Six Learnings From Running a Public Company vs. Private: Founder Story
There is nothing more intoxicating than watching your company’s name on the ticker of the stock exchange.
When my company, Fyber, was acquired by a public-listed entity RNTS media, I was ecstatic. After all, wasn’t that supposed to be our “happily ever after” when we kicked off as a startup? In a way, it was! And this move ushered in a wave of prosperity. My co-founder and I became the Managing Directors of Fyber NV, raised €150M convertible bond, and bought not one, not two, but three companies within a span of 18 months! In short, it has been quite a ride since 2014.
But to be honest, it wasn't all smooth sailing. In fact, going public birthed a set of unique challenges, which seemed insurmountable at that moment. We had to recalibrate our processes, manage costs, rework reporting and forecasting, and so much more. But on the flip side, Fyber got the financial leverage that it truly deserved - and honestly, who amongst us would say no to that! So, it was no less than a rollercoaster ride.
And so, if you find yourself navigating your way in such choppy waters, then you have come to the right spot. Here are my top six learnings about public companies vs. private companies.
#1. Openness & transparency culture changed
With Fyber, we had only about 150 or so employees. And since most of us played our respective roles in building Fyber from scratch, we were no less than a close-knit family.
As a result, our company rested on the principles of openness and transparency. Keeping all lines of communications open and sharing even the minutest of details helped every employee realize their role in building the company. As a result, our workforce was highly motivated and productive to help Fyber reach its goal. Even externally, we were comfortable in sharing our numbers with anyone with the hope that we can influence them positively.
However, all of that changed as we went public. Much like other public companies, we had to impose a lockdown on information on material nonpublic information (MNPI). Resultantly, our employees were no longer privy to this information in an attempt to contain the possibility of insider trading. Such crackdowns may not even prove to be extremely effective in certain cases, but they have to be put in place, which can be no less than a culture shock.
#2. Reinforcement of culture
Whether you go down the M&A route or purchase multiple companies, centralizing culture is key to bringing multivariate companies on the same scale. Almost everyone now understands the true value offered by strong company culture. However, this venture is a lot easier when you run a private entity. With private companies, you have that autonomy to invest in setting deeply-rooted corporate cultural values.
In contrast, you have to go from pillar to post to convince investors about the need for developing, fixing, establishing, and communicating culture in a public setting. Justifying this move can get progressively tougher when the company is performing well and turning in good numbers. After all, if your employees can keep up the good work then why rock the boat and upset the status quo?
Reinforcing culture is also difficult for public companies as the top C-suites are now busy in a plethora of activities that may move them away from the employees. Whereas, in the case of private companies, senior leadership and teams can work hand in hand to embrace and consolidate culture. This art of practicing what one preaches supports leaders in impressing culture that will last several years. However, such a conjecture is largely generic. If you have strong leadership on your side, then even public companies can effectively maintain their culture despite disruptions - as we did in the case of Fyber!
#3. Going public is costly
Okay, so this learning may seem counterintuitive to some. After all, shouldn’t private companies get more access to liquidity and capital that can work in their favor? So how can the ability to tap into different financial instruments turn costly?
While I do not contest with the part that public entities gain access to greater working capital, they can prove to be more expensive than their private counterparts from a regulatory and compliance perspective. I came across this recent study that pegged the total cost of compliance at 4.1% of the market capitalization, which is quite significant.
These compliance costs include a medley of fees for underwriting, legal, accounting, printing, registration, exchange listing, and more. And if you have read enough tips and tricks on how to go public, you know that roping in an excellent CFO and a legal team should be one of the prerequisites for IPO preparedness. So naturally, if your core team expands, so would the cost liability!
Not to mention that the process of going public is also pretty lengthy. So if time is money, you are also spending that here!
#4. Public company forecasting & reporting is a different ball game
Once your company is listed as public, it will be subject to extensive public scrutiny. As such, you will have to ensure that your operations adhere to the highest standards, as mandated by various government and regulatory agencies. As long as you can uphold your public reputation, you are golden.
Being in the spotlight also plays a role in molding public perception. Key financial metrics like annual budgeting, reporting, and forecasting that are available in the public domain will influence investment-related decisions. Hence, public companies have to be hypervigilant while navigating such communications because even a minor slip-up could have far-reaching repercussions. Apart from walking on eggshells, companies also have to stringently deliver upon these promises - consistently and reliably.
Such a situation reminds me of this interesting quote that I once came across, “when CEOs experience troubles, they take it home. When investors sense trouble, they sell it off.” And so, you have to douse many fires in retaining investor trust.
In contrast, most VCs are more forgiving as they are fully aligned to the organizational goals of private entities. They are interested in the company for the long haul. Accordingly, they hardly pull their investments and often stay put.
#5. Going public isn’t for everyone
Why do companies go public? To raise more capital from the sale of shares, gain liquidity, and enjoy higher valuation. The outcomes are pretty straightforward and rewarding. As such, it is a fantastic opportunity for companies that have a strong presence, reliable growth, unique positioning, robust business model, and a competitive edge.
However, going public is not the pot of gold at the end of everyone’s rainbow as everyone makes it out to be.
If anything, going public can prove to be more disadvantageous to some companies than others. To illustrate this point, I have already talked a bit about the cost of going public and the headaches that come with compliance and reporting. To such complications, you can add the part where you lose managerial control over the business, live life in the public eye, and sometimes even lose focus of your core business.
I must preface this opinion by stating that I am in no position to dictate whether or not you should go public. But for all it’s worth, I can definitely ask you to mull over it thoroughly before making the choice.
#6. Your role changes & you cannot change that
In 2014, as the founder of a company that had recently gone public, I found myself splitting my time between minding the business versus romancing the markets and wooing investors. Easily, juggling these responsibilities was the toughest thing that I had to do.
With time, I found myself to be overly distracted from overseeing the business operations as I was spending more time interacting with investors. The outward communications far outweighed the internal ones. Eventually, there can a point where I realized that it was nearly impossible to handle both. Fortunately for me, I had the support of an awesome team to run the public company but giving up the role was not easy.
Similarly, you will also have to change with your company and hand over the reins in some aspects. Of course, this transformation may not have any deeply rooted effects if you have a managerial team that can maintain focus on the business.
To summarize, my experience running a public company vs. a private company has been diametrically opposite. But I wouldn’t have it any other way - both had their high points and a few limitations.
My piece of advice would be to conduct in-depth research on the viability of such a move. Weigh out the pros and the cons, and avoid hurrying any decision - know that whether you go public or stay private, the end goal is to realize the organization’s core mission and vision. Once you are convinced that going public will help you attain it and have committed to the idea, then prepare a detailed roadmap on the mode and subsequent course of action.
Most importantly, keep the above pointers in mind and enjoy the journey.
What's next for me?
After Fyber, I am now building my next long-term venture Weflow with my co-founder Henrik Basten and we recently raised USD 2.7 million. Weflow is a Salesforce productivity platform that helps account executives save time, structure their day & win more deals.
If you use Salesforce, book a demo to see how you can manage your Salesforce pipeline, take notes & organise your todos inside Weflow.