question
Do you believe that becoming public is a viable step toward obtaining the funding that is much needed by start-up and early-stage growing companies?
Stephen Replin
The Replin Law Group
Author of "Where to Go When the Bank Says No"; www.ReplinLawGroup.com
answer
The answer is that it depends.
Like everything else in small business, financing should be viewed strategically rather than simply as a means for obtaining money.
What is right for one growing small firm may not be right for another, and there are many factors that impact this — starting with the founder's desires and aspirations. For one firm, this may mean bootstrapping growth is the right move, for another, it may mean bank financing and for yet another, it may mean venture capital or going public.
Going public is a significant undertaking and requires public demand for ownership, which is why relatively few firms do it.
Because of this, it is generally used as a later-stage source of funding when a firm needs a larger pool of capital than can be efficiently raised elsewhere (see Twitter, Groupon, Facebook), as well as a means for earlier investors to sell their shares on the public market and exit the company.
So the answer is that going public is viable for a small subset of growing firms, but generally only firms that are well beyond the start-up phase. For firms that believe there is public demand for their stock, they still must decide if it is the right move strategically. If there is public demand, there will likely be private alternatives for raising capital as well.
About the author
Jay Ebben, associate professor of entrepreneurship,
University of St. Thomas Opus College of Business