A lot of talk yesterday about the lack of Danish IPOs at the #FBV (The Association of Listed Danish Growth Companies) conference. Which leads me to expound on the eternal question: When is it too early to go public?
You’re an early-stage biotech company just beginning your first phase I trial. You’ve meticulously completed the preclinical work, so you see this trial as a formality. However, you urgently need substantial funds for the coming phase II trial to avoid delaying your entire clinical program. But is it too early to go public at the phase I stage?
Not necessarily, and here’s why.
What truly matters to investors is the value your company can generate with their capital. Achieving clinical proof-of-concept in a phase II trial is a significant value inflection point for any biotech company. The fact that you’re still years away from the market is less critical. What’s important is the risk-reward balance of your next step.
Investors in publicly traded growth stocks—like the nearly 800 listed on the Spotlight and First North Exchanges in Denmark and Sweden—are well-versed in portfolio diversification. They understand that investing all their savings in a single small growth company is unwise, and they’ve long recognized that being a passive, long-term investor in a company requiring regular capital raises is a losing strategy.
Let’s be honest: Most investors aren’t betting on your company’s long-term prospects (I dislike that word “betting,” but it’s apt here). They’re focused on your next milestone. If you can convincingly show that you’ve done everything possible to mitigate the risks of this next step, and have prepared thoroughly and professionally, you’ve done your part. The rest is up to the investors.
In short, the question of whether your company is IPO-ready isn’t really about risk – if we assume the risk can be explain and perhaps even quantified. It may sound simplistic, but it’s too early to go public if you and your company aren’t ready. You do need to be able to answer critical questions like: Are you running a tight ship? Are you, your board and your senior team ready for the challenges ahead? Are your internal procedures—financial, R&D, communication, governance, salaries, strategies, and everything else—adequately reflective of the grave responsibility of managing other people’s hard-earned money?
If you can confidently answer “Yes,” then you may indeed be ready, and it might not be too early.
The investors can handle the risk – if you just handle everything else.