Going Public: A Founder's Guide to the IPO

An initial public offering is two events wearing one name. It is a financing, the moment a company sells shares to the public and takes on a market that will price it every second of every day. It is also, for the founder and the early team, the largest personal liquidity event of their lives. The two get planned by different people. Bankers and lawyers run the financing. The wealth, the part that decides what the founder actually walks away with, is often left to sort itself out. It does not sort itself out.

Before any of the machinery starts, a few plain questions are worth sitting with. Should we go public at all, or is there a better door? Is the company actually ready to be looked at this closely? What will I be able to sell, and when? And what happens to the wealth that, until now, has existed only on paper?

Public, or not

The first decision is whether to list at all. Companies stay private far longer than they used to. In 1989 the average company going public was about six years old; by 2021 that figure had roughly doubled. Deep pools of private capital, from growth equity to crossover funds, mean a company can raise nine figures without ever filing an S-1.

When a company does decide to go public, the traditional IPO is one path among several. A direct listing floats existing shares without an underwritten offering, and since a 2020 rule change it can raise fresh capital alongside them, which suits a well-known brand that needs a public mark and liquidity more than it needs a marketing push. A SPAC merger offers speed and a negotiated price, at the cost of dilution and a mixed reputation. An outright sale to a strategic or a sponsor ends the independent story entirely, often at the highest certainty of price. Each buys something and gives something up. A public listing hands you an acquisition currency, a mark the world can see, and access to permanent capital. In return you accept public disclosure, the discipline of quarterly results, and shareholders who did not know you when the company was three people and a plan.

Taking chips off the table before the bell

For a founder or an early employee, the years before an IPO create a strange kind of wealth: large on paper, impossible to spend. Your salary comes from the company. Your net worth is locked in the same company's stock. Both face the same single risk, and one bad year can take the paycheck and the fortune together. The instinct to hold every share until the listing is understandable. It is also undiversified in a way no advisor would recommend to a client holding any other asset.

Pre-IPO liquidity has become its own discipline. The most common route is a structured tender offer, in which the company organizes a window for eligible holders to sell a set amount at a set price, either back to the company or to incoming investors. These offers usually come with limits: a cap on how much of your vested equity you can sell, often around a fifth, plus rules on tenure and on who qualifies. Auctions, direct secondary sales, and borrowing against shares fill in the rest. None of this is about cashing out. It is about converting a slice of a concentrated, illiquid position into something that can pay a tax bill, exercise an option, or simply reduce the risk that everything depends on one outcome.

The readiness runway

By the time a company files, it has usually spent well over a year becoming the kind of company that can survive being read this closely. A board with independent directors and a real audit committee. Financial statements prepared to public-company standard and audited without drama. Internal controls that would hold up under Sarbanes-Oxley. A finance function that can close the books fast enough to meet a public reporting calendar. The registration statement, the S-1, pulls all of it into one document that the market and the regulator will comb line by line.

This is where value is quietly made or lost. The multiple a company earns is set in part by how much a buyer of its stock has to discount for uncertainty, and every surprise in diligence is a reason to discount more. Clean numbers, defensible metrics, and a management team that can answer hard questions without flinching are worth real basis points. That readiness is built over eighteen months or more. It cannot be assembled in the quarter before the roadshow, and it deserves its own project.

The offering itself

The formal process opens with an organizational meeting, where the company, its bankers, and its lawyers agree on the timeline and divide the work. Drafting the S-1 consumes the first stretch. Most companies now file it confidentially first, as a draft registration statement, and quietly test the waters with institutional investors before anything becomes public, a path the JOBS Act opened for emerging growth companies and the regulator later extended to nearly everyone. The document still enters review with the Securities and Exchange Commission, which responds with comment letters that the company answers and refiles, sometimes across several rounds, but the early drafts stay private until the company is close to ready. In parallel, the underwriters assemble the syndicate and prepare the marketing.

Then comes the roadshow, a compressed tour in which management tells its story to institutional investors while the bankers build a book of demand, gauging how many shares each account wants and at what price. The night before trading, the company and its lead banks price the offering. That price is a negotiation between two pulls: the company wants the highest number it can defend, and the banks want a first-day gain that rewards the buyers they will need again. An over-allotment option, the greenshoe, lets the underwriters sell more shares if demand runs hot and support the price if it does not. The next morning the stock opens, and the private number becomes a public one.

The lockup, and the years after

The bell is not the liquidity event most founders imagine. A lockup, typically 180 days, bars insiders from selling right after the IPO, so the wealth stays on paper for months longer. When the lockup lifts, selling is still constrained. Executives can trade only during open windows, and the clean way to sell into a moving market without inviting an insider-trading question is a 10b5-1 plan: a written schedule of trades, set up in advance at a time when the insider holds no material non-public information, that then executes on its own. Since 2023 those plans carry a mandatory cooling-off period, generally around ninety days for officers and directors, before the first trade can run, which closed the old trick of adopting a plan and selling almost immediately.

What follows is less a moment than a discipline. Diversifying a concentrated public position over years. Managing the tax that comes due as paper becomes cash. Resisting the pull to treat a high stock price as permanent. The founders who do this well decided how they would sell before they were allowed to.

Plan the wealth before the price runs

The single most valuable move around an IPO is one that has to happen before it. While a company is still private and its shares carry a low, defensible valuation, a founder can move a portion of them into a grantor retained annuity trust, or sell them to a trust, sending the future appreciation to the next generation at little or no gift-tax cost. Shares that qualify as qualified small business stock may shelter a large slice of the eventual gain from federal tax entirely. Both depend on acting while the value is low and the structure is clean. Once a price is on the table, whether an acquisition letter or a public filing, the discount is gone and so is much of the benefit.

An IPO is a milestone, not a finish line. It converts a decade of building into a number and a set of choices, most of which are better made early than late. The question worth holding onto through all of it is a simple one: what is the liquidity for? The answer, more than the opening print, is what the whole thing was about.