For small businesses, an initial public offering (IPO) is sometimes a key milestone that many strive for. It is the first time that the stock of the company is offered to the public, and represents a new wave of capital and expansion. Small businesses often use IPOs to further their company’s growth and see the IPO as a necessary and crucial step forward. However, sometimes the IPO turns out to be more hindrance than help imposing limitations and headache son the very company that sought to use the IPO as a source of expansion. “Data published by Renaissance Capital indicate that as of June 2, 2016, there were only 34 IPO pricings, compared to the same point in 2015 when there were 70 IPO pricings. These 34 IPOs raised only $5.5 billion as of June 2, 2016. This amount is 55.8% below the $12.5 billion raised by IPOs between Jan. 1, 2015, and June 2, 2015.”
Callum Laing, a partner in the private equity firm Unity-Group and co-author of a new book “Agglomerate – From Idea to IPO in 12 Months”, shares a whole new insight of five ways an IPO can hurt a small business. These are a few ways that you should avoid at all costs, or your next IPO may become one of the many that flounder.
Entrepreneurs are usually integral to the business. They build the company from the ground up, know the ins and outs of the business, are familiar with its culture, and are even at times central to the image of the business. Most of the times, they are the driving force and passion behind the enterprise who are working tirelessly for years to help the company reach an IPO. However, when it is the time for an IPO there may be shifts in how much they can be involved in the day to day running of the business, and often, the original entrepreneur leaves, taking most of the drive and passion with them.
With the major changes that come from an IPO, key people often leave the business, sometimes with the key customers. This is truer if the business is not well prepared for the transition. For small businesses, talent is crucial and the dynamics of the team and the unique talents of those involved are often a central selling point. Often, even the departure of a single customer or key staff member can result in serious fiscal consequences. An IPO can also result in a shift in the brand identity, forgetting that the brand is actually a valuable asset that should be retained. However, with the brand and culture now controlled by a board of investors rather than individual entrepreneurs, culture and identity may fall second to maximising profit margins, ultimately hurting both.
Listing IPO’s is extremely expensive and time-consuming. Entrepreneurs used to working with a small tight knit cabinet find they will need a board to run the business and the IPO. In addition to advisors, specialist non-executives and experienced board members are often essential to attracting investors. Some companies think having strong international markets and business partners is a great way to reduce risk and improve valuation, but the added risk and expense of operating in a foreign country can mitigate any of the benefits such a strategy provides. Finally, public company investors are a generally very different from the angel investors and venture capitalists that the business would have worked with so far. Because of this, most roll-ups are either debt funded or investor funded – either way, this creates huge stress on the business.
Raising money for smaller businesses is very hard. Small businesses may find that they are just not big enough or de-risked enough to attract adequate funding from an IPO. With the Federation of Small Businesses reporting 99% of all businesses globally as small or medium enterprises, the competition is stiff. And even when you do get investments, it is often at the price of control over the business. Publicly listed shares will often carry a premium for their liquidity, and the entrepreneurs must show a strong business case for every use of money to their new board of investors. Even with more capital, the lack of liquidity and slow movement of funds can prove more of a hindrance than a boon.
Timing is critical to creating the best value and wealth from an IPO. Many good businesses that were keepers back in 2007 or 2008 do not exist anymore. The biggest question is always when to sell? Sell too early and you may miss out on all those contracts that you have slowly been building trust and market presence to acquire. The biggest issue with wealth creation in business is that only a small percentage of businesses actually create any wealth for their owners, and often nothing more than a return on capital. Not a great return if you add up all the hours, risks, and sacrifices required to start a business.
What is the Alternative to Traditional IPO?
Instead of going at an IPO alone, and potentially facing all of the pitfalls, small businesses can consider joining together with other small businesses and forming a holding company, banding together for a collective IPO. This process, known as “agglomeration”, can give all the member businesses an instant boost in scale and diversification, as well as boost the geographic reach of each member if other members are in diverse locations. This can immediately increase valuation and make the small business more attractive to investors. The public listing allows business owners more financial freedom while tackling the public listing with other small business owners helps foster cooperation to drive share value. Agglomeration allows a pooling of resources that also reduces the cost of the IPO, eliminating the need for separate advisors, boards, and non-specialist executives for each company.
Best of all, each individual entrepreneur can remain 100% in charge of their own business, retaining their own brand name, culture, and staff. This reduces the risk of shifts in company culture and staff or leadership that often mars the IPO process. Since each business is an individual unit within the group, there is limited liability – and if one entrepreneur chooses to leave, it is relatively easy with publicly listed stock to go and bring a similar business unit into the holding company and assimilate their management team. This creates easy natural succession without having to sell the entire parent company.
IPO’s can be difficult for small businesses to go at alone, with many pitfalls that can wind up hurting the business more than the increased capital can help. Agglomeration with other small businesses can allow entrepreneurs to have a better chance of making the IPO, and their business, a true success.
400 cities, 135 countries and the 54-hours! Startup Weekend has a reputation of being one of the biggest entrepreneurial events held throughout the world and it has produced hundreds of successful startups. The Startup Weekend is coming back to Karachi with its 4th edition this November. Aplos Innovations has teamed up with SEED Ventures is hosting it on the dates of 25th to 27th November.
What is a Startup Weekend?
Startup Weekend is a 54-hour event that includes brainstorming of ideas, creation and pitching. It is usually held over the course of three days at the end of the week. It provides aspiring entrepreneurs not only a platform on which they can develop their ideas into an applicable business plan and structure in the 54 hours, but also pitch and sell their product on a global scale.
The event provides a platform to all the entrepreneurs and professionals like designers developers and business analysts to work on their big idea and create a successful unique Startup out of it! Don’t worry if there is nothing in your mind yet or you don’t have an idea, you can still join Startup Weekend Karachi and be a part of it if you are good at what you do. You can join a team, work with them on their idea and become a partner!
This program is for everyone. You can become a part of it just by registering yourself and paying a small fee. Once you’re registered, you have become a participant and you can pitch your idea and receive help and feedback on that from the speakers, mentors and judges at SW over the weekend, they will help you work on your idea and turn it into a potential and useful business product. Since this event is also a part of the Global Startup Battle, It is a global competition and the winning team gets qualified to participate in it. They’ll get a chance to go to compete in finale of the Global Startup Battle.
Who is hosting Startup Weekend in Karachi ?
Aplos Innovations has teamed up with SEED Ventures to bring this unique platform once again in Karachi. Aplos Innovations have always played an encouraging role in this regard. They believe in the strength of technology and entrepreneurship. Entrepreneur acting as strong catalysts to our socio-economical growth is Aplos Innovation’s catch in this. Hashim Yasin is the official facilitator credible for past three Startup Weekends held in Karachi. Here’s what he has to say:
“Startup Weekend is a big opportunity for all the budding entrepreneurs who need a platform to pitch and present their ideas.
Startup Weekend Karachi is part of a global celebration happening in over 250 cities around the world and we really want our winning team to be among the shortlisted ideas which will be competing with other startups in the Global Battle. It would be a moment of pride for all of us”.
– Mr. Hashim Yasin, Facilitator of Startup Weekend
With partners like eventbrite, .CO, Google for Entrepreneurs, KASBIT, Starlinks, Jang Group, Pizza Hut, FM 91, bookitnow.pk and Lipton, this Startup Weekend is expected to be the biggest and most successful Startup Weekend ever.
This year, this prestigious program is being arranged as a part of Global Startup Battle(GSB) from Friday, 25th of November 2016 to Sunday 27th of November 2016.
Startup Weekend Karachi will incorporate three distinct events:
- Opening night with a wonderful theme dinner.
- Working & Mentoring Sessions which will be followed by a Social Night
- The Closing Ceremony followed by a Theme Dinner.
Reach Us At?
Ask us anything you want to at: firstname.lastname@example.org
Or call us at: +92-336-4069-039
A study by Eventbrite highlights the extent to which the generation Y values experience and access over owner-ship: 78 percent would rather go and pay for an experience than material goods, compared with 59 percent of boomers (born 1946-1964). The survey analysis states: “This generation not only highly values experiences, but they are increasingly spending time and money on them: from concerts and social events to athletic pursuits, to cultural experiences and events of all kinds.”
It’s been over half a century since the first ever big music festivals took place. Fast forward to today and the concept of the huge festival is well established, but bigger doesn’t always mean its better. Countless stages and unmanageable timetables often frustrates the festival goer attending for the music and not the fanfare and distractions. Of course, commercialization is becoming an issue for some, and many of these events being pushed to reinvent themselves in order to stay relevant and attract younger generations alongside older loyal fans. So who is leading the way?
Challenges aside, there are some positive developments happening on a purely entertainment level. Artists are often innovating and coming up with new ideas, And for them it offers an opportunity to reach new audiences and try different formats. Plus, technology has made it easier for more of us to experience concerts live, streaming advancements mean they can now be enjoyed from the comfort of the couch. So what’s the appeal? Positioned at the cutting edge of the electronic music landscape and its interactions with digital culture.
The potential of virtual reality and music festivals is huge. Artists will likely start to offer their own virtual reality experiences, which may prove to be a huge revenue opportunity as the music industry revenue model focuses on rich content to supplement streaming.
“Live streams have provided a new way for people to have the second best thing and I could definitely see virtual reality becoming a part of the experience in the future.” – Hardwell
Imagine being able to hang out backstage with an artist before going on stage with them, exploring what it feels like from their perspective. “There is no comparison between watching an artist online versus in person. The energy, emotion, and community that the festival experience provides is unattainable.” Said Hardwell, “That being said, live streams have provided a new way for people to have the second best thing when they can’t attend a festival and I could definitely see virtual reality becoming a part of the experience in the future.”