Taking your startup public through an Initial Public Offering (IPO) is a transformative milestone. It can unlock significant capital and raise your company’s profile, but it also comes with rigorous financial requirements and scrutiny.
Financial Readiness for an IPO
Before considering an IPO, financial readiness is paramount. This means having a business with solid financial performance and the internal capacity to meet public-company standards. Start by evaluating whether your company’s financials tell a compelling story of growth and stability. Can you demonstrate consistent revenue growth or other key metrics that public investors expect? Ideally, you should be able to accurately forecast your financial performance for the coming quarters. Investors and underwriters will want to see that you have a clear grasp of your revenue trajectory, expenses, and profit margins. A company that can reliably close its books on time each month or quarter – and produce clean financial reports – is signaling it has mature financial processes in place.
Audit Requirements and Historical Financials
One of the most time-consuming parts of an IPO preparation is getting your historical financials in shape. U.S. securities laws require that you include several years of audited financial statements in your IPO registration filing (the Form S-1). Typically, you will need to provide two to three years of audited financial results, plus interim financial statements if you’re partway through a fiscal year at the time of the IPO. For example, a company aiming to go public in mid-2025 might need audited financials for 2023 and 2024 (and possibly 2022, unless it qualifies as an “Emerging Growth Company”), as well as unaudited results for the first quarter of 2025. All of these financial statements must adhere to U.S. GAAP and be audited by an independent auditor registered with the Public Company Accounting Oversight Board (PCAOB).
Audit and compliance: Preparing historical financial documents for an IPO requires thorough audits and proper documentation.
Start the audit process early. If your company hasn’t been through a PCAOB-standard audit before, be prepared for a detailed review of your accounts. Auditors will scrutinize your revenue recognition, expense accounting, and overall compliance with accounting standards. It’s common for private companies to discover they need to make adjustments or even restate certain financials to align with GAAP before going public.
Regulatory requirements also extend to financial disclosures beyond the numbers. Along with the financial statements themselves, your IPO filing will include sections like Management’s Discussion and Analysis (MD&A), where you’ll explain year-over-year financial trends, and selected financial data summarizing key figures over a five-year period (though emerging growth companies get some leeway on this).
צור קשר – נשמח לעמוד לשירותך
Building the IPO Team
Going public is not a solo endeavor – you’ll need to assemble a team of experienced professionals to guide the company through the IPO journey. Start with your internal team: if you haven’t already, this is the time to bring on a seasoned Chief Financial Officer (CFO). The CFO will act as the quarterback for the financial readiness process, coordinating audits, financial disclosures, and more. Ideally, your CFO has prior IPO or public-company experience; they will know the pitfalls and best practices to meet SEC requirements and investor expectations.
Externally, you will need trusted advisors. A reputable audit firm is mandatory – likely one of the major audit firms familiar with IPOs or a well-regarded regional firm with PCAOB credentials.
The CFO’s Role in Financial Disclosures
The CFO’s role in an IPO is multifaceted and absolutely central to the process. At a high level, the CFO is responsible for making sure all financial disclosures are accurate, complete, and in compliance with accounting standards and SEC rules. In practice, this covers a lot of ground. A critical responsibility is overseeing the preparation of the Form S-1 registration statement, especially the sections containing financial data. The CFO will work with the accounting team to compile the audited financial statements and with legal advisors to draft the MD&A (where management tells the story behind the numbers). Every figure in the S-1 – from revenue and net income to metrics like customer counts or margins if they’re disclosed – will likely pass under the CFO’s watchful eye. It’s the CFO’s job to ensure that these figures tie out to the audited books and that any non-GAAP metrics or projections are clearly explained and reasonable.
The CFO leads the charge on IPO financial disclosures, reviewing reports and collaborating with auditors and lawyers to prepare the S-1.
GAAP compliance is another area the CFO must champion. As a private startup, you may have had some wiggle room in how you presented financial results, but as a public company, you must adhere strictly to standard accounting practices. The CFO will often coordinate with technical accounting experts (either in-house or external consultants) to address complex accounting issues ahead of the IPO.
Valuation Considerations and Working with Bankers
One of the big questions founders have is: What will our company be worth in an IPO? Valuation is both an art and a science, and it’s an area where your chosen investment bankers will provide guidance. In the run-up to an IPO, bankers will study your financial results, build models, and compare your company to similar public companies (peers) to gauge a reasonable valuation range. They’ll also factor in market conditions – for example, if tech IPOs are hot or if the market is cautious, it will influence how aggressively they think your company can be priced. Founders should approach this process with realistic expectations. It’s not uncommon for private companies (especially high-growth startups) to have lofty internal valuations or prior funding round valuations that may not fully translate to the public market climate. Be prepared to have frank discussions with your bankers about the assumptions behind valuation, such as growth rates, profit margins, and how public market investors might perceive your risks and opportunities.
Financial Reporting Before and After Going Public
The IPO itself is just the beginning of your life as a public company. Financial reporting obligations ramp up significantly once you’re public, and it’s wise to prepare for those well in advance. In the pre-IPO phase, as you draft the S-1, you are essentially creating a baseline of public financial information. The S-1 will contain all the historical financials and disclosures, and once it’s filed, much of that information enters the public domain. This means customers, competitors, and of course potential investors can all see your revenue, costs, and even strategic insights from your MD&A. It’s a level of transparency most private companies are not used to. Ensure that your team is comfortable with this and that sensitive information (like key client concentration or margins) is disclosed appropriately but not in a way that harms the business. Often, legal counsel helps strike this balance in the S-1.
After the IPO, the real work begins: quarterly and annual reporting. Public companies in the U.S. must file quarterly financial reports (Form 10-Q) and annual reports (Form 10-K) with the SEC on strict deadlines.
There’s also the matter of internal and external oversight. Public companies must establish an audit committee of the board (composed of independent directors) to oversee accounting and auditing matters. Your auditors will continue to audit the annual financials and review the quarterlies. Over time, especially after any transitional relief for new issuers expires, auditors will also issue opinions on your internal controls over financial reporting. This means the controls and processes you put in place at IPO need to be maintained and improved continuously. The CFO should schedule periodic internal control reviews and upgrades, treating compliance as an ongoing effort rather than a one-time project.
Investor Communication and Roadshow Preparation
A critical component of a successful IPO is convincing investors of your company’s value and growth story. This happens during the roadshow, which is the period (typically a week or two) just before the IPO pricing when management meets with institutional investors (such as mutual funds, hedge funds, etc.) to pitch the stock. Preparation for the roadshow begins well in advance. Together with your CFO and bankers, you’ll craft an investor presentation that highlights the most compelling aspects of your business: your market opportunity, competitive advantages, historical financial performance, and future growth drivers
Equally important is practice and consistency. During the roadshow, the CEO and CFO (and sometimes other key executives) will present the company multiple times a day, in meetings across different cities or via online calls. You need to deliver a crisp, confident message. Rehearse the presentation until your team can cover all key points smoothly within the typical 20-30 minute slot. Then prepare for the Q&A: investors will ask tough, probing questions.
Navigating a Successful IPO
Embarking on an IPO in the U.S. is a complex journey, but with thorough financial preparation and the right support, it’s an achievable and rewarding goal.By being well-prepared financially and operationally, you set yourself up to thrive in the public markets, delivering on the promises you’ve made to your new investors while continuing to drive your business forward.