, up for greater success as he prepared for the financial requirements that come with a public company including rigorous reporting, audits, and Sarbanes-Oxley compliance.

Whether it’s dealing with modern accounting challenges from asset valuation to revenue recognition, having the technology in place will go a long way in helping navigate these complexities.

Put the Right People in Place

The demands of the IPO process can take any CFO away from day-to-day operations. While the finance leader plays an integral role in paving a path to a public debut, this is far from a one person job, and requires all hands on deck. Having a seasoned team both in finance and non-finance roles that work together to navigate the public market is among the many factor’s investors consider.

While many of the responsibilities will be led by the finance team in this process, close coordination is required with non-finance functions like an investor relations team to ensure a company is prepared to not only show results but is equipped to communicate on an ongoing basis with a set of stakeholders that will soon extend beyond immediate colleagues and partners.

Putting a team in place that can help provide quick access to financial metrics and reports for a public audience on an ongoing basis will be critical to managing transparency in the public market.

Manage Corporate Governance

As the finance leader of a public company you will need to fundamentally change the way you manage risk, make decisions, and help inform objectives for the company. To support this, robust reporting processes should be put in place to ensure that preparing for and complying with public company requirements is as efficient as possible with strong internal controls and accurate financial analysis.

If your company will be operating globally there are several regulatory entities to manage. Today, most companies operate across borders. Be prepared to meet accounting regulations across the countries your business is operating in and to put processes in place that can help automate these tasks so your finance team can get ahead of the challenges that come with operating in a public and global market.

Know How to Tell Your Story

It’s not enough just to have a good company story – you must know how to tell it in a way that resonates with a broad audience. Being able to articulate everything from competitive differentiation and product roadmap to brand identity and growth objectives is fundamental to instilling confidence in the market.

Company storytellers and gatekeepers need to be armed with real-time information on financial performance and KPIs that help inform a narrative that others can relate to. Remember, financial data is the foundation, but being able to show company vision, mission, and commitment to other factors like sustainability and diversity have also become important considerations to investors and is playing a role in shaping the future market value of public companies.

ThredUp, a digital marketplace for secondhand clothing which went public this year is a good example. The brand’s mission to help eliminate fashion waste and support growing habits from consumers who are prioritizing sustainable brands demonstrates how a core company value can help propel a brand to IPO success. ThredUp debuted 30 percent above its IPO price in March and is just one of many examples of how telling your company story effectively can help support the financial performance of a company in the public sphere.

Keep Customers at the Heart of What You Do

The bar for engineering a successful IPO, SPAC or direct listing remains high and with much scrutiny. You will be asked to provide large amounts of data on your operations and financials as well as detailed information on your business strategies at a drop of a hat. Communicating your customer-centric business strategies to stakeholders and staying focused on delivering for your customers even during this busy time will serve you well – with employees, investors and most importantly, customers. Having real-time access to customer, sales, and operational data will be critical in driving success in this endeavor and bring clarity to what is undoubtedly a lengthy process.

Businesses continue to turn to CFOs to be the sound decision-makers and leaders both in the midst, and well after, a public debut.

Justin Cowan is VP of Strategy & Operations at Oracle NetSuite.