A Crucial Step: Creating the IPO Team

Whether you are Bill Gates, Michael Dell, or Sergey Brin and Larry Page (founders of Google), you will need help with the demanding process of going public. In fact, you will be building a whole team of advisors and staff, which is commonly called the IPO team.

One of the most important members of the IPO team is your investment banker. Among other things, the investment bank plays the role of advisor, underwriter, and sales force, managing many details such as the timing and size of the IPO, as well as the pricing of the shares. Whether you decide to go with a big, national investment bank or a small local investment bank, it is a decision to make carefully.

You will need to meet with each investment banking firm you are considering and ask a lot of questions. Some of the things you will want to know about your investment banker are:

• What do previous clients say about them?
• How long have they been in business?
• Are they known to be honest and ethical?
• Do they have a reputation for being effective and skilled?
• How busy are they? Do they have time for your IPO?
• Are they willing to be fully committed to your IPO?

Last but not least, find out how much the investment bank’s services are going to cost.  This is not going to be an insignificant expense. Usually an investment bank takes 7% of the proceeds of an initial public offering. Therefore, if you do a $50 million public offering, they will get $350,000 in fees. At that price you do deserve some premium service, so shop around!