Why Founders Need to Think Like Public Market Investors Now — Not Later
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Why Founders Need to Think Like Public Market Investors Now — Not Later
“We just closed our Series B. Why should I care about an IPO?” the CEO asked, looking puzzled.
“That’s right, Mark,” his CTO added. “We’re fully focused on developing our technology right now.”
I nodded, recognizing the all-too-common response. “That’s fantastic,” I agreed. “But keep in mind, preparing for public markets takes time. You’ll need to align your organization with what public investors expect long before you file for an IPO.”
“How long?” the CEO asked, curiosity piqued.
“Typically, I’d give it 1–3 years,” I replied from experience.
“That’s not what I’ve heard!” the COO jumped in. “I spoke to some investment bankers, and they said it only takes 6–12 months.”
They laughed, seeing the IPO as a mere technicality: file some paperwork, do a roadshow, and voilà — you’re listed. But they were missing the most crucial part.
“An IPO is just a technical process, right? Public market investors will be happy with a 1–3x return,” the COO confidently insisted.
But here’s the real issue:
They were focusing only on the transaction, ignoring the humans behind the investment.
The Harsh Truth About IPOs — Why Founders Should Care
You’re the CEO of a startup fresh off a Series B.
Everything’s moving fast.
Raising a Series C, perhaps a Series D, and eyeing an acquisition as your exit strategy.
Why should you care about an IPO?
Here’s why:
Raising a Series C or D is already challenging, but when your post-money valuation hits $500 million or more, the road gets even narrower. Fewer acquirers, fewer easy exits.
If you want to give your VCs the exit they dream of, your valuation needs to hit between $5 billion and $500 billion. And who can buy you out at that level?
Not many private companies. But the public markets can.
Like Mark in the opening conversation, many founders underestimate the depth of preparation needed to transition to public markets successfully. They mistakenly believe that an IPO is just paperwork and roadshows when, in reality, it’s much more.
On the public markets, a new type of investor awaits with a unique set of expectations.
This is where investors like Charlie Munger thrive — people who look for long-term, sustainable growth.
They’re not impressed by flashy, one-dimensional startups. They want resilient, scalable businesses built to last.
Getting the Return Expectations Right
One of the biggest mistakes founders make is underestimating public market investors’ return expectations.
Like Mark’s COO, they assume public investors are satisfied with modest 1–3x returns. But that’s far from the truth.
Take Warren Buffett, who consistently generates 20% annual returns for Berkshire Hathaway. Over 10 years, that compounds to a 6x return.
Once your company is public, you’re not just competing for attention — you’re measured against benchmarks like this.
Public market investors are looking for game-changing returns, not incremental growth. Many founders miss this because they think an IPO is just another technical milestone, assuming the rest will take care of itself. Magically.
But in business, things don’t take care of themselves.
The Timing Trap
Here’s where most founders go wrong:
They believe they can wait until the last minute to prepare for an IPO, keeping it off the task list until it’s unavoidable.
They think the process is purely technical — filing documents, drafting a prospectus, and hitting the road to court investors. Delegating everything to an investment banker, getting the company listed. And then, magically, the team wakes up with a few hundred billion dollars more in valuation.
But here’s the critical error:
Founders often take their primary source of information from investment bankers, who are laser-focused on the technical listing process.
While bankers handle the paperwork and regulatory hurdles, it’s up to founders and VCs to focus on valuation growth and positioning the company for long-term success in public markets.
After all, founders and VCs want a significant return. That return is only achievable if public market investors believe in a much larger pie down the road.
These critical elements — business model, narrative, and long term communication — are often overlooked when checking off the technical boxes of an IPO.
A successful IPO doesn’t start a few months before the listing — it starts years in advance.
It’s about aligning your team, business model, and processes with what public market investors expect.
They don’t just want short-term wins. They expect you to be built for long-term resilience.
The Multidisciplinary Mindset: Charlie Munger’s Key to Success
This is where Charlie Munger’s philosophy becomes invaluable.
Munger is a master at integrating insights from multiple disciplines, and this broad perspective is what helps companies thrive in complex environments like public markets.
Too often, I see tech startups filled with like-minded people — engineers surrounded by more engineers, tech experts focused solely on the tech. But public market investors, like VCs, value diversity — not just in demographics, but in skillsets and experience.
Paul Arnold from Switch Ventures puts it perfectly: “Diversity in experience is crucial for success.”
A one-dimensional team rarely has the capacity to prepare a company for the public markets.
Why does this matter? Because life throws curveballs. A one-dimensional team can easily overlook challenges since they have many blind spots.
You need people who can sell your product, manage revenue growth, ensure profitability, develop your team, and navigate legal and financial structures.
Each of these roles requires different expertise.
To succeed and identify challenges correctly, you need a team that includes financial experts, compliance officers, legal strategists, and a strong board.
Preparing for Public Market Investors: 3 Key Steps
So, what does it take to get public market-ready?
Here are three key steps every founder should start today:
Build a Diverse and Multidisciplinary Team
Public market investors want to see a team that understands all aspects of the business — from financial reporting and legal compliance to marketing and sales.
The deeper your team’s expertise, the more confidence investors will have in your company’s long-term growth.
2. Strengthen Your Operational and Financial Processes
Public market investors scrutinize everything. Your financial controls, auditing process, and governance must be airtight.
Don’t wait until you’re preparing for an IPO to strengthen these systems. Get them right now, and you’ll have a smoother transition to the public markets.
3. Craft a Compelling Investment Case and Business Model
An IPO isn’t just about growth — it’s about resilience.
What’s your moat?
How will you scale profitably?
Public market investors need to see how you plan to sustain your competitive advantage and thrive in the long run.
The Big Picture: Aligning Early for Success
When you apply these principles — building a multidisciplinary team, strengthening operational processes, and crafting a compelling investment case — you’re not just building a business.
You’re creating a long-term powerhouse that can withstand the scrutiny of public markets.
Waiting until the last minute to make these changes is a recipe for disaster.
Start now. Build the right team, and create a business narrative that public market investors will love.
How Charlie Munger’s Principles Apply to Your Business
In my latest podcast episode, I dive deeper into this topic, breaking down 9 principles from Poor Charlie’s Almanack that align with long-term growth and IPO success:
Inversion Thinking: Avoid failure by identifying what could go wrong and working backward.
Mental Models: Use a multidisciplinary approach to make smarter, more informed decisions.
Ego and Emotional Management: Stay focused on long-term success and avoid being swayed by short-term validation.
The Power of Compound Interest: Small, continuous improvements lead to exponential growth.
Cognitive Biases: Identify and mitigate biases that cloud decision-making.
Character and Culture: Build a company culture of integrity that aligns with long-term goals.
Munger’s Investment Checklist: Assess your company’s strengths and weaknesses using Munger’s criteria.
How to Fail in Life: Avoid common pitfalls that lead to business and personal failure.
Get the Incentives Right: Align your team’s goals with long-term growth.
Each of these principles, when applied correctly, helps to build a company that can not only survive but thrive in public markets.
If your goal is an IPO, don’t wait until the last minute.
Start building a business that public market investors will love — today.
Prepare Your Company for IPO Success — Understand the Mindset of Public Market Investors
In my latest podcast episode, I break down 9 core principles from Poor Charlie’s Almanack that every CEO should know — especially if you’re navigating the tricky waters of Series C and beyond.
🎧 [Listen to the full podcast episode here]
📅 Curious about your company’s IPO readiness? Let’s assess where you are and what you need to tweak to succeed in the public markets.
[Book a complimentary discovery call with me here]
Upcoming Conversations and Events:
October 31, 2024 - 01:00 pm CET - Alberto Chalon, Giano Capital
Podcast Episodes and Clips
#144: 9 Life-Changing Principles from Charlie Munger: Smarter Investing and Decision-Making
EP 143: Jordi Ferrer Rendé - Is Healthcare Destroying the Planet? The Shocking Truth About CO2 Emissions
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