Jay Samit is the CEO of Social Vibe (http://socialvibe.com/). You can see more content here on Docstoc or follow him on Twitter.
- Lack of predictable revenue. If you can’t figure it out, investors can’t figure it out.
- No plan for your capital. How will you employ that cash infusion?
- Lack of analyst awareness. You want to be in touch with analysts in your sector at least a year before you go out.
The three biggest pitfalls that I see in young entrepreneur’s racing out and doing an IPO too early is that they really don’t have predictable revenue.
They can’t figure out next quarter, the quarter after whatever. If they can’t figure it out, investors can’t figure it out and after that IPO when the institutions go in they’ll go in and out. Your stock goes down and all too often young entrepreneurs are pressured by board or early investors to get into that cycle and that hurts them.
The second one is they don’t have a plan for the capital. That’s going to be the one shot that you’re going to have this massive cash infusion. How are you going to deploy it? Where? How do you maximize the ROI for your investors and therefore make your share price go up.
And the last and the most critical thing is a year before you go out start developing a relationship with analyst in your sector. Let them know who you are. What you do. What makes your company different and unique so that they are tracking you. Their opinions matter the most. That’s what gets amplified and if you don’t do those three things your IPO will be a disaster.