From growth capital to potential international recognition and more, choosing to take your company public can unlock a plethora of opportunities and challenges for your business.
Going public isn't a decision that any company should take lightly. It's one that requires management to seriously evaluate their business’ strategy, vision, enterprise value, and short and long-term capital requirements.
In the United States, going public is often considered a liquidity event for founders, long-time employees, and / or early investors. However, in Canada—particularly when it comes to the Venture exchange—going public often happens at earlier stages, thereby allowing the public to share in both the upside potential and risk of an early or development stage enterprise. And surprising to many, raising significant capital in Canada as a public company is often a quicker process than doing so as a private company.
While there's no magic formula to determine whether or not you're ready to go public, I believe companies can get a better idea of where they are in the decision-making process by asking themselves a simple set of questions:
1. Is significant capital required to reach critical growth objectives?
The first and most obvious question is whether or not your business needs additional capital to reach its critical growth objectives over the next 12-24 months. A critical growth objective should be a milestone that enables your company to excel and join the leaders in its marketplace (i.e. proving a new technology with demonstrable commercial potential, scaling production to outperform competitors, commercializing your product / service / technology, or securing the funds for a multi-million dollar marketing blitz).
2. Does your business have global potential?
A company with the potential to have impact outside of its borders often garners the attention of a broad investor audience, resulting in increased access to growth capital and overall corporate exposure (a key reason why many companies decide to go public). Moreover, a company with global ambitions is one that probably requires significant growth capital.
3. Does your company have a blatantly obvious differentiator?
A company looking to go public should have at least one easily identifiable differentiator that enables it to stand out amongst the clutter of publicly traded companies, be it the potential for industry disruption, first-mover advantage, cost leadership, or something else equally unique. In Canada alone, there are roughly 1,500 small or micro-cap publicly traded companies (market caps under $500 million).
4. Have you found a value-add investment partner?
Value-add investment partners are like Sherpa's for the hikers who attempt to brave Mt. Everest; they know how to help their clients safely navigate complex routes, and in doing so, can help them reach new heights.
Knowing When To Take Your Company Public Isn’t Black & White
It's only natural to feel an element of uncertainty—even anxiety—when deciding to raise capital; likewise, when deciding whether or not you should take your company public or keep it private. Garnering a significant amount of capital is never easy as an entrepreneur, but Canada’s venture capital ecosystem provides excellent options for early and development stage companies to raise funds by going public.
Hopefully these questions will help crystallize whether going public may be right for your company or not. If you think it may be a good option, the first thing you should do is talk with a securities lawyer; the good ones are happy to chat briefly about your venture and go-public options at no cost.