By Chris Jeffries, CEO and founder of Launch Your Career and Dev Clever
What a remarkable year 2020 was for the international financial markets. The Covid-19 pandemic triggered a crash that was major and sudden, the worst in a generation.
Yet world markets picked up and stocks roared back to record highs. Despite the lockdowns, economic instability and millions of deaths from coronavirus worldwide, the stock market recovered ending the year up 13%.
2021 has been a record-breaking year for international initial public offerings (IPOs), and we’re only halfway through the year. With an 85% increase on last year, it’s the highest figure in two decades.
With many investments put on hold during the first year of the pandemic, an IPO frenzy is currently underway. Businesses looking to secure financing may also be ruminating on the possibility of floating on the stock market. But what are the pros and cons of going public?
In 2019, I floated my company, DevClever, on the London Stock Exchange. My journey from start-up to stock exchange was full of highs and lows. There were challenges and a great deal of personal risk throughout. But it was the right path for me and my business and I’d like to share some insight from that process.
IPO advantages and disadvantages
The main reason for going public is to help entrepreneurs raise capital and expand their business at a rapid pace. The injection of funds is a game changer and can be used to reduce debt, finance research, develop or buy new technology and hire the best staff.
However, it’s worth noting that the IPO process itself is a costly one.
Lawyers, investment bankers and accountants are all required and they’re not cheap.
On top of that, you need to factor in the time required to prepare for an IPO. Months that could be spent developing and promoting your product or negotiating deals.
Business owners on the IPO journey must make their peace with the many changes to their company. Like the scrutiny that comes from very regular and public financial reporting. Or the differences in the decision-making process now that there are shareholders and a board of directors. This can be a real cultural shift for many start- ups.
On the flip side, it can bring many benefits. Having a board of directors also opens the door to extensive business expertise that can catapult your company to the next level. I know I have benefitted greatly from my board’s experience of growing and scaling international businesses. They have seen it, done it all before and got the T-
shirt. They save you from costly mistakes and prepare you for unexpected risks.
An IPO can also lead to more publicity as analysts and news agencies report on the business. This can attract new clients as well as help the company to build strategic business relationships.
When I was considering whether to float my business on the London Stock Exchange, it came down to two things: credibility and international reach.
Fundraising was not my main goal as I had already invested heavily in the company to give it the initial impetus.
I’d parted ways with my former business partner who wasn’t keen on investing and sold my house and my cars to put £1.5 million of my own money in the business. This took my initial small-scale careers advice product and transformed it into an end-to-end careers guidance platform.
My next step was to make the shift from a local Midlands-based company to an international one. To do this I needed to show I was a credible and committed business ready to play on a global scale. And that meant getting listed.
The process of going public on the London Exchange took a whole year ending in January 2019. Floating the company did improve my credibility and indeed paved the way for global partnerships with technology company Lenovo and NISA, the
independent schools alliance in India that represents over 70,000 schools.
It also enabled us to acquire technology and skills which led to rapid development. We were able to take advantage of changes in the market more quickly than if we were backed by private investment which meant we could grow and expand in an unprecedented way.
Deciding whether to float your company on the stock exchange is a very personal decision. One piece of advice I’d give is that once you’ve made your decision, commit to it, follow through on it and take the business to where you believe it needs to go next.
Chris Jeffries is CEO and founder of Launch Your Career, an online and virtual
reality experience for young people which provides careers guidance based on a
student’s personality, and is the brainchild of digital innovation experts Dev Clever.