How to navigate the road to IPO

While the IPO market remains uncertain following 2023’s major slowdown and recent market volatility, there are some signs of a turnaround. Despite zero growth in the number of IPOs in Q1 2023 and Q1 2024, the amount of funding raised more than tripled in Q1 2024. All eyes are on the back half of the year, with hopes pinned to the likes of Stripe, Databricks, and ZocDoc to signal a turning of the tides.

The directive to startups looking to IPO is clear: Be prepared and proceed with caution, for three reasons:

1. An exit might be earlier than planned. An estimated 1,200 startups are expected to run out of funding in 2024. As the private market is still sluggish, companies might need to go public earlier to get the capital they need.
2. Investors are being cautious in a volatile stock market, especially with companies that have a longer or more complicated timeline to profitability and impact.
3. Media loves a takedown story. Valuations are coming down but have a ways to go from the 2021 peak. The correction playing out on the public market sets up a juicy headline.

Where does that leave companies? In an uncertain market, they must lay the groundwork for an IPO sooner rather than later—even as they’re waiting for the market to improve. This means building trust and credibility early on, setting clear expectations, and helping investors and key audiences understand their businesses. Here are a few steps all pre-IPO companies should take.

Craft your corporate narrative as a public company

In a skeptical, volatile market, companies must clearly communicate their business model and balance longer-term vision with near-term profitability and revenue. IPO success is not measured by a single moment. Rather, it’s measured by sustained proof of reputation and performance over time.

As the IPO market reopens and investors reprioritize factors beyond explosive growth, a carefully crafted corporate narrative will be key. There are different expectations of companies going public now, making it important to build credibility beyond traditional investor relations (IR) programs. A strong narrative will indicate competitive differentiation, validate your vision, and make it clear your best days are ahead.

Build reputation beyond investor relations

In the era of stakeholder capitalism, companies must build reputation beyond Wall Street—and they must do it long before listing day. While many companies hire an IR firm to focus on the investor audience, it’s equally important to build reputation with a broader audience. This is where a PR or communications agency with IPO experience is crucial.

Key stakeholders that must be factored into your strategy include media, industry influencers, customers, partners, and often the general population. Building reputation with these audiences requires a thoughtful, proactive communications strategy that goes beyond investor outreach. For example, key company executives need ownable thought leadership platforms that demonstrate their credibility, vision, and performance track record. A communications agency can help develop these platforms and provide individualized media training to ensure spokespeople are equipped to stand up to scrutiny and high-stakes media moments.

Proactively manage risk

Increased expectations as a public company bring new levels of scrutiny. It’s important to identify business and reputation risks early on and build a plan to proactively manage those risks. A strong communications strategy in the lead-up to an IPO will help you get ahead of a crisis by pressure-testing messaging and building out a response plan.

Investors and other stakeholders will want to see a proven track record of resilience, which means managing risk even before an IPO. Two examples come to mind:

• Skeletons in the closet: Now is the time to air all of your dirty laundry with your communications partners. As your company faces more scrutiny, any issues with executive behavior, cultural norms, or HR incidents will likely come to the surface.
• Complex business models: A longer, more unpredictable sales cycle can be challenging with quarterly reporting. So can a business model built on royalties or downstream economics. Preparing for how to set expectations and communicate around volatility or delayed revenue, and starting to communicate in this way to investors is a great habit.

Meet audiences where they are

Traditional media are certainly a key audience, but the landscape is changing as newsrooms continue to shrink, content is everywhere, and everyone—including retail and institutional investors—get their news in increasingly diverse ways. An integrated communications strategy can prime the market by seeding financial performance narratives, shaping perceptions of the company and industry among all key stakeholders, and strengthening messaging ahead of the big day.

LinkedIn and owned channels are essential to control the narrative and have direct relationships with your audiences. Social media is an increasingly vital channel; Spotify’s CEO has been doing earnings previews on Instagram. Netflix does their earnings calls via video. This isn’t to say that you must go all-in on Insta for your earnings calls—traditional disclosure channels are still required—but you can get a little creative in how you directly connect with your key audiences and wrap your narrative around your financial data. This foundation should be laid well before you list.

An IPO is the beginning of a new future. Companies must lay the groundwork long in advance to ensure they can leverage all the opportunities—and scrutiny—that future brings. This is especially true in a market as volatile as the one we’re in now.

Tyler Perry is co-CEO of Mission North.