Why & How Early-Stage Startups Should Start Preparing for IPO Comms Now

Facing an IPO is a daunting task for any founder, regardless of your experience. No matter how confident you feel about your company's readiness, it's crucial to have a strategic communication plan in place as early as possible. Because when the stakes are high, there's no room for errors or second chances.

For a comprehensive guide on IPO communications, we reached out to Katharina Berlet, a seasoned communications expert with extensive experience in guiding companies through the IPO process. Katharina’s expertise in public relations, strategic communication, and media management makes her an ideal advisor on the subject.

In our discussion, we explored how founders can craft a compelling equity story, the importance of early and strategic communication, managing media relations, and the common pitfalls to avoid. We also covered basic steps that founders, even those on a budget, can take to prepare their communication strategy for a successful IPO.

Read our full conversation or watch an edited version of our chat below.

Let’s start with a quick explainer of IPO Comms. In simple terms, what is it and why is it so important to the success of an IPO?

Communication plays a key role when companies go public. I would even say it’s just as important as the advice from lawyers and calculations by financial consultants. In the end, it's all about a successfully developed equity story. Before going public, each company must explain authentically, emotionally, and convincingly why investors should buy shares at that particular time and valuation. 

Through strategic and strong communication of the equity story, you can influence a wide range of interests, such as strengthening public awareness of the company and addressing a broad investor base. This can optimize issue proceeds, potentially leading to an oversubscribed transaction and, ultimately, a successful perception of the transaction.

The right communication strategy at the right time is often worth hard cash for companies.

You believe early-stage startups can and should begin preparing their IPO comms strategy from day one. Why so early? An IPO is likely many years away.

We all know a good story and relevant content are not built overnight. In the best-case scenario, you develop your success story, including your vision, the potential of your business model, and your future perspective to scale further, consistently starting from day one. 

The actual IPO process itself is strictly regulated, with numerous legal frameworks to comply with and regulations to observe. As a founder or management team, you will be very busy then. In the final months before the IPO, these conditions often leave the communications team with little room to implement the IPO communication strategy. 

This makes it even more important to utilize external corporate communications at an early stage to position the company's profile and segmentation sustainably in the business and financial media, as well as via news agencies.

What do startups risk by waiting to plan their IPO comms later? 

The biggest mistake is to think that nobody cares what was written two or three years ago, but the media don't forget. Many founders exaggerate their statements at an early stage, make promises for the future, and set very specific deadlines for reaching certain milestones – and then things turn out differently. 

Scaling takes longer than expected, innovations never reach market maturity, or markets become volatile due to wars or other crises. Shortly before the IPO, a critical journalist might ask, "Why didn't you achieve that target set back then? Did you just gamble? Or was the strategy not so good after all?" 

In worst-case scenarios, the evaluation is in jeopardy. If an IPO is an option for you in the future, it's always best to seek advice and support from communication experts who can formulate core messages and manage the media so that your equity story follows a clear, comprehensible, and convincing line.

What common challenges or hurdles have you seen startups encounter as a result of not planning further in advance?

One of the biggest challenges is problematic news that the media sometimes drops, especially problematic articles published shortly before or even during the IPO process. This happened in the IPO process of WeWork, for example, in 2019. 

Precise leaks are probably the most critical. For example, if a planned IPO becomes public too early, it may have to be pushed forward, affecting the marketing strategy. Or, the potential valuation may be estimated significantly too low or too high, deviating from the company targets. 

If you have an experienced communication department or experienced external experts and consultants, they generally bring a good network with proven relationships with the media to manage these situations properly, even off the record. These experts are trained to take critical situations into account, consider a wide range of stakeholders, and manage potential conflicts accordingly.

Can you give an example of a company that did prepare their IPO comms right away and how that paid off?

For example, when I accompanied the IPO with Mister Spex in 2021, I had already been on board for about seven years. I was able to consistently steer the company's success story with targeted PR during this time. 

The IPO had always been an option, but the right moment was not clear for a long time. By the time things got serious, we had regularly presented our successful business model with strong and resilient proof points in relevant media over many years. 

The brand, the company, and the leadership team were well-known (in Germany) publicly and had built up strong reputations. Our target group of investors already had a positive perception of us, which we were then able to build up in a concrete and strategic way by further sharpening our equity story within the pre-phase of the IPO. We were able to increase valuation once again and steer it in the right direction. Despite leaks, we managed well. 

In the end, we even saw a strong spillover effect on the consumer brand due to our broad and convincing communication within that specific IPO year. All in all, I think this success was only possible because communication was always an important part of Mister Spex's strategic approach.

Can you provide some tangible, easy-to-follow steps or best practices that any startup can implement from day one?

Many founders initially feel flattered when media inquiries reach them, and their business receives public attention at an early stage. Interview requests are quickly accepted. However, you must always be aware that preparation is time-consuming, and you should take the time. 

Whenever you have an interview request, ask yourself: Who is the journalist who wants to talk to you? What has the sentiment been like for similar articles in the outlet in the past? What message do you want to send? How can you back up your statement with figures and proof points? Are there certain topics you don't want to talk about? How will you react if asked about them? How do you want to come across, and why? 

If you feel unsure about this, then it's time to get help from an expert. It doesn't always have to be an expensive agency. Many experienced externals can provide support with specific media training, an initial communication strategy, or even setting up and guiding your internal team to further develop communication on their own over time. Sometimes it’s just small first steps to take.

At what point do you recommend a company should seriously consider hiring a seasoned comms pro or agency that can support IPO comms?

Of course, the earlier, the better, but at the latest, when talks with the bank start and the date for the IPO becomes concrete, you need experienced external advice, even if you already have a good in-house communication team.

The IPO is a strictly regulated process with many legal requirements. You need experience in coordinating communication with lawyers and banks. There are several required public notifications that follow a specific form and timetable. Therefore, it's important to have an external partner who can actively manage this process and the media, especially if the company itself is no longer allowed to communicate actively at a certain point in the process. 

If you could give early-stage founders one final piece of advice when it comes to the importance of strategic communication and early planning, what would it be and why?

Take the time early on to familiarize yourself with the communicative needs and resulting strategy that accompanies an IPO when you are not yet under time pressure. The sooner you understand how valuable strong communication is for your storytelling, the more you will realize that it's not about the perfect starting point but a process that takes years to build and develop. So familiarize yourself as early as possible.

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