While the window for IPOs has been closed for most of this year, there have been signs of hope recently, with several transactions being priced. However, some bankers we speak to think it may not be until early 2017 that the overall market for life sciences companies really comes back.
Although disappointing for management teams that are trying to responsibly conserve their cash until better days, we think the wait could actually be a good thing for many companies. The extra time allows you to better polish your story and message, and build critical new relationships with potential investors. We think the remainder of 2016 is a pivotal time to be busily prepping ahead of a potential upturn in the market.
What are the best ways to take advantage of the extra time? Here’s what we’re recommending to our private company clients:
- Keep developing the story. I always heard when I was a kid that you can never practice too much. It’s true. Fine-tuning and tweaking your company’s positioning is an ongoing and iterative process. Solicit feedback from both internal and external sources. Ask people who don’t know what your company does to listen to your presentation, and then ask them how clear the message is. Listen to what your competitors are saying and see what’s working. Incorporate changes that make sense and help drill home what you do and why you do it well.
- Stay visible with potential investors. We always tell our clients that times have changed. In the past, an investor would see a company once on a road show and then be making a decision on whether or not to buy on the IPO within just a few days. Now there is a need to visit with the buy side two, three, or even more times to build the relationship and gain interest. If there are new updates, make a call, reach out, and reconnect. There are a lot of companies vying for attention so keep finding reasons to be noticeable.
- Execute on the business. Never lose sight of your first job: running your business. While it’s easy to get distracted with the IPO process, the best way to increase the valuation of your company is to achieve the goals you cited in your business plan. Delivering on your strategic vision is truly what investors really care about and what they will reward you for. With that in mind, continue to stay focused — if you deliver good data, beat revenue expectations, or file an NDA early than you might be glad you had more time to achieve that key catalyst.
- Maintain dialogue with your bankers. If your cash runway is very limited, explore alternate forms of financing with your bankers. See if there are non-dilutive ways to bring in some capital as a bridge to the IPO. Remember too that Wall Street tends to be a game of musical chairs. People tend to move around a lot and the banker or analyst you had a relationship with four months ago may have already moved on to the next place. Be sure the team you have been speaking to is intact and will be the team you will be working with when the IPO does occur. Although there are no guarantees, no one likes surprises and far too many times we hear that a banker or analyst who is liked may have changed firms.
- Be ready to go. Never take your eye off the ball. The market is volatile and can turn quickly. You don’t want to be the last one in the queue. Use the time to get all the documents in place, implement back office systems, keep the investor deck updated and the numbers fresh. Don’t get caught standing by and watching. Be prepared.
We know it can be frustrating to do all the hard work, yet be unable to take your company public because of uncooperative market conditions. Turn the negative into a positive and utilize the time to your advantage to upgrade your story. Start by checking out our eBook, “Westwicke Insiders’ Guide to Going Public.” Then feel free to reach out to us with any questions or for a more thorough discussion.