Looking for an Exit: Startup Founders, Investors, and Bankers Offer Some IPO Guidance

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the reason most companies go public is because they have “tired investors… The VC investors want out, and you have to look for a new type of investor, and ideally one who has a 15- to 20-year time horizon.”

—In contrast, MaxLinear’s Seendripu says he felt no pressure from his board to take MaxLinear public. Rather, he says it was a calculated decision driven mostly by MaxLinear’s senior executives and was based on their reasoning that corporate valuations had been beaten down by the recession, and would rise—much like Southern California’s residential real estate market.

—While the timing of MaxLinear’s IPO on March 24th proved impeccable, Roth says he advises startups against trying to time the market. “We used to say there were good years for IPOs and bad years,” Roth says. “Then we started looking a good quarters or bad quarters.” Now market volatility has reduced the opening of an IPO window to a few weeks, or even days.

—Volatility also is a bane to Sweeney, who now heads PatientSafe Solutions—his ninth health care company. Volatility is an inherent part of the markets, yet Sweeney says, “government intervention” since his first IPO in 1981″has done everything possible to destroy to process” of taking a company public. The level of predictability in financial reporting “is almost like being a Fortune 500 company,” Sweeney says, and Wall Street investors and analysts expect IPO candidates to show $100 million in annual revenue, no debt, and profitability. “The bottom line to going public is so huge that you can’t afford to go public.”

—Seendripu says he got similar advice before MaxLinear’s IPO, with most people counseling him to avoid going public. But he was encouraged to stay the course by Ted Alexander, a Mission Ventures managing partner and MaxLinear board member. “Ted was steadfast,” Seendripu says, “but I almost buckled and didn’t do the road show.”

In talking with startup founders, Seendripu says his advice is that “fundamentally, you should do it if you think you need to do it and if your plans call for it. But you have to believe in the goodness of people…I can’t tell you what it means to be a great company [yet],” Seendripu says, “but to be an entrepreneur, you have to be a bootstrapper. You have to be passionate in your belief that the market will reward those people who believe in themselves.”

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