I know, I know. It’s still way too soon to declare the Facebook IPO a success or failure (although it seems unlikely to turn into a success anytime soon), but I do think the Facebook IPO has left businesses around the country asking real questions about the value of going public.
Up until 10 years ago, IPOs served a very different role in the development of a company. Companies like Apple and Microsoft used the funding of their public offerings to make large investments back into their companies. However, with a growing horde of venture capitalists and angel investors, it is no longer necessary to wait for IPOs to make these investments. This has turned the act of going public into merely a reward for founders and investors.
Without defined goals for the funds generated, IPOs are becoming more of a gamble for investors and stakeholders. Many companies are weighing the cost and risks of an IPO and are choosing a different route.
Companies like Pardot and many others have avoided this fast track in favor of more traditional organic growth, and this slower, more gradual approach to growth offers a host of advantages. So if you are a smaller company and feeling a little self conscious about all the media surrounding IPOs these days, take a look at a few things you have going for you:
Too often, tech companies on the route to going public seem like they are just trying to get to the finish line before their wheels fall off. Their focus is on building up the statistics that will generate the best PR and raise the potential price of their shares. Companies will offer heavy discounts, sacrifice customer service, and hire too quickly in order to look more appealing to investors on paper.
This method of growth is not sustainable and creates a very unstable foundation for a company. Smaller companies have the ability to focus on developing the best product for their customers, providing exceptional customer service and building a skilled and enthusiastic team. All of these factors contribute to healthy, long-term growth.
When a company accepts funding or goes public, they are willingly shifting the focus of the company from the product to the profits. Public companies are slaves to their quarterly statement and anything that will boost those numbers. Investors do not want to focus on any activity that does not directly serve this end.
Smaller companies are more agile than their public counterparts and are able to adapt and change in ways that best suit the company. Managers and their employees know their company far better than investors and are able to better steer themselves toward success.
Companies can grow rapidly, even those without major influxes of outside funding. In this constantly evolving environment, it can be hard to maintain the company culture you set out to create. As Pardot CEO David Cummings has said many times, “company culture is the only competitive advantage completely within your control.” Heavily funded or public companies turn that control over to their investors.
Private companies have the ability to take their time in the hiring process, and thoroughly analyze the the degree to which every candidate is a fit for their culture as well as the position. This helps them to develop their culture as a competitive advantage and key to long-term success.
So if all the Facebook IPO media coverage has you down about the size or growth of your company, cheer up! You likely have more control, agility, and stability than your larger rivals and are much better equipped to outlast them in the future. Take that Zuck!