IPOs on European stock exchanges rose from 191 in 2020 to 485 in 2021, and 2022 is expected to see even more.
While some argue 2022 may not be the right time to IPO — earlier this month, Dutch file-sharing company WeTransfer cancelled its IPO citing “market conditions” — there are plenty of European companies on the verge of the big exit.
As more startups seek funding and investors look to put their capital to good use, we asked startup leaders, from founders to CFOs, on the most valuable lessons they learned.
Preparation is key
Pernilla Nyrensten is the CEO and cofounder of RevolutionRace, a Swedish outdoor leisurewear company that listed on the Nasdaq Stockholm in June 2021 at a valuation of SEK10bn (€942m).
She warns that preparation takes a lot of time — she slept only three hours a night in the six months prior to RevolutionRace’s listing, and that a longer lead time could have made things a bit smoother.
“In just six months, we managed really well to prepare the company and team for a public environment, while also maintaining focus and operations,” Nyrensten tells Sifted. “I do believe it would have been useful with nine to twelve months of preparation, so for startups thinking of going public I’d recommend a slightly longer lead time.”
For all companies with a vision to become public, they would be well served to act like a public company long before they are one
Lisa Picardo is the chief corporate officer at PensionBee, an online pensions provider listed on the London Stock Exchange in April 2021. She says going public was always part of the long term strategy at PensionBee, and this meant they’d already implemented high corporate governance standards before they were required by a stock exchange.
“For all companies with a vision to become public, they would be well served to act like a public company long before they are one,” she says. “Early adoption in company behaviour and mindset, together with an experienced management team and board, helps to ensure a smooth transition without the need for any major cultural shift once the company is listed.”
Get the right people in the room
Dirk Graber is the founder and CEO of Mister Spex, an online optician that sells glasses and contact lenses. The company listed on the Frankfurt Stock Exchange in July 2021 with a valuation of €1bn. He says they couldn’t have done it without the right help.
“We’ve been part of the Deutsche Börse Venture Network, which was helpful in terms of getting in touch with experts at the stock exchange and meeting potential investors. We also worked with an experienced advisory firm that supported us during the entire IPO process,” Graber says.
Consulting, acceleration, different advisers — it is absolutely critical you get that
Romain Gauthier — head of Grow by SAP which helps companies grow, scale and go public — says it’s crucial to find someone who can help you with the long list of requirements that an IPO entails.
“When it comes to the team that surrounds you when you IPO, or when you want hyper-growth, it’s important you get the right people around you. Consulting, acceleration, different advisers — it is absolutely critical you get that,” Gauthier says.
He also recommends talking to other founders who have gone through it and says this can mean creating a community where founders can exchange ideas. “This is one of the roles that Grow by SAP aspires to fill,” Gauthier tells Sifted.
“What can I learn from my peers that have gone down this road already? That's where SAP can be very helpful because we do have this very large existing base of customers that have gone through that and they can share their feedback.”
Do not understaff your finance or legal teams and select advisors who are not only the very best, but also have the right mindset and personality
And help doesn’t only mean external advisers and networks. Yann Leca, CFO of OVHcloud, a French cloud computing company that listed in 2021 for $464m, says staffing is key, and that sometimes, quantity is as important as quality; having enough people is as important as having the right people to ensure the company keeps growing.
“Do not understaff your finance or legal teams and select advisors who are not only the very best, but also have the right mindset and personality and if possible, who have been working with each other in the past. This played a critical role for us during Q3, when market conditions became more adverse in the two months preceding our IPO and the entire group had to pull through,” Leca tells Sifted.
Prepare for a non-IPO, too
IPO is an exit option, Gauthier says, but M&A or sales can also be more adequate to the company's strategy. SAP can also be helpful in this eventuality.
“Companies that are looking into acquiring you will look into your technology stack during the due diligence. They will try to understand how ready the company is to scale and the effort required to integrate the company. This is where SAP has a strong advantage. Most of the fortune 500 companies use SAP already and it is going to be much easier to leverage the same data model,” Gauthier says.
The process is inevitably intense
One such process is the IPO readiness assessment, which ensures everything is in place pre-IPO, from accounting to tax structuring, and ensures companies are transparent and public about everything they’re doing. Picardo, from PensionBee, says most companies will need to go through this, and it requires extra effort.
“The process is inevitably intense because the stock exchange has high standards for businesses that are listed and the highest degree of diligence needs to be taken in everything that you do,” Picardo says.
Keep your priorities straight
While it’s important to fulfil the legal requirements, founders need to think about what’s best for them and their company.
OVHcloud held more than 100 investor meetings in the run-up to the IPO. Leca says the process can pose a challenge for management.
“The IPO process requires the co-ordination of many different skills internally, from legal to finance through HR, communications and investor relations, but also more than 100 advisers at any point in time — a whole mini-company with your own company!” Leca says.
I constantly find myself in rooms full of suits these days. Do I conform to them? Absolutely not!
And it’s not just about your business; Nyrensten says staying true to yourself should act as your North Star throughout the process.
“I’m an outspoken person in everyday life, but as a stock exchange CEO, there are a lot of rules about information management and when and how things are communicated. It was a little strange in the beginning, but you get used to it,” Nyrensten says. “That said, I still do things my way. I constantly find myself in rooms full of suits these days. Do I conform to them? Absolutely not!”
Think about your next steps
The pandemic certainly threw a wrench in many founders’ plans. While Graber found the IPO surprisingly efficient as it largely happened over virtual meetings in home offices, it came with other stresses, like changing market conditions.
“We would have liked the development of the share price to be somewhat different, but it doesn’t worry us,” Graber says. “We regard the share price decline as a short-term headwind, and we’re confident that our mid-term strategy with an acceleration of revenue growth and an increase in profitability, will also be reflected in an upward share price.”
Nyrensten says overall, the listing has been a positive experience and RevolutionRace has had one of its best financial quarters in terms of both sales and profit.
“Being a listed company is exciting and comes with many upsides, and the capital market can create new opportunities for you as a company,” she tells Sifted. “It’s been good for our brand recognition, our customers have been able to properly join us on our journey as shareholders and it also aided us in attracting incredible talent from all over the world.”
Gauthier says that for many companies, the IPO is just the start; CEOs will quickly find themselves in new markets with more opportunities, and they should already be thinking about what’s most important to them after the exit.
“Why do you want to raise money? Is it to enter more countries or is it to acquire more companies? Is important to have in mind what the IPO is going to be helpful for. At the end of the day the IPO is only the first step on a very long journey.”
Check out if you are eligible to apply for Grow by SAP or contact grow@sap.com.
