Educate me on the ipo process?

[achilles28]

My impression is that only established, large companies qualify for underwriting and ipo on a large exchange like the Nasdaq or NYSE.

Smaller companies with an existing product and cash flow and sales (sub one million) don't seem to qualify. This is more the space of venture capitalists like depicted on the shark tank.

It would seem to me the problem with this model is that large companies that don't necessarily need the capital through an ipo have access to it. Whereas smaller companies that do require cash via the capital markets are blocked out.

Although simplistic, is this a fair understanding of the existing ipo space in America?

 

[xandman]

Not really. It became much easier to fund via IPO and VC's after the late 1990's.

 

[MoreLeverage]

Why would you want to be a small public company anyway, unless if to sell out to the suckers, er, public? All the regulatory costs can eat up a huge amount of your time and profit, expose executives to extra legal liabilities and personal trading restrictions, and for what? If your business was any good, you'd have plenty of VCs clamoring to fund it until you hit $1B or so.

 

[achilles28]

So what's the minimum threshold in terms of sales/cash flow must a company reach before they can ipo?

And how do companies access capital before that stage usually ?

 

[zdreg]

So what's the minimum threshold in terms of sales/cash flow must a company reach before they can ipo?

And how do companies access capital before that stage usually ?

credit cards ,savings , friends, factors etc, at high rates + crowd funding
Factoring - Small Business Encyclopedia - Entrepreneur
www.entrepreneur.com/encyclopedia/factoring
Entrepreneur
A financing method in which a business owner sells accounts receivable at a discount to a ... Because factors extend credit not to their clients but to their clients

 

[Sig]

So what's the minimum threshold in terms of sales/cash flow must a company reach before they can ipo?

And how do companies access capital before that stage usually ?

The vast majority of growth type companies, i.e. innovative startups vice restaurants, dry cleaners, etc. get their first substantial funding from angel investors or VCs. If you haven't done this before you usually start out with funders savings and maybe some friends and family money to get to a prototype or first customer stage, get angels to get you your first hundreds of thousands in funding, then go to VCs when you're at the several $M funding stage. If you're a serial entrepreneur you can often get a VC to either start you at $M or give you a $500K seed round with a follow-on if you get traction.
You need to be a $100M plus market cap company to make it worth the regulatory overhead and hassle factor of being public. An IPO is often as much or more about a liquidity event for early investors as it is a fund raising tool.

 

[achilles28]

All the regulatory costs can eat up a huge amount of your time and profit, expose executives to extra legal liabilities and personal trading restrictions, and for what? If your business was any good, you'd have plenty of VCs clamoring to fund it until you hit $1B or so.

You need to be a $100M plus market cap company to make it worth the regulatory overhead and hassle factor of being public. An IPO is often as much or more about a liquidity event for early investors as it is a fund raising tool.

Thank you. This is what I'm talking about. Why is the regulatory hurdle so large it prices the companies who need capital out of the IPO process? It's totally counter-productive to capitalism.