VC Lingo: What is an IPO?
A few words from someone who’s been there and done that…
Explained by Sean O’Sullivan, Managing Partner at SOSV…
“IPO—that’s an initial public offering—legal ways of offering your securities to the general public through listing your shares of your company, your startup, on a common marketplace such as the NASDAQ, New York Stock Exchange, or many other exchanges around the world. I’ve done one of those…
“When I was 28, my first company, MapInfo, went public. What an IPO does for the founding team of the company is it frees them up to be able to sell their shares on the public markets. It enables the employee base as well— the hundreds of people that are working at the company—to be able to realize the value of their stock options as they continue to vest. They can sell those shares for liquid cash.
“Typically companies can be, say, just $20 or $50 million in revenue and consider going public. There are some exceptions, like in the life sciences area, in biotech, where actually the majority of IPOs are for pharmaceutical companies that have not yet even shipped their products. It’s a remarkable exception, and it is a very important exception because there are many IPOs in life sciences of companies that don’t even have revenues. But in most cases, companies that are successful at listing their shares on the public markets are those that will be doing consistent and growing revenue quarter over quarter for at least two years before they can be considered as likely IPO candidates.”
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VC Lingo is a video series from SOSV in which we define the terms and concepts you need to know to be fluent in the language of venture capital.
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