Startups gearing up for IPO; Transitional changes

Startups gearing up for an Initial Public Offering (IPO) signifies their preparation to transition from being privately held to publicly traded companies. As startups are preparing to transition from private to public ownership through initial public offerings (IPOs), this shift signifies a growing emphasis on financial performance, particularly prioritizing profitability over rapid growth. As a result, startups are undergoing a clean-up phase, redirecting attention towards the bottom line. This manifests in two key themes: streamlining manpower and reshuffling leadership teams.

Going public through an Initial Public Offering (IPO) is indeed a complex and demanding process that poses significant challenges for most companies.

The process of going public is a challenging and time-consuming endeavour that requires careful planning, execution, and ongoing commitment to meet the demands of public ownership. While the transition to becoming a public company offers opportunities for growth and expansion, it also entails significant responsibilities and regulatory obligations that companies must navigate effectively to succeed in the public markets.

One of the most discussed IPOs in the market recently has been Swiggy’s. In January, Swiggy made headlines when it initiated workforce reductions, letting go of approximately 350-400 employees. Additionally, it undertook strategic restructuring, merging its premium grocery vertical, InsanelyGood, and its Swiggy Mall with its quick-commerce service, Instamart. These moves were part of Swiggy’s preparations to transition into a public limited company. Recently, Swiggy launched its IPO for public investment, further solidifying its position in the market.

Late-stage startups and category leaders, despite their prominence, face pressure to strategically approach the IPO process. Somdutta Singh, former member of Niti Aayog, highlights, companies like Swiggy must demonstrate a clear path to profitability to attract investor confidence. This often involves making strategic decisions to streamline operations and optimize financial performance.

Various companies, including Airbnb, The Good Glamm Group, Ixigo, and Dunzo (backed by Reliance Retail), opted to go public through IPOs after restructuring their teams and reducing their workforce. As a result, they have experienced notable increases in their annual revenue and profitability.

Few companies such as InShorts, Dealshare, Cultfit, Mygate, and Third Wave Coffee, Opted for the appointment of new CEOs, which signifies a commitment to implementing stronger governance practices and driving profitability. Industry insiders suggest that the objective behind these strategic moves is to streamline operations and enhance financial performance. These startups aim to increase their appeal to public market investors, as well as potential late-stage venture capitalist firms and private equity funds. By prioritising financial metrics and operational excellence, these companies aim to enhance their competitive positioning and attract investment from discerning investors in both public and private markets.

Overall, while the process of going public involves significant regulatory and operational complexities, IPOs offer startups access to capital, brand visibility, liquidity opportunities, Market Valuation and strategic advantages that can accelerate growth and enhance shareholder value over the long term.